161-ocr-gcebus-f293qa

161-ocr-gcebus-f293qa - 2010 Edition The

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Unformatted text preview: 2010 Edition The market........................................................... 2 Role of marketing.............................................. 2 Relationship of marketing to business decision making................................................. 2 Orientation........................................................... 3 Market segmentation ........................................... 4 Market Segmentation ...................................... 4 Market share and market growth .............. 6 Buyer behaviour................................................ 7 Marketing and the Law........................................ 8 Marketing and the law .................................... 8 Market research ..................................................... 9 Sampling Methods ......................................... 11 Data Analysis ................................................... 13 Marketing Planning............................................ 16 Market plan ...................................................... 16 SWOT Analysis ................................................ 17 Objectives.......................................................... 17 Ansoff and Porter Strategies ..................... 18 Porter’s Generic Strategy............................ 19 International marketing................................... 19 Overseas distribution................................... 19 The role of the EU .......................................... 21 The Marketing Mix ............................................. 22 Blending the Marketing Mix....................... 22 Product .................................................................... 23 Product differentiation ................................ 23 Product Portfolio ............................................ 23 Value Analysis.................................................. 24 Product Life Cycle .......................................... 25 Boston Matrix................................................... 26 Product Mapping ............................................ 27 New Product Development ........................ 27 Price.......................................................................... 29 Why price is important ................................ 29 Elasticity............................................................. 30 Income Elasticity of Demand..................... 32 Pricing Methods................................................... 33 Cost Based Pricing Methods....................... 33 Customer based pricing............................... 36 Competition based pricing ......................... 37 Promotion .............................................................. 38 Promotion mix................................................. 38 Above the line .................................................. 39 AIDA and DAGMAR........................................ 40 Below the line .................................................. 41 Place (distribution) ............................................ 43 A2 Marketing Glossary...................................... 45 1st Edition. First published 2010 © Richard Young. All rights reserved. The right of Richard Young to be identified as the author of this Work has been asserted in accordance with the Copyright, Designs and Patents Act 1988. | The market 1 involves segmentation. The population is separated into different sub groups sharing similar characteristics. A sample is taken from each sub group. Used when answers to questions are vary between segments. In the target population is divided into groups (clusters). Clusters are then selected at random from which a random sample is taken. A cost effective method of sampling for widely dispersed populations. a good source of data in exploratory research It is used by firms for small-scale research where time, finance and ability to travel are limited. A relatively small sample of people who can be reached easily is used eg existing customers. High risk of unreliability. To ensure greater reliability a quota may be also used ie equal numbers of men and women to be asked is where one individual being surveyed suggest other people. Firms used snowball sampling where it is difficult to get a list of respondents . The population is segmented into sub-groups eg by age or sex. A business then selects respondents to interview eg a survey of magazine buying habits can ask 20% men, 80% women, 10% aged 50+, 25% aged 18-25 – the weightings reflect the population. Quota sampling is quick, inexpensive and convenient – if open to bias. Both methods use segmentation. In random stratified subjects are chosen by chance while in quota the firm selects those to be interviewed. ? Cluster sampling is used when surveying a list of randomly chosen subjects involves too much time, travel or expense. Eg: suppose the target audience is adults living in the EU. Random sampling involves the researcher travelling all over Europe to interview subjects. An alternative is to select a few geographical areas at random and interview every subject in a given town. More interviews take place in a given time period. Each method of sampling has its strengths and limitations. The key issues are cost, time, ease of contacting representative respondents, and the extent to which the consumers in the main market have similar or different characteristics. Sampling an entire population means there is always the chance that the respondents selected do not give answers representative of the whole target population. Two statistical indicators summarise the amount of “certainty” indicate how sure a firm can be that survey results are representative, expressed as a percentage. A 95% confidence level means that there is a 5%, or 1 in 20, chance of being ‘wrong’ or a 95% chance of being right or : is the range of data within which the mean is expected to lie and is usually shown as a ± (plus or minus) percentage. See sampling error for an example. Sampling error is the chance a samples’ answers may not reflect the target population and is measured by the confidence interval. Statisticians calculate a) the confidence level and b) the confidence interval. This is the range of data within which the mean is expected to lie and is usually shown as a ± (plus or minus) percentage. Eg if 75% of respondents say they will try a firm’s new product, then given a confidence level of 95% & confidence interval of 3 , the firm can be "sure" that, 19 times out of 20, had the entire population been asked, then between 78% (75+3)and 72% (75-3) would have picked that answer. 