AQA A Level Business unit 3.3

What is marketing?

The process of identifying, anticipating (predicting) and satisfying customer needs profitably.

Marketing objectives in other functional areas

Marketing objectives set will have an impact on other parts of the business like finance.

Business benefits of setting marketing objectives

- Ensure functional activities consistent with corporate objectives

- Provide a focus for marketing decision-making effort

- Provide incentives for marketing team

- Measure success/failures

- Establish priorities for marketing resources and effort.

Potential problems with setting marketing objectives

- Fast changing external environment

- Potential conflict between marketing objectives

- Easy to be too ambitious with marketing objectives

- Entering a new market

- Gaining an advantage over competitors.

Internal influences on marketing objectives

- Corporate objectives

- Finance

- HR

- Operational issues

- Business culture.

What is primary research?

Data collected first hand for a specific research purpose.

What is secondary research?

Data that already exists and which has been collected for a different purpose.

Advantages of primary research

- Directly focused to research objectives

- Kept private

- More detail.

Disadvantages of primary research

- Time consuming

- Costly

- Sampling may not be representative.

Advantages of secondary research

- Often free and easy to obtain

- Quick to access

- Good source of market insights.

Disadvantages of secondary research

- Can be out of date

- Not tailored to business needs.

Primary research methods

- Focus groups

- Observation

- Surveys.

Secondary research methods

- Google

- Published reports

- Competitor materials.

What is quantitative research?

Research based on numerical data.

What is qualitative research?

Research based on views and opinions.

Benefits of qualitative research

- Essential for important new product development and launches

- Focused on understanding customer needs

- Effective way of testing elements of the marketing mix.

Drawbacks of qualitative research

- Expensive to collect and analyze

- Based around opinions.

Benefits of quantitative research

- Data is easy to analyze

- Can be compared with data from other sources.

Drawbacks of quantitative research

- Focuses on data rather than explaining why

- May lack reliability if sample size and method is not valid.

What is sampling?

Involves gathering of data from a sample of respondents, the results of which should be representative of the population as a whole.

Benefits of sampling

- Can provide useful research insights

- Reduces risk and costs

- Flexible and quick.

Drawbacks of sampling

- Biggest risk = sample is unrepresentative of population

- Risk of bias

- Less useful in market segments where customer tastes and preferences are changing frequently.

What is extrapolation?

Use of trends established by historical data to make predictions about future values.

Benefits of extrapolation

- A simple method of forecasting

- Not much data required

- Quick and cheap.

Drawbacks of using extrapolation

- Unreliable

- Assumes past trend will continue into the future

- Ignores qualitative factors (changes in tastes).

What is correlation?

A method of forecasting that looks at the strength of a relationship between 2 variables.

What are confidence intervals?

The percentage probability that an estimated range of possible values in fact includes the actual value being estimated.

What is market size?

Market size is a measure of the total available demand for competitors in a market.

What is market share?

The proportion of market size held by each competitor in a market.

What is market growth?

The percentage of growth in market size over a period.

What is price elasticity of demand?

Measures the extent to which the quantity of a product demanded is affected by a change in price.

Price elasticity of demand (PED) formula

% change in quantity demanded / % change in price.

What is price elastic?

More than 1; change in demand is more than the change in price.

What is price inelastic?

Less than 1; change in demand is less than the change in price.

What is unitary price elasticity?

Exactly = 1; change in demand = change in price.

Why does price elasticity of demand matter?

If PED > 1 (elastic) then a change in price will cause a larger change in demand; overall revenues would increase with a price cut; overall revenues would fall with a price increase (opposite if PED < 1, price inelastic).

Factors that influence what the PED is for a product

- Brand strength

- Necessity

- Habit

- Availability of substitutes

- Time.

What is income elasticity of demand?

Measures the extent to which the quantity of a product demanded is affected by a change in income.

Income elasticity of demand formula

% change in quantity demanded / % change in income.

What are luxuries in terms of income elasticity?

Income elasticity more than 1; as income grows, more is spent on luxuries (e.g., consumer goods, expensive holidays, branded goods).

What are necessities in terms of income elasticity?

Income elasticity less than 1 but more than 0; as income grows, less is spent on necessities (e.g., staple groceries).

What are inferior goods?

Have an income elasticity of less than one; income rises, demand falls.

Limitations of using elasticities

- Difficult to get reliable data

- Many markets subject to rapid technological change

- Competitors will react.

What is market segmentation?

Involves dividing a market into parts that reflect different customer needs and wants.

4 ways to segment a market

- Demographic (age, gender, religion)

- Income

- Behavioural

- Geographical.

Benefits of market segmentation

- Helps new product development

- Helps make the marketing mix more effective (better targeting of promotion).

Drawbacks of market segmentation

- Markets are increasingly dynamic

- Segmentation is an imprecise science.

What is niche marketing?

Where a business targets a smaller segment of a larger market, where customers have specific needs and wants.

What is mass marketing?

Where a business sells into the largest part of the market, where there are many similar products offered by competitors.

Advantages of targeting a niche

- Less competition

- Clear focus

- Can often charge a higher price.

Disadvantages of targeting a niche

- Lack of economies of scale

- Vulnerable to market changes.

What is product differentiation?

Where a product has a value proposition that is sustainably different from competition.

What is the marketing mix?

Combination of elements used by a business to enable it to meet the needs and expectations of customers.

What are the 7 P's of marketing?

- Product

- Price

- Place

- Promotion

- People

- Process

- Physical.

Influences on the marketing mix

- Segmentation, targeting, positioning, marketing mix

- Business resources

- Technology

- Customer relationship.