Unit 4 - Intro to marketing

Market Size

Volume or value of sales of a product

Market Growth

The percentage change in sales (volume or value) over a certain period of time

Variables that a market is affected by?

• Economic Growth

• Nature of product

• Changes in taste

• Social changes

• Fashion/trends

Market share

The percentage of sales of a product or services held by one firm or brand

Market Concentration

The market share of top firms in an industry

Marketing

The management role of predicting, identifying and meeting the needs and wants of customers in a profitable manner

List the 7 P’s

• Promotion

• People

• Process

• Place

• Physical evidence

• Price

• Product

Market Orientation

An approach that is adopted by business that are outward looking. They focus on making products they can sell rather than selling products they can make. - Primark

Product Orientation

An approach that is adopted by businesses that are inward looking. They focus on selling products that they can make rather than making products that they can make. - Iphone

USP

Unique selling point

Commercial Marketing

The use of marketing strategies to meet the needs and wants of consumers in a profitable way.

Social Marketing

The planning and implementation of programs to bring about social change using concepts from commercial marketing.

Market planning process

• Marketing audit

• Marketing objectives

• Marketing strategies

• Monitoring and reviews

• Evaluation

Market Segmentation

The division of the market into sub groups according to different factors.

Types of Market Segmentation

Demographic - Age, gender, race, income

Geographic - Climate, location

Psychographic - Emotions and life style of customers - values, status, religion

Behavioural - Actions, habits, and interactions with a brand or product

Advantages of Market Segmentation

• Understanding of customers

• Higher Sales

• Product differentiation

• Identification opportunities

Describe a Perception Map for Quality and Price.

High P & Q - Premium Brand

High P & Low Q - Cowboy Brand

Low P & Low Q - Economy Brand

Low P & High Q - Bargain Brand

Niche Marketing

Targeting a specific and well defined segment of a market. E.g Ferrari, Red letter days, Build a bear etc.

Mass marketing

A number of different market segments are communicated at the same time

Niche marketing advantages and disadvantages

Advantages:

• Less competition

• Can charge more

• Advertising may be cheaper

• Easy to tailor products

Disadvantages:

• Less customers

Mass marketing advantages and disadvantages

Advantages:

• More customers

• Economies of scale

Disadvantages:

• Not personalised

What are the ways of a company differentiating themselves?

• Packaging

• Design

• Size

• Colour

• Payment & delivery options

Simple linear regression

Business management tool used to study the nature of the relationships between two variables

Correlation

Indicates the extent to which there is a relationship between the variables or events e.g the amount of marketing expenditure and market share.

Sales forecasting

Is a quantitative management technique used to predict a firms sales over a given period of time.

It is important as it can help a business identify problems and opportunities in advance.

Market Research

The identifying and forecasting the buying habits of consumers which can be vital to a firms prosperity and survival.

Extrapolation

The forecasting technique which identifies a firm’s sales trend by using historical data and extending this trend to predict future sales.

Time series analysis

The sales forecasting technique attempts to predict sales levels by identifying the underlying trend from a sequence of actual sales figures recorded at regular intervals in the past.

Seasonal Variations

Periodic fluctuations in sales revenue during different times

Cyclical Variations

These are recurrent fluctuations in sales revenue linked to the economic cycle of booms and slumps.

Unlike seasonal variations, cyclical variations can last longer than a year.

Random Variations 

These are unpredictable fluctuations in sales revenue caused by erratic and irregular factors that cannot be practically or reasonably anticipated.

Benefits and Limitations of Sales Forecasting

Benefits:

• Improved working capital and cashflow - better cashflow management as they have ideas of sales and revenue so they can anticipate better.

• Improved stock control - ensure correct levels of stock are available for use in production at different times in the year.

• Improved product efficiency - the ability to plan for the correct levels of production means better use of their resources.

• External Sources of finance  - sales requirement needed in business plan used for loans and potential investors.

Limits:

• Limited information and predictions are based on the past so there’s no guarantee of it happening again.

• They are based on guesses and don’t take disasters(COVID, wars etc.) and economic collapses into account.

• Garbage in Garbage out - if data is outdated the forecast will be unrealistic and of no use to management.

Describe a Perception Map for Competitive Advantage and Scope.