12 Sampling Methods | Set the eg customers, competitors and the economy, eg increased sales or market share Market planning is likely to suggest alternative action plans for meeting set objectives. The best marketing strategy the one is most likely to deliver set objectives given the current context of the business, its resources and external environment. Ansoff’s matrix outlines potential growth strategies by increasing sales in existing or new with existing or new . Ansoff’s matrix identifies four options for achieving growth. . Market penetration is where a firm focuses its activities on building sales of an existing product in a market in which the business is already operating. This is a low risk option as the firm is operating in a known market with an established product. The pricing strategy may be to cut price and the promotion strategy uses point of sale displays/ Market development seeks to find a new market for an existing product. This can be a high-risk strategy if the firm has little experience of operating in the new market. A place strategy may be to set up new distribution channels eg the web. Careful market research and planning reduces risk. Particular care needs to be taken if targeting: A . The firm needs to balance the benefits of meeting the specific needs of the target sub market against the additional costs of offering tailored products. . The firm needs to be fully aware of the cultural, financial (eg exchange rates) and legal difficulties involved. Product development means launching a new or improved product to an existing market eg orange flavoured Kit Kats. This strategy is often used when a product is in need of an extension strategy because it is in the decline stage of its product life cycle. NB a new product can be a new product for the firm or an innovation for the market Diversification involves targeting a new market with a new product. This is a high risk strategy because the firm is developing new products for unfamiliar markets. Firms diversify when existing markets and products offer little prospect of meeting objectives. Moving into new markets with new products is a high risk strategy and can be justified given potentially high rewards. Firms opt to diversity when existing markets are highly competitive, market share is static, existing markets are in decline or if the firm wants to spread risk across several products. given marketing strategy depends on . If the business aims to become the market leader within 12 months a market penetration strategy is more likely than diversification The financial and human resources available are key factors. A firm may not be able to fund or staff the market research and R&D needed for product development. Firms operating close to capacity are unlikely to adopt a growth strategy 18 Ansoff and Porter Strategies | Take advantage of new technologies Create new products to make use of spare capacity Developing new products requires financial and human resources. The launch requires a supporting marketing campaign with no guarantee of success Market research identifies market opportunities for new products; monitors and evaluates customer responses to test marketing allowing improvements to be made and predicts sales at different price points to establish potential profitability The process of research and development (R&D) test marketing, and promotion can be very expensive. Many new products fail. Innovative firms with high profit margins can generate the internal finance needed for new product development Lead time is the time taken to develop and test new products. Reducing lead times is a source of competitive advantage: new products are launched sooner than rivals It takes time and resources to get a product established. Most products fail during launch, never reach the growth stage of the product life cycle because overestimates demand and revenue. Production delays means the product no longer meets evolving customer requirements distribution problems mean consumers cannot buy the product Costs are underestimated and the product cannot be sold at price that allows a profit or means the item fails to fulfil function. The product is a ‘me-too’ product no different form established market leaders react by launching their own new product or enter into a price cutting war. 28 New Product Development | Profit maximising firms may opt for creaming prices for new products and price discrimination in sub markets Growth seeking firms may opt for penetration prices Firms in a recession or price war may opt for short term contribution prices to survive until trading conditions improve A firm’s pricing decision depends on its: Marketing objectives: growth seeking firms may opt for penetration prices Market conditions: Firms in a recession may opt for short term contribution prices Firms setting ‘low’ prices may be chasing market share, seeking extra sales to overcome cash flow problems, or trying to drive out new or uncompetitive rivals from the market Promotion is the process of business communicating with stakeholders Potential promotion objectives include: ie raise consumer awareness of a product, its functions and benefitsparticularly important for new products convince consumers and the trade that a product is superior to rivals to create product differentiation in the mind of the consumer Businesses use a mix of advertising, direct response mailing, sales promotion, public relations or direct selling to promote products. Excellent products with the right features, price and distribution fail if customers are unaware of the good or service. is the use of non-targeted mass media advertising to reach a mass audience. The aim is to raise product awareness and reinforce brand identity. promotions is the use of targeted non-advertising methods to reach potential customers. The aim is to secure sales. direct mail and sponsorship 38 Promotion mix | . Sales promotion, personal selling, public relations, the traditional elements of the marketing mix: product, price, promotion and place the use of non-targeted mass media advertising to reach a mass audience. The aim is to raise product awareness and reinforce brand identity. paid for non-personal communication using mass media that aims to persuade and inform measures their responsiveness of demand to a given change in advertising