Business Studies IGCSE (CIE) - Unit 3 Marketing Key Terms

Customer base

the group of customers a business sells its products to

Market

all customers and consumers who are interested in buying a product and have the financial resources to do so

Target market

individuals or organisations identified by a business as the consumers of its products

Customer

an individual or business that buys goods and services from a business

Consumer

the final user of a product

Consumer markets

markets for goods and services bought by the final consumer

Industrial markets

markets for goods and services bought by other businesses to use in their production process.

Business environment

the combination of internal and external factors that influence the operations of a business

Free trade

no barriers exist that might prevent trade between different countries

Niche marketing

developing products for a small segment of the market

Mass marketing

selling the same product to the whole market

Market segment

a part of the whole market in which consumers have specific characteristics

Market segmentation

dividing the whole market into segments by consumer characteristics and then targeting different products to each segment

Geographic segementation

dividing consumers in the market by geographic area

Demographic segmentation

dividing consumers in the market by factors such as age, gender, income, ethnic background and social class.

Psychographic segementation

dividing consumers in the market by lifestyles, personalities and attitudes.

Market research

the process of collecting, recording, and analysing data about the customers, competitors and market for a product.

Unique Selling Point (USP)

The special feature of a product that sets it apart from competitors’ products/

Market-oriented

Products are developed based on consumer demand as identified by market research

Product-orientated

The firm decides what to produce and then tries to find buyers for the product.

Primary research

The collection of first-hand data for the specific needs of the firm

Secondary research

The collection of data from second-hand sources

Quantitative research

The collection of numerical data that can be analysed using statistical techniques.

Qualitative research

The collection of information about consumers’ buying behaviour and their opinions about products.

Sample

A representative sample of the target market selected to take part in market research.

Marketing mix

Four marketing decisions needed for the effective marketing of a product

Four Ps

The right product at the right price with the right promotion in the right place.

Product

A name, image or symbol that distinguishes a product from competitors’ products.

Brand image

The general impression of a product held by consumers

Product life cycle

The pattern of sales of a product from introduction to its withdrawal from a market.

Extension strategies

Marketing activities to extend the maturity stage of a product.

Price

The amount paid by the customer to the supplier when buying a good or service

Product quality

The product meets the needs and expectations of customers

Market skimming

setting a high price for a new product that is unique or very different from any other product on the market (e.g. technology products such as the latest TV or PlayStation)

Advantages:

• Initial profit earned from market skimming is high

Disadvantages:

• Businesses may need the large profit to pay back high costs of research and development of the product

• Limited market penetration due to high prices

Penetration pricing

setting a low price to attract customers to buy a new product (e.g new products entering a highly competitive market such as snack foods or drinks)

Advantages

• Rapid market penetration, allowing the business to quickly gain market share and establishing a strong customer base early on

Disadvantages

• Customers become used to the low prices, if raised they may go to competitors instead.

Competitive pricing

setting a price similar to that of competitors’ products which are already established in the market

Advantages

• Businesses with good brand image and customer loyalty utilise competitive pricing as their loyal customers will purchase their high quality brand and product over competitors

Disadvantages

• Reduced profit margins as a result of low prices from competitors - the greater the competition, the lower the prices will be

Cost-plus pricing

The price is calculated by taking the unit cost of the product and adding a mark-up (e.g a loaf of bread costs $1.50 to make and is sold for $2.50 after the mark-up is added)

Advantages

• Easy to calculate price and determine the quantity of sales needed in order to achieve a certain level of profit (for niche marketing)

Disadvantages

• Doesn’t consider how much consumers are willing to pay, for example, consumers in some locations may be willing to pay a higher price

• Doesn’t consider the prices of rival (competing) products, which may mean that it is not competitively priced

Psychological pricing

The price is made to seem cheaper than it actually is (e.g. $9.99 seems cheaper than $10)

Advantages

• Customers feel like they’re getting good value for their money

• Price seems less expensive to a customer

Disadvantages

• The customer might be aware of the strategy and is put off by it (does not like being ‘deceived’)

Dynamic pricing

The price changes in real time in response to changes in market demand and supply (e.g. new products entering a highly competitive market such as snack foods or drinks)

Advantages

• Businesses such as hotels and airlines which, are able to sell their products online, as prices can be changed easily

• Business wishes to fully utilise spare capacity, which can be achieved by charging customers different prices

Disadvantages

• Can’t be used for businesses with physical retail outlets, as the process of changing prices can be costly and complicated

Demand

the quantity of goods and services consumers are willing to buy

Price elasticity of demand

measures by how much demand (sales) for a product changes when there is a change in its price

Price inelastic demand

the percentage change in demand is less than the percentage change in price

Price elastic demand

the percentage change in demand is greater than the percentage change in price

Revenue

The amount earned by a business from the sale of its products

Channels of distribution

How a product gets from the producer to the final consumer

Wholesaler

a business that buys products in bulk from producers and then sells them to retailers

Retailer

shops and other outlets that sell goods and services to the final consumer

Middlemen

the intermediaries in the channels of distribution (e.g. wholesalers and retailers)

Direct selling

the product is sold by the producer directly to the final consumer without the need for any middlemen

Promotion

marketing activities used to communicate with customers and potential customers to inform and persuade them to buy a business’s products.

Advertising

Paid-for communication with consumers which uses printed and visual media. The aim is to inform and persuade customers to buy a product.

Informative advertising

information about the product communicated to consumers to create product awareness and attract their interest.

Persuasive advertising

communication with consumers aimed at getting them to buy a firm’s product rather than a competitor’s product

Below-the-line promotion

promotion that is not paid for communication but uses incentives to encourage consumers to buy.

Sales promotion

incentives used to encourage short-term increases in sales or repeat purchases.

Personal selling

sales staff communicate directly with the consumer to achieve a sale and form a long-term relationship between firm and consumer

Direct mail

printed materials which are sent directly to the addresses of customers

Sponsorship

payment by a business to have its name or products associated with a particular event

Marketing budget

the amount of money made available by a business for its marketing activities during a particular period of time

E-commerce

use of the internet and other technologies by businesses to market and sell goods and services to customers

Marketing strategy

a plan to achieve the marketing objectives using a given level of resources

Legal controls

Laws that control the activity of businesses

Barriers to trade

usually taxes, quotas or bans that one country places on the goods of other countries to prevent or increase the cost of them entering that country

Domestic market

the market for goods and services in the business’ own country

Joint venture

an agreement between two or more businesses to work together on a project