Generic strategies

A business management decision making tool that outlines the competitive business strategies that a firm uses to compete with others.

Ad Hoc market research

Now and then, when necessary for a specific issue to be solved.

Continuous market research

Constantly researching the market, on a regular ongoing basis.

Quantitative market research

Collecting and using factual and measurable/numerical information

Qualitative market research

Getting non- numerical answers and opinions

Primary research

Collecting information yourself for a specific purpose.

Types of Surveys

Self-completed, Personal, Telephone, Online postal.

What makes a good survey?

• Avoiding bias or leading questions e.g. how much did you like …

• Avoid jargon (language that people don’t know)

• Use open and close ended questions

Interviews Pros and Cons

Pros:

• In depth analysis

• Misunderstanding can be connected

• Further questions can be asked based on responses

Cons:

• Non - quantitative means analysis can be difficult

• Time consuming

• Potential interviewer bias

Focus groups

A team of consumers discussing their thoughts and feelings about a given product or market.

Focus groups Pros and Cons

Pros:

• Engaging discussions

• Products tried and tested

• In depth analysis of a number of people

Cons:

• Time consuming

• Expensive

• Participants may have similar personality traits

Observation 

Watching how people behave and respond in different situations

Observation Pros and Cons

Pros:

• Shows what consumers are thinking

• Demonstrates what consumers actually do, not just what they think they do

Cons:

• Expensive to employ psychologists

Secondary research

Taking the information that has been collected for a different purpose.

Market analysis and how can it be done?

Gathering and evaluating information about an industry, target customers, and competitors to determine the viability of a business or product.

Can be done through:

• Specialist market research: ACORN, Mintel

• Competitors: websites, annual reports.

• Trade publications: Specialist magazines

Academic journals

Publications from educational and research institutions

What are the Government publications that can be used for secondary research?

ONS - economic and social trend (Office for national standards)

Census of population - once every 10 years

Types of media articles for secondary research

Books - Auto/Biographies, text book

TV - Documentaries

Newspapers - Reputable source only such as Financial times

Business journals - The Economists

Internet - reliability

Secondary market research Pros and Cons

Pros:

• Generally Cheaper

• Wide range of sources

• Large sample size

• Provides further explanation on an industry

Cons:

• Could be outdated

• Needs to be manipulated to suit the needs of the researcher.

Sample

A selected proportion of the population used for primary market research purposes.

Random sampling

Each member of the target population has an equal chance of being chosen, may lead to unreliable results.

Quota sampling

Already knowing the target market/takes it into account.

If 40% of the target market is male then 40% of the sample should be male.

Convenience sampling

Using individuals who are easy (convenient) to reach.

List the 5 D’s

Damage - protection of people and the environment.

Deceitful - presenting data openly, not in a misleading way.

Deceptive - letting people know their views are being recorded.

Disclosure - Breach of confidentiality, sale of consumer information.

Detachment - Interviewer must be free from bias.

Fast moving goods

Everyday convenience products, frequent purchases e.g. groceries.

Consumer perishables

Products which do not last a long time. Not necessarily ‘frequent’ e.g. flowers.

Consumer durables 

Products which last a long time. Usually expensive so infrequent purchase e.g. furniture

Speciality products

Exclusive, highly expensive products. E.g. house, sports car

Product Portfolio

The range of products or brands provided by a business.

Describe the Boston Matrix

Describe a Star on the Boston Matrix

High Market Share and growth, increasing revenue but also competition, high promotion costs and outflows may exceed inflows at first.

Describe a Cash Cow on the Boston Matrix

High market share, low market growth, established markets, lower promotion costs, less new competition therefore high barriers to entry, products can 'milked’ i.e. they generate revenue to support other products.

Describe a Question mark on the Boston Matrix

Low market share, high market growth, has lots of potential to become stars or even cash cows, often termed question marks at the start of their cycle. High levels of investment to do.

Describe a Dog on the Boston Matrix

Low market share and growth, most likely to be withdrawn if the business gets into financial difficulty.

Describe a products life cycle

Product design

Deciding on a production method whereby the product works well, looks good and can be produced easily and at the lowest possible cost.

