unit 3-decision making to improve marketing performance business

market segmentation

the process of splitting the market into subgroups of consumers with similar characteristics

Market Targeting

deciding which part of the market the business wants to operate in (the whole market or parts of it)

mass

targeting to whole market

niche

targeting a segment

market mapping

can help business position its product or service compared to the competition

marketing objectives

are targets set to the marketing function to achieve the overall business objective

sales volume

is the number of units sold

sales value

is how much the sales are worth

market share

is the proportion of a particular market that is controlled by an individual business

market growth

measures the change in size in market as a %

Market share calculation

Sales of business / total sales in market x 100

sales growth calculation

difference in sales / sales in original year x 100

Market growth calculation

(new market size - old market size) / old market size x 100

Market size calculation

sales/market share x 100

external influences on marketing objectives

Economic environment / competitor actions / market dynamics / technological change / social and political change.

internal influences on marketing objectives

Corporate objectives/Finance/Human resources/Operational issues/Business culture

market research

is the process of gathering data on potential customers

primary research

is the collection of information for the first time for a specific purposes

secondary research

is the collection of data using research or information provided by others, such as magazines, journals and the internet. Often called desk research.

qualitative market research

Collection of information about the market based on subjective factors such as opinions and reasons.

quantative market research

is the collection of information on consumers views and behavior that can be analysed statistically

Primary research advantages

specific to the immediate data needs and topic at hand, offers behavioral insights generally not available from secondary research

Primary Research disadvantages

Costly
Time consuming
Requires more sophisticated
training and experience to design
study and collect data

Secondary Research Advantages

Saves time in collecting data because they are readily available
Free or inexpensive (except for syndicated data)

Secondary Research disadvantages

May not be precisely relevant to information needs
Information may not be timely
Sources may not be original, and therefore usefulness is an issue
Methodologies for collecting data may not be appropriate
Data sources may be biased

sampling

is the selection of a representative group of consumers from a larger population

sample

a subset of the target population who are representative of the target population

random sampling

a sample is selected from a population where each individual is chosen entirely by chance and has a an equal chance of being selected

quta sampling

the population is first segmented into subgroups before a judgment is made selecting respondents that are representative of that subgroup

stratified random sampling

Population divided into subgroups (strata) and random samples taken from each strata

benefits of sampling

reduces time
if the right people are surveyed should be representative of the target population

Drawbacks of sampling

the sample may be unrepresentative
the data collected may be inaccurate (questions may be biased, the sample may be too small, etc)

confidence interval

is the plus or minus figure used to show the accuracy of results arising from sampling

confidence level

is the probability that research findings are correct

correlation

is a statistical technique used to establish the extent of a relationship between two variables such as the level of sales and advertising expenditures

extrapolation

analyses past performance of a variables such as sales and extends the trend into the future

what is a trend

is a underlying pattern of growth or decline in a series of data

correlation positive

when the two factors move in the same direction

Correlation Negative

when the two factors move in the opposite direction

correlation strong

when it is easy to draw a line of best fit

correlation weak

when it is difficult to fin a line of best fit the weaker the correlation is the least accurate the data will be

Elasticy

is a measure of the responsiveness of demand to a change in a variable

Preice Elasticity of Demand

is a measure of how responsive demand is to a change in price

income elasticity of demand

is the measure of the responsiveness of demand of a good or service to a change in income.

PED calculation

% change in quantity demanded / % change in price

factors influencing elasticity of demand

strength of brand
whether it is a necessity or not
whether there are substitutes

If a product is elastic bellow -1

a change in price (or other variables) will result in an equivalent or greater change in demand

if a product is inelastic (-1-0)

a change in price will result in change in demand less then change in price

How does PED help firms?

-set optimal price to maximise sales revenue
-anticipate change in demand
-plan production output so order the correct amount of stock from suppliers to match the new level of demand
-Decide on the correct promotional method for example sales promotion is not a suitable promotion method for inelastic products.

luxury good

is a product or service that is not necessary income elasticity greater than 1

normal good

is a product or service that is a necessity income elasticity 0-1

inferior good

is a product or service that has a low perceived value income elasticity bellow 0

YED calculation

% change in quantity demanded / % change in income

if income increases and decrease for a inferior product

increase-the demand for inferior goods will fall and revenue will fall
decrease-the demand of inferior good will increase and revenue will fall too

what happens when income changes for inelastic YED

the change in demand will be small so only effect revenue small bit

the income increase and decrease for luxury goods

increase-the demand will increase and revenue will increase
decrease-the demand will decrease and revenue will decrease as well

How does YED assist firms?

