Studied by 3 peoplemarket orientation
an outward looking approach basing product decisions on consumer demand, as established by market research
product orientation (+example)
an inward looking approach that focuses on making products that can be made or have been made for a long time - and then trying to sell them (luxury products/brands)
advantages of market orientation
chance of failing for newly developed products is reduced
cheaper than product orientation
likely to survive longer
advantages of product orientation
associated with high quality products
can succeed in industries where business is slow
define market share
the percentage of sales in the total market sold by one business
formula for market share
firm’s sales in a given time period / total market sales in time period (market size) x 100
define market growth
percentage change in total size of a market over a period of time
formula for market growth
market size (2nd year) - market size (1st year) / market size (first year) x 100
the importance of market share and market leadership
brand recognition
economies of scale
influence in the market
what is a marketing plan?
a document outlining the firm’s marketing objectives and the marketing strategies to be used
advantages of marketing planning
improves the chances of success (deal with problems)
senior managers have more control
disadvantages of marketing planning
many small firms don’t have time, resources and expertise
can become outdated; doesn’t allow for flexibility
what is market segmentation?
a distinct group of customers with similar characteristics (age, gender etc)
what is targeting?
specific audience a company wants to reach
ways to market segment
1) by demographic factors (characteristics of population)
2) by geographic factors (location or climate)
3) psychographic factors (lifestyle, emotions)
advantages of market segmentation
a better understanding of customers; less resources used
increase sales
better opportunities
what is undifferentiated marketing?
large number of different market segments are targeted in order to maximize sales
advantages of undifferentiated marketing
time & resources are saved
bigger customer base
disadvantages of undifferentiated marketing
not suitable for all businesses due to high barriers for entry
competition can be aggressive
lack of focus
what is differentiated marketing?
tailors a marketing mix to each market segment
advantages of differentiated marketing
customers are satisfied to have specific marketing mixes tailored to their needs
risk is divided between several market segments
what is niche marketing?
target a specific and well defined market segment
advantages of niche marketing
better marketing focus
business charge higher price because demand is high
what is positioning?
analyzing customer perceptions of current brands using position maps
importance of having a USP
differentiates you from competitors
creates a competitive advantage and customer loyalty
how do companies differentiate themselves?
product differentiation (short term):
physical and perceived difference
service differentiation:
customer service, delivery, training
price differentiation:
offering a differentiated product at a differentiated price
distribution differentiation:
the channel the product passes to reach the end user
relationship differentiation:
a company’s personnel having personal customer relationships
image/reputation differentiation:
created by product quality, superior performance
what is sales forecasting?
uses quantitative methods to try and predict a firm’s future sales
advantages of sales forecasting
better cash flow management
understanding seasonal variations
increased efficiency
better work planning
disadvantages of sales forecasting
time consuming
it ignores qualitative external factors (political, social changes)
is based on present knowledge
estimation
techniques of sales forecasting
market research
extrapolation; using historical data to identify trends to predict future sales
time series analysis; identifying underlying trends using past sales figures
why do companies do market research?
gives up-to-date and accurate information
allows business to see whether current products meet the needs of customers
helps predictions for the future
how do companies carry out market research?
primary and secondary research
examples of primary research
surveys, interviews, focus groups, observations
advantages and disadvantages of surveys
quick
easily constructed
wide range of information
can be poorly constructed
may not be an accurate representation
can be expensive and biased
advantages and disadvantages of interviews
detailed information
high response rate
time consuming
interviewer may provoke bias
advantages and disadvantages of focus groups
cheap
measure reaction
insight on company’s position in customer’s mind
small number of individuals
may not be honest
advantages and disadvantages of observations
direct method of measuring behaviour
cost-effective
large number at once
no complete answers
need to combine with another method
examples of secondary research
academic journals, media articles, government publications, market analyses, online content
advantages and disadvantages of academic journals
peer reviewed by experts
good sources
take less time to publish than books
not good for general information
peer reviewing can be time consuming
advantages and disadvantages of media articles
cheaper than TV
newspaper is reliable
widely available
may be out of date
can be biased
waste of paper/resources
advantages and disadvantages of government publications
information on changes in government policy
reliable
good statistical information
difficult to gain access to some official governmental data
advantages and disadvantages of market analyses
information is accurate
more expensive option
advantages and disadvantages of online content
up-to-date
quick and easy to access
may be biased or incorrect
limited scholarly research is openly available
differences between quantitative and qualitative research
quantitative:
numerical data
less open to interpretation
objective
qualitative:
opinions, beliefs, attitudes
more open to interpretation
subjective
methods of sampling
quota, random, convenience
quota sampling (+ads, disads)
based on market segmentation (age, gender etc)
+ representative sample
+ more reliable than random
+ quick and cheap
- number and how random sample is doesn’t always accurately represent the population
random sampling (+ads, disads)
giving everyone in the population and equal chance of being selected for the sample
+ easy to get a sample
+ less biased
- indiscriminate
- large population needed
convenience sampling (+ads, disads)
based on ease of access to the researcher (e.g teacher survey about school canteen)
+ fast and cheap
- can be biased
product life cycle
1: developing
2: introduction/launch
3: growth
4: maturity
5: decline
7 P’s
product, price, place, process, physical environment, people, promotion
what is a product portfolio, and what tool is used?