Product development

The creation of a new or improved good or service for release into an existing market

Describe the process of developing new goods or services

1. Generating ideas

2. Analysis of ideas

3. Product development

4. Test marketing

5. Launch

List Influences of the development of a product

• Entrepreneurial skills

• Competitors’ Actions

• Technology

• Results of market research

• Ideas from other countries

• Personal needs

• Personal experiences

• Environmental issues

Comment on the Introduction section of a PLC

• Launch of product

• Product awareness is low, advertising costs are high

• Negative cash flow, expenditure greater than revenue

• Effects depend on the company, for example a large investment on advertising and PR before the launch will result in potentially high sales/ revenue

Comment on the Growth section of a PLC

• Increasing popularity

• Retailer confidence

• Firm may start to achieve break-even and achieve profits

Comment on the Maturity section of a PLC

• Profitable

• Sales may reach more of a platform/ may plateau but can still increase.

Comment on the Saturation section of a PLC

• Competitors attracted to the market, which can affect sales.

Comment on the Decline section of a PLC

• Falling sales

• Many firms will remove the product from their portfolio at this stage.

Extension strategies

Methods used to lengthen the product life to delay its decline e.g. changing taste, features of the product, price or targeting new markets.

Brand

A name, colour, sign, symbol, font or design that is identifiable with a product of a particular business.

List what branding is

• A legal instrument, brand name create a legal identity that can’t be copied.

• A risk reducer, brands give new products in the portfolio a better chance of survival.

• An image enhancer, a successful brand > premium pricing.

• A revenue earner, branding encourages brand loyalty.

List what branding creates

• Intangibility, brands place an intangible value on the physical product.

• Uniqueness, brands are unique, products can be copied.

• Timelessness, products can become obsolete but their brand name lives on.

Trademark

Gives legal protection to the owner to have an exclusive use of the brand name.

Brand awareness

Measures the extent to which people recognise a particular brand. Often expressed as a percentage of the sample surveyed.

Brand development

Refers to the ongoing and long-term marketing process of improving and enlarging the brand name in order to boast sales revenue and market share.

Brand loyalty

Occurs when consumers buy the same brand of a product repeatedly overtime. Customers are devoted to the brand as they have brand preference over other rival brands.

Importance of brand loyalty

• It helps a business maintain or improve their market share.

• It helps enable businesses to charge premium prices for its products, which improves their profit margins.

• It acts as a barrier to entry in highly competitive markets, such as fashion and consumer electronics industries. This is because brand loyalty reduces the likelihood of brand switching.

• It plays major role in the future success of a business, helping to prolong the product and brand’s life cycles.

Brand value

The premium that consumers are willing to pay for a brand name over and above the value of the product itself, i.e. customers are willing to pay more for a reputable brand.

Advantages of boosting brand value

• Higher market share - market share is  an indicator of the level of development and brand loyalty.

• Premium Prices - Having high brand value allows a business to charge higher prices for its products because consumers feel that they are paying for the value added that the brand carries.

• Higher barriers to entry - Brand value makes it more difficult for  a new business to enter the market and compete, simply because customers are loyal to the existing brand.

Cost Plus Pricing

Adding a percentage or specific amount of profit to the cost per unit of output to determine the selling price - Mark up

Penetration pricing

Low prices are set to penetrate or break into the market or gain a sudden spurt in market share.

Loss Leader Pricing

Setting a price below the cost of production with the intention of raising sales of other products in a firm’s product portfolio.(Draw them into the store)

Predatory Pricing

A firm sets very low prices to drive other firms out of the market.

• Could be deemed illegal

• AKA Destroyer Pricing

Premium Pricing

Setting the prices significantly higher than similar competing products, usually because the product is of higher quality or is significantly unique.

Dynmaic Pricing

Varying price to reflect changing market demand. Peak and of Peak.

Competitive pricing

Firms set prices equal to or similar to competitors.

Contribution Pricing

Takes into accont the direct costs of making the product.

Price Elasticity of Demand

The responsiveness of a change in quantity of a good or service demanded to a change in price.

Inelastic demand

Quantity of goods relatively unresponsive to price 0 <e < 1.

Elastic demand

Quantity of goods relatively responsive to price e > 1.

What would a increase and decrease in price do to the total revenue of an inelastic, unitary and elastic product?

Increassse Tr and the oppsirte for a decrease in P