Business - Marketing Unit 4

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market orientation

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87 Terms

1

market orientation

an outward looking approach basing product decisions on consumer demand, as established by market research

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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)

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3

advantages of market orientation

  • chance of failing for newly developed products is reduced

  • cheaper than product orientation

  • likely to survive longer

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4

advantages of product orientation

  • associated with high quality products

  • can succeed in industries where business is slow

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5

define market share

the percentage of sales in the total market sold by one business

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6

formula for market share

firm’s sales in a given time period / total market sales in time period (market size) x 100

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7

define market growth

percentage change in total size of a market over a period of time

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formula for market growth

market size (2nd year) - market size (1st year) / market size (first year) x 100

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9

the importance of market share and market leadership

  • brand recognition

  • economies of scale

  • influence in the market

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10

what is a marketing plan?

a document outlining the firm’s marketing objectives and the marketing strategies to be used

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advantages of marketing planning

  • improves the chances of success (deal with problems)

  • senior managers have more control

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12

disadvantages of marketing planning

  • many small firms don’t have time, resources and expertise

  • can become outdated; doesn’t allow for flexibility

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13

what is market segmentation?

a distinct group of customers with similar characteristics (age, gender etc)

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14

what is targeting?

specific audience a company wants to reach

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ways to market segment

1) by demographic factors (characteristics of population)

2) by geographic factors (location or climate)

3) psychographic factors (lifestyle, emotions)

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advantages of market segmentation

  • a better understanding of customers; less resources used

  • increase sales

  • better opportunities

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what is undifferentiated marketing?

large number of different market segments are targeted in order to maximize sales

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advantages of undifferentiated marketing

  • time & resources are saved

  • bigger customer base

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19

disadvantages of undifferentiated marketing

  • not suitable for all businesses due to high barriers for entry

  • competition can be aggressive

  • lack of focus

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what is differentiated marketing?

tailors a marketing mix to each market segment

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advantages of differentiated marketing

  • customers are satisfied to have specific marketing mixes tailored to their needs

  • risk is divided between several market segments

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22

what is niche marketing?

target a specific and well defined market segment

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advantages of niche marketing

  • better marketing focus

  • business charge higher price because demand is high

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what is positioning?

analyzing customer perceptions of current brands using position maps

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importance of having a USP

  • differentiates you from competitors

  • creates a competitive advantage and customer loyalty

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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

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what is sales forecasting?

uses quantitative methods to try and predict a firm’s future sales

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advantages of sales forecasting

  • better cash flow management

  • understanding seasonal variations

  • increased efficiency

  • better work planning

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disadvantages of sales forecasting

  • time consuming

  • it ignores qualitative external factors (political, social changes)

  • is based on present knowledge

  • estimation

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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

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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

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how do companies carry out market research?

primary and secondary research

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examples of primary research

surveys, interviews, focus groups, observations

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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

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35

advantages and disadvantages of interviews

  • detailed information

  • high response rate

  • time consuming

  • interviewer may provoke bias

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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

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37

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

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examples of secondary research

academic journals, media articles, government publications, market analyses, online content

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39

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

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40

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

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41

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

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42

advantages and disadvantages of market analyses

  • information is accurate

  • more expensive option

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43

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

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44

differences between quantitative and qualitative research

quantitative:

  • numerical data

  • less open to interpretation

  • objective

qualitative:

  • opinions, beliefs, attitudes

  • more open to interpretation

  • subjective

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methods of sampling

quota, random, convenience

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46

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

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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

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48

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

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49

product life cycle

1: developing

2: introduction/launch

3: growth

4: maturity

5: decline

<p>1: developing </p><p>2: introduction/launch</p><p>3: growth </p><p>4: maturity</p><p>5: decline</p>
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50

7 P’s

product, price, place, process, physical environment, people, promotion

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51

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)

<p>is a technique used by firms which identifies the position of each product within its market</p><p>(BCG matrix)</p>
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52

PLC extension strategies

  • price reductions (sales)

  • redesigning (introducing new features etc)

  • repackaging

  • new markets

  • promotion

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53

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

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54

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

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55

the importance of branding

to give one message that the company portrays - represents the company’s reputation and how the customers perceive them

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56

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

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cost-plus pricing

calculates average costs, % profit the firm wants to make

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58

penetration pricing (+aim)

setting a low initial price, increased over time: aims to get many customers quickly

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price skimming

setting a high initial price, decrease over time

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60

psychological pricing

e.g $9.99, or $4.95

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loss leader (+aim)

selling at below their average cost: aims to attract customers to buys something else

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premium pricing (+aim)

higher prices than competitors: aims to give the impression of superioirity

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63

price discrimination

charging a different price for different groups of people (e.g cinemas, theme parks etc.)

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competitive pricing

takes into account what your competitors are doing

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predatory pricing (+aim)

eliminates any opposition by putting prices lower than your competitor’s average cost: aims to drive them out of business

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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

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contribution pricing (+formula)

calculates variable cost per unit and adds it to initial pricing:

contribution per unit = price - variable cost

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68

what is price elasticity of demand?

measures how much the demand for a product changes when there is a change in price

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69

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

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70

types of distribution channels

zero intermediary, one intermediary, two intermediary

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71

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

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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

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73

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

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74

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

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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

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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

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77

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

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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)

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79

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)

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80

international marketing

the marketing of goods and services across national boundaries

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81

how businesses enter international markets

  • the internet

  • exporting

  • direct investment

  • joint venture

  • international franchising

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opportunities as a result of enter and operating internationally

  • a larger market

  • diversification

  • enhanced brand image

  • gaining economies of scale

  • forming new business relationships

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threats as a result of enter and operating internationally

  • economic challenges

  • political challenges

  • legal challenges

  • social challenges

  • technological challenges

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84

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

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85

dogs

  • low market growth, low market share

  • typically in the decline stage of PLC

  • known to put a strain on company resources

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86

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

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stars

  • high market growth, high market share

  • apart from high market share, stars enjoy customer loyalty, goodwill among shareholders etc.

  • requires ongoing investments

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