is a technique used by firms which identifies the position of each product within its market
(BCG matrix)
PLC extension strategies
price reductions (sales)
redesigning (introducing new features etc)
repackaging
new markets
promotion
what is the boston consultancy group matrix
product range analysis that looks at market share and market growth of new and existing products
question marks, dogs, stars, cash cows
aspects of branding
brand awareness: recognition
brand development: plans to improve product image
brand loyalty: commited customers, repeat purchases
brand value: reputation, potential income, market value
the importance of branding
to give one message that the company portrays - represents the company’s reputation and how the customers perceive them
pricing strategies
cost-plus pricing
penetration pricing
price skimming
psychological pricing
loss leader
premium pricing
price discrimination
competitive pricing
predatory pricing
dynamic pricing
contribution pricing
price elasticity of demand
cost-plus pricing
calculates average costs, % profit the firm wants to make
penetration pricing (+aim)
setting a low initial price, increased over time: aims to get many customers quickly
price skimming
setting a high initial price, decrease over time
psychological pricing
e.g $9.99, or $4.95
loss leader (+aim)
selling at below their average cost: aims to attract customers to buys something else
premium pricing (+aim)
higher prices than competitors: aims to give the impression of superioirity
price discrimination
charging a different price for different groups of people (e.g cinemas, theme parks etc.)
competitive pricing
takes into account what your competitors are doing
predatory pricing (+aim)
eliminates any opposition by putting prices lower than your competitor’s average cost: aims to drive them out of business
dynamic pricing
firms charge different prices for their products depending on which customers are buying or when they sell, prices change on an ongoing supply and demand
contribution pricing (+formula)
calculates variable cost per unit and adds it to initial pricing:
contribution per unit = price - variable cost
what is price elasticity of demand?
measures how much the demand for a product changes when there is a change in price
formula for price elasticity of demand (+what values mean)
PED = % change in quantity demand / % change in price
PED > 1: the good is price ELASTIC
quantity demand is responsive to change in price
PED < 1: the good is price INELASTIC
price has no effect on demand
PED = 1: the good has unit elasticity
assumes that as the price of the good changes the quantity demand will change at the same rate
types of distribution channels
zero intermediary, one intermediary, two intermediary
zero intermediary distribution channel (+ads & disads)
producer → consumer
perishable goods often sold directly
+ low cost
+ fast
+ producer is often the key decision maker
- costs are taken by the producer
one intermediary distribution channel (+ads & disads)
producer → retailer → consumer
often used for expensive goods
+ promotion done by retailer and assists selling
+ costs of holding stock is incurred by retailer
- two profit mark-ups could lead to the product becoming expensive
- the producer has less to say in strategies
two intermediary distribution channel (+ads & disads)
producer → agent → wholesaler → retailer → consumer
particularly used for products being sold over large geographic distances
+ wholesaler incurs storage costs and breaks the bulk into smaller batches
- two profit mark-ups could lead to product becoming expensive
- further reduce producer’s say in strategies
above-the-line promotion
paid for communication that uses mass media (e.g TV, radio, billboards etc.)
the control is passed on to another organization
below-the-line promotion
the company has direct control over the promotional activities (e.g direct marketing, personal selling etc)
focuses on promotion to a specific group
through-the-line promotion (+aim)
mixture of above- and below-the-line promotion (e.g TV adverts released the followed up magazine adverts): aims to gain greater brand awareness
the importance of delivery processes in marketing a service and changes in these processes
processes can set a business above its competitor by informing customers how easy it is to do business with them (customer service, efficiency, consistency)
direct activities: add value at the customer interface as the customers experience the service
indirect activities: support the service before, during and after it has been consumed
importance of employee-customer relationships in marketing a service and cultural variation in these relationships
selecting and hiring the correct staff with the right skills for the production and sale of goods / services (customer service)
the importance of tangible physical evidence in a marketing service
the tangible or visible touch point that are observable to customers (like to smell, touch see products before buying)
international marketing
the marketing of goods and services across national boundaries
how businesses enter international markets
the internet
exporting
direct investment
joint venture
international franchising
opportunities as a result of enter and operating internationally
a larger market
diversification
enhanced brand image
gaining economies of scale
forming new business relationships
threats as a result of enter and operating internationally
economic challenges
political challenges
legal challenges
social challenges
technological challenges
question marks
high market growth, low market share
require steady investments so they can gain market share (and turn into stars)
if market slows down and they maintain their lead, they eventually become cash cows
dogs
low market growth, low market share
typically in the decline stage of PLC
known to put a strain on company resources
cash cows
low market growth, high market share
dominate the market they in and ensure steady cash flow
fall into the maturity stage of PLC
stars
high market growth, high market share
apart from high market share, stars enjoy customer loyalty, goodwill among shareholders etc.
requires ongoing investments
Note
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