Flashcards · 0264 · Topic 3

Marketing flashcards

29 cards on Topic 3, subtopics 3.1 to 3.4. Pick a subtopic or study them all.

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3.1 Marketing and the market

The role of marketing (five parts): Identify customer needs, satisfy customer needs, maintain customer loyalty, build customer relationships, and anticipate changes in customer needs.
Why do consumer spending patterns change?: Rising or falling incomes, changes in fashion and tastes, the age structure of the population, new technology, the prices of substitutes, and changing attitudes (for example about health or the environment).
A firm’s sales revenue stays at 2,250,000 while the market grows from 15,000,000 to 18,000,000. What happens to its market share?: It falls from 2,250,000 ÷ 15,000,000 × 100 = 15% to 2,250,000 ÷ 18,000,000 × 100 = 12.5%. Sales revenue can stay the same, or even rise, while market share falls.
Mass market and niche market: Mass market: a large market with many customers and standard products; big volume and economies of scale, but strong competition. Niche market: a small specialist part of a wider market; less competition and higher prices, but limited customers and growth.
Market segmentation, and the five bases named in the syllabus: Splitting a market into groups whose members share traits. Bases: age, income, location, gender and lifestyle.
Advantages and disadvantages of market segmentation: For: products matched better to wants, targeted promotion, gaps spotted, sales revenue may rise. Against: research costs, several versions raise costs, segments may be small and groups overlap.

3.2 Market research

Primary and secondary market research: Primary: new information collected first-hand for the business. Up to date and specific, but expensive and slow. Secondary: existing information collected by others. Cheaper and faster, but may be out of date and not specific.
Primary research methods: Questionnaires or surveys, interviews, focus groups and observation.
Secondary research sources: Competitor websites, government sources, market reports and trade magazines.
Focus group: one advantage and one disadvantage: Advantage: shows customers’ reasons and opinions. Disadvantage: small and possibly unrepresentative, and one person may dominate.
Sample, and why businesses use one: A smaller group chosen to represent the whole population. Asking everyone costs too much and takes too long. A sample is reliable only if large enough and representative.
Factors that affect the accuracy of market research: Sample size, bias in who is chosen, question wording, honesty of answers, the age of the data, the reliability of the source and the influence of the interviewer.
90 out of a sample of 250 shoppers prefer home delivery. What percentage is this?: 90 ÷ 250 × 100 = 36%. It is an estimate for all customers, not a certainty.

3.3 Marketing mix

Marketing mix: The combination of product, price, place and promotion used to sell to a target market.
The four stages of the product life cycle, with sales and profit at each: Introduction: low sales, little or no profit. Growth: sales rise steeply, profit rising. Maturity: sales high and flat, profit highest. Decline: sales and profit falling.
Extension strategies: Actions to keep a product’s sales from falling: new markets, new uses, adapting the product or packaging, and more advertising or sales promotion.
Penetration pricing and price skimming: Penetration: a low price to gain market share quickly. Skimming: a high price at launch for a new or unique product, to gain profit from early buyers.
Cost-plus pricing: unit cost $14 with a 50% mark-up: Price = unit cost × (1 + mark-up) = 14 × 1.5 = $21, giving $7 profit per unit.
Competitive pricing and dynamic pricing: Competitive: setting the price in line with rivals, used when products are similar and prices are visible. Dynamic: the price moves with demand, by time or by customer.
Sales promotion and advertising: the difference: Sales promotion: a short-term offer to boost sales (vouchers, reward schemes, competitions, discounts). Advertising: a message in a medium to inform or persuade (social media, targeted emails, leaflets, billboards).
Distribution channels: what do a wholesaler, a retailer and an agent do?: Wholesaler: buys in bulk and sells to retailers. Retailer: sells to the public. Agent: arranges sales for a commission. Selling direct keeps the whole margin but the producer does the storage, delivery and selling.
Ecommerce: advantages and disadvantages for the business: For: a wider market, lower premises costs, always open. Against: website and security costs, delivery problems, fraud, and rivals are one click away.
Entering markets in other countries: advantages and disadvantages: For: more sales, risk spread, longer product life, possibly lower unit costs. Against: cultural differences, lack of knowledge, legal requirements, transport and exchange costs.

3.4 Legal controls

Purpose of legal controls on marketing: To protect customers, especially from misleading promotion and faulty goods, and to keep competition fair for honest businesses.
Misleading promotion, with examples: Promotion that leaves customers with a false or unclear picture and influences their decision to buy. Examples: a false claim about the product, a “was” price never really charged, hidden conditions on an offer, an unfair comparison.
Faulty goods, and the remedies: Goods that do not work properly, are damaged or are not as described. The remedy is repair, replacement or refund.
Opinion or checkable claim: “Our tea is delicious” and “Contains 30% less sugar”: “Delicious” is opinion. “30% less sugar” can be checked, so it must be true.
Effects of legal controls on a business’s marketing: Costs and limits: claims must be checked and supported, testing and labelling, honest prices, systems for returns, fines and bad publicity if broken. Benefits: greater customer trust and repeat purchases, fairer competition, better quality control.
A firm sells 16,000 items and 2.5% are faulty. How many are faulty, and what does a recall cost at $12 each?: Faulty: 16,000 × 0.025 = 400 items. Cost: 400 × 12 = $4,800.