Business Studies AS Level (Marketing)

Marketing

The anticipation and satisfying of customers' wants in a way that delights the consumer and also meets the needs of the organisation

The Market

Originally was a physical place where buyers and sellers come together but due to technology, they can exist through postal services, telephones and internet links

Market Size

The volume of sales of a product e.g. the number or units sold

Or the value of sales of a product e.g. the total revenue from the units sold

• Market size can increase due to more units sold or persuading customers to pay higher prices e.g. for certain brands for trainers like 'nike'

• Market size indicates the potential sales for a firm

Market Growth

The percentage change in sales over a period of time

Factors influencing Market Growth:

• Economic Growth - Country's wealth is growing, sales are likely to rise in any market
• Changes in Taste - Lifestyles change, new products become more popular than others (This can be due to good marketing)
• Social Changes - People's living standards such as staying at home more would be good for digital television and long working hours means less time to cook and prepared meals to be accounted for
• Fashion - Latest trends which may have been influenced from the television such as DIY, cooking and garden design are likely to influence people pursuing those activities

Market Share

The percentage or proportion of total sales of a product or service achieved by a firm

• Market Share = Sales if one product or brand or company
• Total sales in the market
• X 100

Market Analysis

The study of the market conditions to help meet the firms plans

Quantative Analysis: Statistical information to draw conclusions about the nature of the market

Qualitative Analysis: Reasons why certain actions take place showing your understanding of the statistical significance

Market Mapping

A technique used to analyse markets by looking at the features that distinguish different products or firms e.g. people may buy cars because:

• They are suitable for family use
• Cheap to buy and run
• Environmentally friendly
• Fast Speed
• Safe and Secure

Market Segmentation

The types of customers or potential customers put into groups or sub-groups who respond differently to different products and marketing approaches

Segmentation Analysis

Using quantitative and qualitative data to discover the types of consumers who buy its products and why

Types of Segmentation

• Age-e.g. magazines
• Gender-e.g. perfume (females)
• Social Class-e.g. working class people are likely to be supporters of football
• Geographic-e.g. surfing, clubbing, theatre etc depending where you live
• Lifestyle-e.g. people who attend the gym are more likely to want organic food which is healthy

Reasons for Segmentation

• To find ways in marketing the product - Once a firm recognises the customers' characteristics , they can target its advertisement through the media by that market segment
• To extend products into new markets - E.g. Mobile phones were targeted at business users but have now been also targeted at teenagers and then whole families
• To Increase market share - Organisations ca realise the market segments which have not been reached and adapt its products and marketing to reach those segments

Problems with Market Segmentation

• Difficulty in identifying most important segments for a product - e.g. bread, household cleaners etc
• Knowing how to reach your chosen segment with your marketing
• Recognising changes in the segments
• Failure to meet the needs of customers who are not included in your chosen segmens - e.g. perfume can also be targeted for homosexuals, transvestites etc

Market Research

The process of gathering primary and secondary data on the buying habits, lifestyle, usage and attitudes of actual potential customers and evaluating the information

Purpose of Market Research

• Achieving objectives
• Identifying trends
• Comparisons
• Why certain things might occur e.g. weather
• How much advertising affects volume of sales
• Predictions on how new prices may affect sales
• How competitors will effect profit levels
• Level of demand
• Ideal price level
• Best ways or promoting

Primary MarketResearch

First hand information for a specific purpose to meet your exact requirements

Secondary Market Research

Secondary data which has already been used for a different purpose but is useful as it may provide information on general statistics e.g. total consumer spending on soft drinks

Examples of Primary Research:

• Observation - stores watching customers to gather which displays or offers seem to be more efficient
• Surveys
• Personal Interviews - best for qualitative information (face to face)
• Telephone Interviews
• Internet Surveys
• Focus Groups - a group of customers who are encouraged to discuss their feelings about a product or service (expensive)

Sample

Agroup of respondents whose views represent the target market as a whole

Statistical Significance

The extent to which Statistical conclusions are likely to be true

Confidence Level

Statistics are reliable predictor of actual events

Random Sample

A group which each member of the target audience has a equal chance of being chosen e.g. choosing names out of a hat