-if the economy is doing well and incomes are rising this will lead to relatively fast growth in the demand for products that have a positive and high-income elasticity of demand
-during a booming demand for inferior goods is likely to fall

Market Postioning

is where a particular brand stands in relation to other brands in the market

demographic segmentation

segmenting markets by age, gender, income, ethnic background, and family life cycle

Geogrpahic Segmentation

organizes customers into groups on the basis of where they live

Behavioural segmentation

dividing a market into segments based on consumer knowledge, attitudes, uses, or responses to a product

Income segmentation

dividing a market into different income segments

Benefits of market segmentation

-Identifies opportunities for new product development
-Helps in the design of marketing programs that are most effective for reaching homogeneous groups of consumers
-Improves the allocation of marketing resources

Drawbacks of market segmentation

-Difficult to identify the key groups needed
-Difficult to reach the chosen groups
-The segments may not always stay interested in the product
-Meeting the needs of the customers not in the chosen market segment

benefits or niche marketing

-lower competition
-brand loyalty
-less spent on marketing
-higher profit
-expertise

drawbacks from niche marketing

-limited growth
-if profitable may attract competitors
-may be difficult to generate accepatbale profit

Benefits of mass marketing

- Huge potential number of customers
- Higher production levels allow economies of scale - lower production costs
- Can use mass media advertising

Drawback of mass marketing

-high competition
-not beneficial for small business
-customers experience

the marketing mix

Product, Price, Place, Promotion,process,physical environment and people

industrial product

products purchased for further processing or for use in conducting a business

unique selling proposition (USP)

refers to differentiating factors that allows a business to differentiate its products or services from other markets

the importance of a USP

-can base its advertising campaign around the difference between its products and competitors
-encourages brand loyalty
-allows business to charge premium price

Product Life Cycle (PLC)

a graph that tracks sales of each individual product over time

Prodcut Life Cycle

introduction, growth, maturity, decline

product life extension strategy

are marketing actions taken to prolong the life of a product

research and development (plc stage)

Market research is carried out, the idea for the product is developed and prototypes produced. This is an expensive period for the company as no sales are made as the product is not yet available.

Induction (plc stage)

Sales begin and start slowly as consumers are getting to know the product. This stage will involve a lot of expenditure on promotion. The firm will need to convince their distributors to stock the new product.

Growth (PLC Stage)

The beginning of this stage is marked by the point at which profitability becomes positive. Sales growth continues at an increasing rate and new firms will enter the market, attracted by high-profit potential.

Maturity (PLC Stage)

The initial phase of this stage is characterized by slowing sales. Eventually industry sales level off as the market becomes saturated. Consumer demand peaks during this stage. Price competition is greater during this stage than during the preceding stages. Some manufacturers may be forced out of the market as total industry profits decrease throughout this stage.

Decline (PLC Stage)

Industry sales decline and many firms leave the market. Industry profits continue to decline throughout this stage. Most remaining firms will exit the market. The length of the PLC will vary depending on the nature of the product, technological displacement, the competitive climate, and consumer demand. In general, product life cycles are getting shorter.

Pros of Product life cycle

-tracks sales
-prompts extension strategies
-helps to plan marketing activities

Cons of product life cycle

-not always clear where the product is on it
-only for individual products
-does not explain change in sales
-can be difficult to read
-based on past figures

Boston Matrix

Analyses all of the firm's products in terms of their market share and the growth of the market

Boston Matrix - Dogs

LOW market share
LOW market growth
little or no profit

Boston Matrix - Cash Cows

HIGH market share
LOW market growth
profitable with no need for investment

Boston Matrix - Stars

HIGH market share
HIGH market growth
needs investment to be profitable

Boston Matrix - Question Marks

high market growth, low market share

strategy for Boston matrix-question marks

MONITER this product to see whether it has potential to become a star if the product doesn't achieve its potential it will become a dog

strategy for Boston matrix-stars

INVEST in this product as it has potential for further growth keeping its market share high is key to ensure it becomes a cash cow in the future

strategy for Boston matrix-dog

REMOVE this product from the market? it depends whether it is making a loss and how important it is to the brand

strategy for Boston matrix-cash cow

MAINTAIN- this profitable products market share but do not spread too much on it as sales are unlikely to grow significantly

benefits of using Boston matrix

-simple to implant easy to understand
-helps company decide its proper management strategy

drawbacks of using Boston matrix

-high market share does not always lead to high profit
-the destitution between high and low is highly subjective
-no medium only high and low might not be reflective

Pricing Stratergies

are pricing decision adopted over the medium to long term to achieve marketing objectives

pricing tactics

are pricing decisions adopted in the short term to suit particular situations

dynamic pricing

is where firms set flexible prices for goods based on current marketing demands

price skimming

involves initially charging high prices for innovative or high-tech products. Price is reduced as the novelty wears off and as substitute products appear.

penetration pricing

setting a low initial price on a new product to appeal immediately to the mass market

pricing methods

are the methods used to calculate the actual price set

cost-plus pricing

adding a standard markup to the cost of the product