aqa business 3.3

Marketing

Marketing

The process of analysing, identifying and satisfying customer needs profitably

Marketing includes e.g. x3

Undertaking and analysing market research Identifying target markets Communicating successfully with customers

Marketing objectives

The goals set for the marketing department to achieve that will help a business to achieve their corporate objectives

Sales volume

Measures the total number of units a firm has sold

Sale value

Measures the monetary value of the sales a firm makes

Sales value formula

Units sold x average selling price

Market size

Can be measured by value or volume (total units sold)

Market size formula

Total units sold in the market x selling price per unit

Market growth

The % increase in the size of the market in terms of either value or volume

Market growth formula

Change in the size of the market/original size x 100

Change in the size of the market formula

Current size - original size

Market share

The % of the total market sales accounted for by one business

Market share formula

Sales of the business/total market sales x 100 Brand

Brand loyality

The extent to which consumers make repeat purchases from the same brand

Internal influences on marketing decisions x2

Finance

Internal influence onf marketing decisions: FInance

it is important to set a clear marketing budget with sufficient finance allocated to enable the company to achieve their corporate objective.

Internal influences on marketing decisions: Coporate objectives

what is the company's overall goal, and what is required of the marketing department in order to achieve this goal?

External influences on marketing decisions x2

Technological change Social factors

External influences on marketing decions: Technological change

Huge impact on marketing in terms of data collection, personalised marketing and impact on the marketing mix

External influence on marketing decisions: Social factors e.g.

Changes in attitudes towards healthy eating etc.

Market research

The process of collecting information about customers and competitors in order to make informed decisions

Market research e.g. x2

Product development Budget allocation

Primary market research

Data collected by a company that is specific for their needs and purposes

Examples of primary market research x2

Surveys Questionaires

Forms of surveys and questionaires x3

Physical Telephone Internet

Focus group

Interviewing a small group about aspects of a business's Marketing mix

Primary market research pros x2

Up to date Target specific group of customers

Primary market research cons x2

Time consuming Expensive

Secondary market research

Data used by a company that has been collected by Another organisation

Sources of secondary research x2

Goverment data Media

Goverment data e.g.

Cenus data

Media e.g. x2

Newspaper trade magazines

Secondary market research pros x2

TIme saving Likely to be more comprehensive covering more data points

Secondary market research cons x2

Could be out of date Not specific to organisation needs

Quantitative data

Statistical information focused on identifying patterns of behaviours

Quantitative data pros x2

Collection of large amounts of data patterns found

Quantitative data cons x2

no reasons for data less quality

Qualitative data

The gathering of in - depth information explaining patterns of consumer behaviour

Qualitative data pros x2

Enables reasons for customers behaviour to be identified Follow up questions can be asked

Qualitative data cons x2

Can be expensive to collect Usually based on small population sizes which may not be representative

Market mapping

The process of assessing the level of competition in a market by analysing the characteristics of brands in that market

Example of possible market maping chracteristics x2

High vs low quality Aesthetically pleasing vs functional design

Market mapping pros

Helps to identify competitors helps to identify possible gaps in the market useful for repositioning or new businesses

Market mapping cons x2

Doesn't identify customer demand May over simplify a complex market

Sampling

Conducting market research on a group of customers chosen to be representative of the entire market

Random sample

A sample is selected for study where each individual is chosen entirely by chance and has an equal chance of being chosen

Stratified sample

This is where the proportion of those sampled is representative of the market as a whole

Sampling pro x2

More cost and time effective to pick a small group of customers then a larger one Samples allow for generalised conclusions to be drawn relatively quickly and accurately

Sampling cons x2

Picking a sample that is truly representative of the whole market Difficultly sampling certain groups of customers (i.e. working mothers)

Effective sampling depends on x2

The size of the sample/the budget available The skill of the market research team

Correlation

Occurs when there is a relationship between two sets of data

Strength of a relationship based on

correlations

Strong correlation

Occurs when there is little deviation from the line of best fit

Weak correlation

Occurs when there is a large deviation from the line of best fit

Positive correlation

Occurs when two sets of data increase or decrease together

Negative correlation

Occurs when two sets of data change in opposite directions

No correlation

Occurs when there is no obvious relationship between the data sets

Confidence intervals

An estimate of the level of the accuracy of the data derived from sampling

A narrower confidence range represents .....

A lower margin of error within the sample and therefore more accurate data

Factors influencing confidence intervals x2

Sample population size

Extrapolation

Using data collected in the past to predict future patterns of behaviour

Extrapolation pro x2

Based on data already collected = cheap to do Helps set targets

Extrapolation cons x2

Based on past data and may not consider unforeseen changes in circumstances Relies on accuracy of data previously collected

Use of technology to gather data e.g. x2

Electric / online surveys loyality cards

loyality card

Tracking individual customer purchases

Use of technology to anylase data x2

Presentation packages to encourage discussion and debate sales data

Use of technology to gather data pros x2

Relatively cheap systems to quantify and store large amounts of data Allows for the collection of far more detailed and personalised information leading to personalised marketing

Use of technology to gather data cons x2

RIsk of paralysis by analysis Risk of an over-reliance on data and less use of the hunch in decision making

Price elasticity of demand

The responsiveness of demand to a change in price

Price elasticity of demand formula

% change in QD/% change in P

Price inelastic demand

when a change in price leads to a less than proportional change in demand

coefficient of PED of an elastic product

less then -1

Price inelastic demand

Occurs when a change in price leads to a less than proportional chance in demand

coefficient of PED of an inelastic product

between 0 and - 0.999

Determinants of PED

Number of close substitutes - a lack of substitutes = inelastic PED Luxury vs necessity = necessities tend to have inelastic PED

Elastic product

consumers are very responsive to changes in price

Increase revenue using Price elasticity of demand x2

Cut the price of the elastic product Increase the price of an inelastic product

Price elasticity of demand impacts on profits x2

Changing the price of the product will have an impact on Impact on profit depends on the effect of costs revenue

Creating inelastic demand x2

Spend money on adveritising to improve brand awareness Increase differentiation so product = unique + no substitutes

Price elasticity of demand pros x2

Helping the business to make pricing decisions helping set targets for sales

Price elasticity of demand cons x2 (including income elasticity of demand)

If past data Is used - accuracy today? Assumes all other factors remain the same e.g. level of competition and consumers income etc

Income elasticity of demand

Responsiveness of demand to changes in peoples income

Income elasticity of demand formula

%change in QD/% change in Y

Inferior goods

Products which have a negative correlation between change in income and quantity demand (negative YED)

Normal goods

Opposite of inferior good (positive)

Necessities

Are goods which demand changes proportionally less then income. Weak correlation between changes in income and demand

Luxuries

Opposite of necessities

Income elasticity of demand pros x2

Help to predict how sales will respond if there are changes in the economy Help manage product portfolio and manage ris

Data used in marketing decisions e.g.

PED/YED data

Data used in marketing decision making pros x2

Understand customers and competitors Make decisions on marketing mix

Data used in marketing decision making cons x2

Paralysis by analysis (complexity difficulty of assessing new products