Quota Sample

A group which share a common feature of the market segments e.g. age, gender

Types of Secondary Research

• Newspapers e.g. The Times
• Company Records e.g. Sales Figures, accounts, previous surveys
• Magazines e.g. Media week
• Competitors e.g. Promotional materials (leaflets)
• The Internet

Advantages

• Cheaper
• Quicker
• Helpful over periods of times as it's regularly conducted

Dis-advantages

• Misleading
• No advantages over its competitors
• May be no relevance

Corporate Objectives

The main priorities of the organisation e.g. to improve profitability by 10% in the next two years

Marketing Objectives

The goals of the marketing function to meet the corporate objectives

Marketing Strategies

Long term or medium term plans at senior management level to achieve the 'marketing objectives'

Marketing Tactics

Short term, adopted to meet the needs of a short term threat or opportunity e.g. advertisements must be designed to appeal to the market segments

Size

• Level of sale volume
• Percentage rise in sales revenue
• target percentage market share
• Certain position in the market (leadership)

Market Positioning

• Rugby league trying to appeal more females
• Starbucks targeting younger age groups
• Channel 5 bidding for 'robot wars' to attract a new group of viewers

Creation of Brand Loyalty/goodwill

• McDonalds looking to maintain the golden arches as the most widely known logo in the world

Security and Survival

• Lotto making sure they don't further decreases their sales as of 02-03

Product Portfolio

The range of products by a firm

Adding Value

increasing its worth by modifying them = Sales revenue - Costs of materials, componenets and services

Niche Marketing

Small segment of the larger market e.g. Kerrang (rock type)

Adv:

• Few Competitors
• Small firms can compete more effectively
• Limited demand will let small firms cope better
• Easier to target customers and promote their products efficiently when they are only selling one type of product

Dis-Adv of Niche Market:

• Small scale limits the chances of high profit
• Vulnerable to changes in demand (risky)
• An increase in interest may attract larger firms into the marks which poses as a threat the the small firms in the niche

Mass Marketing

Adv:

• Larger scale of production, helps lower costs per unit
• Volume of customers allow them to earn huge revenues
• Increases brand awareness
• Allows them to use most expensive marketing which eliminates smaller rivals

Dis Adv:

• Vulnerable to changes in demand, unused spare capacity, increase in unit cost
• difficult to appeal directly to each individual customer because mas markets are designed to suit all customers

Product Life Cycle

The stages that a product passes through during a lifetime

Development

• Generate idea - Brainstorming
• Analysis of Ideas - does the objective meet with the firms image
• Product Development - Prototype
• Test Marketing
• Launch

Introduction - The product is launched and is new to the market, special offers, cash flow begins to be negative (penetration pricing)

Growth - Retailers provide more shelf space and brand recognition helps to increase sale

Maturity - Firm hopes to make profit and sales tend to stabilise

Decline - Sales begin to fall, start to remove from the shelf to prevent financial loss

Extention Strategies: Methods used to carry on the life cycle of a product by preventing or delaying it from reaching the decline stage

• Attracting new Market Segments
• Increasing its usage- breakfast, lunch and dinner
• Modifying the Product
• Change the image
• Tarket new markets
• Promotions, advertising and price offers

Problems with the product life-cycle

Determinism: The idea that something will occur if you expect it to happen (unpredictable)

Capacity: The maximum amount of output of a product that an organisation can produce

Capacity Utilisation: Actual level of output as a percentage of the maximum level of output

Boston Matrix

Product portfolio analysis which classifies products according to the market share and the rate of growth in the market

Stars: High percentage market share, high growth in the market - increase sales revenue, need a lot of promotional spending and increase capacity, they usually generate profits

Cash Cows: High percentage market share, low growth in the market - exist in established markets, spend less of advertising

Problem Children: Low percentage market share, high growth market - they compete in a competative market and future sales can increase only if its market share doesn't, they need a lot of market research and promotion to succeed

Dogs: Low percentage market share, low growth market - they offer little scope for profit making, in a recession, their products will likely need to be withdrawn if they become un-profitable

USP: Unique Selling Point which differentiates a product from the rest (brands, packaging, image, advertisements etc)

