3.3 Marketing

Sampling

Selecting a group of people to represent a target population

Extrapolation

Predicting future trends from past data

Primary Research

Data you collect first hand

Advantages of Primary Research

• Specific to the business

• Up to date

• Reliable

Diadvantages of Primary Research

• Time consuming

• Costly

• Hard to get large sample sizes

Examples of Primary Research

Questionnaires, interviews, focus groups, customer observations

Secondary Research

Research that already exists done by someone else

Advantages of Secondary Research

• Fast

• Better if you want quantitative data

• Easily accessible

Disadvantages of Secondary Research

• Some data you might need to pay for

• Not always up to date

• Not specific for the business

Market Mapping

Shows how products/businesses are viewed to competitors on 2 characteristics

Benefit of Market Mapping

• Helps understand their competition

• Helps to see if they should set up in a market

Drawback of Market Mapping

Only considers 2 variables

Correlation

Helps a business understand the relationship between 2 factors

Advantages of Sampiling

• Quicker and easier than trying to collect research from everyone

• Bigger sample size, will be more representitive

Confidence Levels

Shows how accurate the research findings are

Confidence Interval

Possible range for outcomes for a given confidence

Price Elasiticity of Demand (PED)

Effect on customer demand when changing the price of a product

Price Elastic

Demand decreases when prices increases

Price Inelastic

Demand Increases when price increases

Example of Inelastic Products

water, clothes, glasses, sanitary products, toothpaste

Example of Elastic Products

Cars, Phones, Ice cream

Income elasticity of Demand (YED)

Measures the quantity of a product demanded is affected by a change in income

Price Elastic Number

More than 1

Price Inelastic Number

Less than 1

YED between 0 and 1

Normal essential goods: Demands stays the same. E.g. water

YED smaller than 0

Inferior good:  Income increases and demand decreases. E.g. Transport, Low priced clothing/ Food Products

YED more than 1

Luxury goods: Electronics

Market Capitalisation

Share price X Number of Outstanding shares

Outstanding shares

Number of shares all shareholders own

Market Share

Total sales / Total Market Sales x100

Sales Growth

(New Sales - Old Sales) / Old Sales x100

Market Growth

(New Market - Old Market) / Old Market x100

Market Segmentation

Dividing a market into different parts based on different customer needs and wants

What are demographic segments?

Characteristics: age, gender, religion, ethnicity

What are Income segments?

Income, occupation, social class

What are Behavioural segments?

How customers respond to a product (Loyalty, when/why people buy products)

What are Geographical segments?

Physical Location

Benefits of Market Segmentation

• Matching customer needs = increase customer loyalty

• Identify the needs of specific customers

Drawbacks of Market Segmentation

• Expensive to research

• Constantly changing behaviour

Positioning

Process a business goes through when launching a new product/service. It decides price, quality, branding, customer perception

Market Mapping

“position” the product in a market based on two dimensions

Benefits of Market Mapping

• Helps businesses come up with new ideas for new products

• Make comparisons between rivals products

Drawbacks of Market Mapping

• Mapping a market may require primary research, which can be expensive

• Only two criteria can be chosen

Niche Marketing

A business targets a smaller segment of a larger market, selling products to customers who have specific needs and wants

Benefits of Niche Marketing

• Stronger customer loyalty

• Less competition 

• Clear focus

Drawbacks of Niche Marketing

• Vulnerable to market changes 

• Attract competition if successful

Mass Market

Where a business sells into the largest part of the market, where there are many similar products on offer

Benefits of Mass Market

• More customers/sales

• Brand recognition

Drawbacks of Mass Market

• More competition

• More advertising needed

STP Process

Segmentation - Identify target market based on business strengths/competition

Targeting - Categorise customers based on their characteristics/needs

Positioning - Position competitiors in order to meet customer needs that aren’t yet satisfied

Promotion

How the customer is found & persuaded to buy

Price

How much the customer pays for the product

People

The stakeholder who makes contact with customer

Physical Environment

The elements of the physical environment the customer experiences

Product

The product or service customer buys

Process

The processes that deliver a product to a customer

Place

How the product is distributed to the customer

Brand Loyalty

Customers consistently choosing a business over others

Boston Matrix : Dog

Low market growth

Low market share

Boston Matrix : Cash Cow

Low market growth

High market share

Boston Matrix : Question Marks

Low market share

High market growth

Boston Matrix : Stars

High market share

High market growth

Development Stage

A new product is researched and tested before it is introduced into the market

Introduction Stage

New product is launched into the market

• Lots spent on marketing

• Low sales

Growth Stage

The product experiences a rapid increase in sales

• Economies of scales

• Competition intensifies

Maturity Stage

The product reaches its peak level of sales

• Sales growth slows down

• Compeitionhighest

• Cash flow highest

Decline Stage

Decrease in sales

• Decrease in profit

• Decrease in cash flow

Extension strategies for Decline Stage

Prolong the life of a product and increase sales

• Pricing strategies

Factors influencing pricing

• Branding - Luxury/necessity/affordable brand

• Supply/Demand

• Cost of suppliers

• Competitors pricings

• Product Life Cycle

• Price Elasticity of demand

Penetration Pricing