Flashcards · A Level Business · AS Topic 2

Marketing (AS Level) flashcards

29 cards on AS Topic 2, subtopics 3.1.2.1 to 3.1.2.4. Pick a subtopic or study them all.

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3.1.2.1 Marketing objectives and plans

The six types of marketing objective (9725): Sales volume, sales value, market share, customer retention and repeat sales, sales per product, employee, region, store or customer, and brand loyalty.
Customer retention rate: formula and example (1,000 customers at the start, 250 gained, 1,150 at the end): Retention (%) = (customers at end − new customers) ÷ customers at start × 100. Retained = 1,150 − 250 = 900. 900 ÷ 1,000 × 100 = 90%.
Retention vs repeat sales; and can sales rise while market share falls?: Retention is the share of customers kept; repeat sales are orders from returning customers. Yes: sales can rise while share falls if the market grows faster.
The elements of a marketing plan (9725): Marketing objectives, the marketing mix and the marketing budget. A plan turns aims into actions, coordinates departments and lets managers monitor results.
Return on marketing spending: formula and example (spend 10,000; extra revenue 30,000 at a 50% gross margin): Return (%) = (extra profit from the marketing − marketing spend) ÷ marketing spend × 100. Extra gross profit = 15,000. (15,000 − 10,000) ÷ 10,000 × 100 = 50%. Not all extra sales may come from the campaign.
Influences on demand and resource influences on marketing plans (9725): Demand: price, income, competition, marketing activities, number of customers, customer preferences. Resources: the budget, the skills of employees and capacity (do not aim for sales the business cannot supply).

3.1.2.2 Marketing data

Primary vs secondary market research: Primary: new data collected for the purpose (surveys or questionnaires, interviews, focus groups, observations); fits the question but costly and slower. Secondary: existing data collected for another purpose (websites and social media, academic journals, government publications, media articles); cheaper and faster but may be dated.
Focus groups and observation: one strength and one weakness each: Focus group: gives ideas and reasons; dominant voices and a small group. Observation: shows real behaviour; gives no explanation of why.
Random, stratified and quota sampling: Random: equal chance for all; unbiased but may miss small groups. Stratified: groups in proportion, random within each; represents every group. Quota: set numbers per group, chosen by the interviewer; quick and cheap but open to interviewer bias.
A population of 600 is in groups of 300, 200 and 100. How many from each group in a stratified sample of 30?: 30 × 300/600 = 15, 30 × 200/600 = 10, 30 × 100/600 = 5.
Correlation: what does a value of −0.8 mean?: A strong negative link: as one variable rises the other tends to fall. Values run from −1 to +1; near 0 is weak. Correlation does not prove cause.
Confidence intervals: effect of sample size and confidence level: A confidence interval is a range likely to hold the true figure for the whole market. A bigger sample gives a narrower interval; a higher confidence level (99% rather than 95%) gives a wider one.
What influences the choice of market research method?: Cost, time required and reliability of findings. A tight budget points to secondary data; a high-risk decision to a larger, careful sample.

3.1.2.3 Segmentation, targeting and positioning

Segmentation, targeting and positioning: Segmentation: splitting a market into customer groups that share features or wants. Targeting: choosing the segment or segments to serve. Positioning: the place a product holds in customers’ minds compared with competing products.
The four segmentation methods in 9725: Demographic (age, gender, income, occupation, family size), geographic (country, region, urban or rural, climate), psychographic (values, interests, personality) and behavioural (frequency of use, loyalty, occasion, benefits sought). In 9725 income is a demographic variable.
Niche vs mass marketing: Niche: a small, specialised segment; often less competition from big firms and higher prices, but reliance on one group. Mass: one broadly similar offer to a large part of the market; higher growth potential, but costly promotion and heavy competition.
Premium vs budget positioning: Premium: high price with a quality or status image; usually lower volume, higher margin per unit. Budget: low price, seen as good value (not necessarily poor quality); needs cost control and scale.
Value of targeting (9725): Spending is concentrated where a sale is most likely, the message can be specific and build loyalty, and results can be measured against a defined group. Limits: research cost, a segment may be too small, customers outside the target may be lost.
Repositioning: reasons and challenges: Reasons: tastes or incomes have shifted, sales are falling or the brand looks dated, a rival has taken the position, a new segment appears, bad publicity. Challenges: cost, alienating existing customers, a new image may not be believed, perceptions change slowly.
A segment is 30% of a market of 800,000 customers, and a firm expects a 5% share of it. How many customers is that?: 800,000 × 30% = 240,000 in the segment. 240,000 × 5% = 12,000 customers.

3.1.2.4 The marketing mix

The four elements of the marketing mix in 9725, and why the mix must be integrated: Product, pricing, promotional mix and distribution (place). The elements should support one positioning for one target market: a consistent message, less wasted spend, harder for rivals to copy.
The six stages of new product development, in order: Idea generation, screening, concept testing, business analysis, product testing, launch. Concept testing tests the idea or a description; product testing tests a working prototype.
The four extension strategies in the specification: Advertising (reach, but cost), rebranding (fresh image, but may confuse loyal buyers), lowering the price (volume, but lower margin and price-war risk) and adapting the product (new appeal, but development cost).
Own label brand: A product sold under the retailer’s own name rather than the manufacturer’s brand. The retailer gains margin and control but takes the reputational risk; the supplier faces price pressure.
Price rises from £25 to £27 and sales fall from 500 to 470 a month. Calculate PED and the change in revenue.: % change in price = 2 ÷ 25 = +8%; % change in quantity = −30 ÷ 500 = −6%. PED = −6 ÷ 8 = −0.75 (inelastic). Revenue: £12,500 → 27 × 470 = £12,690, a rise of £190.
Cross elasticity of demand (XED): formula and interpretation: XED = % change in quantity demanded of A ÷ % change in price of B. Positive: substitutes. Negative: complements. Example: a 10% rise in bike prices and 8% fewer locks sold gives −0.8: complements.
Penetration, skimming, dynamic, premium, going rate and discount pricing: Penetration: low entry price for share. Skimming: high entry price, cut later. Dynamic: price changes with demand in real time. Premium: above rivals. Going rate: in line with rivals. Discount: below rivals.
Mark-up vs margin (unit cost £30, 60% mark-up): Price = £30 × 1.6 = £48. Mark-up is profit on cost (60%); margin is profit on price: (48 − 30) ÷ 48 × 100 = 37.5%.
Wholesaler vs agent vs multi-channel distribution: Wholesaler: buys and holds stock, reaches many outlets, takes a margin. Agent: sells on commission without owning the goods; local knowledge but less control. Multi-channel: more customers and spread risk, but channel conflict and higher cost.