Product: Goods or servicesprovided bya business

Product Design: The make up of a product so that it works well and looks good

Product Development: New or improved good or service

• Reliability
• Safety
• Convenience
• Fashion
• Durable
• Legal requirements

Branding: The process of differentiating a product or service from its competitors through name, sign symbol, design or slogan linked to that product

Focus on Core

• Concentrate on areas of expertise, greater effeiciency
• Better understanding of the nature of the business
• larger scale
• Consumers trust

Focus on Product Proliferation

• Increase in number of products spreads the risks
• Different products appeal to different market segments
• New products may help old products in sales
• Greater scope of expansion

Pricing Methods

Cost Plus Pricing: a method using the average cost of a product plus a sum to ensure profit (will depend on the level of competition, the price that customers will pay for and the firms objectives)

Contribution pricing: a method which the price is set to cover the average costs only, plus a sum to pay towards fixed costs and profit (as long as the price is higher than the variable cost then ti'll make profit)

Price Discrimination: a method where a firm charges a high price to some customers for the same product or service because they are prepared to pay (E.g. mobile phone users are willing to spend extra talking to people using peak times)

Price Skimming: Strategy to set high prices to yield a high profit margin (early adopters)

Penetration Pricing: Setting low prices to break into the sudden market

Price Leadership: Setting a market price which smaller firms tend to follow

Price taking: Following the price leader

Predator: Strategy which firms set very low prices in order to drive other firms out of the market

Above the line promotion

Advertising through the media - newspapers, television, radio, the cinema and posters

Below the line promotion

All other promotions, such as public relations, merchandising, sponsorship, direct marketing, personal selling and competitions

The Aims of Promotion:

• Attention - to the consumer of the name by advertising
• Interest - Promotional campaigns over a period of time using a choice of media to target the market
• Desire - persuasive and informative promotion such as a piece of equipment
• Action - purchasing the product, point of sale displays, special offers and competitions entrys. (promotions with in the shop have proved to be successful)

Distribution Channels

Channels or routes which a product passes in moving from the manufacturer (producer) to the consumer

Producers make the product

Wholesalers buy it off the producer in bulk and sell it in small quanitities to the retailer (they help the producer in storage costs)

Retailers - main role is to serve the needs of the customer providing:

• Convenience at the place
• Advice on buying decisions for the consumer
• Financial assistance to help the consumer by accepting payments in a form that suits their needs

They also benefit from low delivery costs and is at advantage as they have the choice of the wholesaler to compare which products and prices have the best deals

Consumer: The individuals or businesses that purchase the finished product for their own use

Factors influencing the method of distribution:

• Size of the retailer
• The type of the product (delicate items don't need a wholesaler)
• The geography of the market (whether it's quicker to directly deliver the goods if it's in a remote rural area)
• The degree of control required by the producer

Distribution Targets: Objectives given to a firm's staff (forcing sales) for more shelving space:

• Promotional Campaigns - increasing public demand and shop keeper will want it
• Offer high profit margins to retailers - focussing on other areas of the shop floor e.g. tesco focussed on selling the Harry Potter books in stead of its food and ended up making a higher profit
• Increasing brand variety - new flavours, new products under the same brand
• Paying commission to sales staff - which will force the incentive to persuade retailers that they should stock their products

The Location of the Point of Sale

• Convenience - location to customers
• Accessibility - Needs to be nearer the town in order for the consumers to find time to visit
• Cost of Access - Free car parking
• Reputation - beneficial in the volume of sales and the price charged

Placement with-in the point of sale

E.g. Supermarkets and greengrocers place brightly coloured, attractive fruit and vegetable displays so that they are visible from outside the store.

Sweets are placed near the counter so it attracts the public eye while they're queuing

Price elasticity of demand: Responsiveness of change in the quantity demanded of a good or service to a change in price

Income elasticity of demand: Responsiveness of change in the quantity demanded of a good or service to a change in income

Formula: %change in quantity demand %change in price/income

Prices influencing the price elasticity in demand:

• Neccessity - The more necessary a product, the more inelastic is the demand
• Habit - e.g. Smoking, alchohol, chocolate and watching television
• Availability of substitutes - depends on consumers tastes, the greater the availability of close substitutes, the more elastic the demand
• Brand loyalty
• Income of consumers - rich people are less worried whether the price goes up