individuals or businesses that sell products on behalf of an organisation a communication model which aims to obtain Attention, Interest, Desire and Action a framework for identifying four strategic options for growth in terms of markets and products firms markets products that (a) match customers want and (b) match their own strengths an investigation into an area of business activity the cost of making one item ie unit cost the use of targeted nonadvertising methods to reach potential customers. The aim is to secure sales. the gain obtained from the use of a particular product a tool used to analyse the product portfolio of a business against market share and market growth a named product customers distinguish from other products eg McDonalds the process of creating a distinctive image for a product that sets it apart from its rivals the minimum level of units sold for revenue to cover all costs - the business is making neither a profit or loss an agreed plan forecasting future income and expenditures or other quantifiable targets the individual responsible for a particular budget and accountable for explaining adverse and favourable variance to their line manager the process of turning inputs such as raw materials into outputs ie goods and services fluctuations in the level of economic activity over time causing booms and slumps. Also called the economic cycle. describes activities between businesses, eg manufacturer to wholesaler; wholesaler to retailer. describes the activities of businesses selling goods or services to end consumers. the decision process customers go through in deciding whether or not to purchase a good or service a number value of the chance of bad outcome from a decision. Eg a 75% or 75:25 chance of a new business surviving its first year. one part of a business grows by taking sales from another a group set up by rival firms to take common action eg agree prices, market share or exchange information on costs in Ansoff's matrix a product with high market share in a slow growing market market clearing price is the one price which leaves neither unsold products nor unsatisfied demand ie equilibrium price. when rival producers cooperate or collaborate eg agree a minimum market price. payment method linked to sales eg 10% commission means a £10 bonus for every £100 of sales when rival firms in the same industry contend for customers when the selling price of a firm's product is set taking into account the price charged by rivals being able to offer a product which customers prefer to rivals an industry made up of many rival sellers each competing for the same customers. the process of identifying and analysing a competitors strengths and weaknesses the number of times out of 100 the results of a survey are expected to be representative factors that restrict business activity, both internal and external | Below the line 45 a small meeting of customers discuss a product or topic, guided by a moderator an attempt to estimate the future value of a variable eg sales a costing method where all direct and indirect costs are allocated to one business unit called a cost centre no business is yet providing a product with a combination of features customers may need eg medium quality low priced fashion clothing the process of ever increasing business activity taking place across national boundaries creating worldwide markets and interdependence the proportion of a product's selling price that is gross profit. Overheads are ignored. an increase in production levels. Expansion unconventional promotional tactics unexpected by the target market perceptions of a product, brand or organisation held by others domestic purchase of goods and services produced overseas measures the responsiveness of demand for a product to a given change in income a government charge on individual's earnings. Gross income less income tax is disposable income goods bought by businesses as opposed to consumers products whose sales fall as incomes rise. Items with a negative income elasticity of demand an agent or go-between discovery or creation of a new product eg DVDs and sliced bread consumers who purchase a product in the late stages of its lifecycle. the body of rules that govern and regulate the way our society operates products sold at a price that does not cover unit cost to encourage the purchase of other profitable items eg printers and printer ink items whose demand varies significantly with income. The demand for luxury items is income elastic the cost of making one item the difference between the actual level and break even level of output the amount added to unit cost to set the selling price - usually expressed as a percentage. The amount of profit from the sale of an item. any place where buyers and sellers meet to trade products eg a shop or the internet a study of customers and competitors for a product that identifies eg size, growth, trends and market share selling an existing product into a new (for them) market. an increase in total market sales - by value volume the firm with the largest market share where outward looking consumer orientated firms only make what they can sell a low risk strategy for growth by increasing sales of existing products in existing markets collecting and analysing data about potential customers, competitors, markets and products a section of the total market made up of customers with similar requirements and behaviours the proportion of total market sales held by a firm or one of its products, expressed as a percentage. Market share = product sales/ market size. demand exceeds supply at a given price. Consumers are unable to buy all they want at that price. total sales of all the firms in a given market expressed by value (ie in money terms eg £1bn) or by volume (ie number of units sold eg 200,000 units). the characteristics of a market eg the number of firms in the industry, barriers to entry and the extent to which rival firms compete for customers the management process responsible for identifying, anticipating and satisfying customer requirements profitably. (CIM) the elements of a firm's marketing strategy designed to meet customer requirements eg product price, promotion and place (4Ps) are the expected outcome from marketing activities, eg to | Below the line 47 ...
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This note was uploaded on 02/08/2012 for the course FIN FIN4345 taught by Professor Koij during the Spring '10 term at FIU.

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