Unit 3

what is marketing
identifying and understanding customer needs and wants
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why market
reduces risk of product failure, helps them understand their customers, helps them communicate their products effectively to encourage customers to buy, keeps them up to date with market trends so products can continue to meet needs
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what is a market segment
a group of customers in a market that have similar characteristics
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market segmentation helps businesses:
carry out market research, tailor products to needs, target promotions at specific groups
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what is market research
gathering information about customers, competitors and market trends by collecting primary and secondary data
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what are the 3 stages of market research
planning and designing the research, doing the research, analysing the information
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what should you ask yourself when reading about market research in a case study
right type of research used? how accurate research likely to be? any important information the research doesnt tell us?
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what is a product trial
customers buy a product for the first time to assess whether or not they want to buy it again
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what can successful product trial lead to
repeat purchases and customer loyalty
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4 methods a business may use to try the product for the first time
low trial prices, advertising, free samples, public relations
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why do businesses aim to keep customers loyal
so they make repeat purchases which generates sales and revenue
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4 methods a business may use to encourage loyalty
special promotions, reminder adverts, product innovations, loyalty schemes e.g loyalty cards
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why do businesses prefer to have loyal customers than new ones
the cost of retaining existing customers can be less than that of attracting new ones
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4 stages of product life cycle
introduction, growth, maturity, decline
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how can businesses increase the life of a product
extension strategies
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2 examples of an extension strategy
create new packaging, add new ingredients/flavours
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what is cash flow
the movement of money into and out of the business
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cash flow during introduction
net cash flow is negative
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cash flow during growth
net cash flow is positive but small
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cash flow during maturity
net cash flow is positive
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cash flow during decline
business will begin to experience cash flow issues
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what is selling a range of products called
product mix / product portfolio
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what does product portfolio analysis help a business make decisions about
what products to launch&when, when to withdraw product, what products are doing well/badly, how to increase sales
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what is the boston matrix and what is it used for
a product portfolio analysis tool used to plan the development of products
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(boston matrix) star
very successful product, growth has to be funded to keep up with demand and cash flow may be a problem
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(boston matrix) cash cow
little growth but an established and profitable product that can support others
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(boston matrix) question
presents a problem, should the busines invest to increase sales?
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(boston matrix) dog
few prospects but should the business continue to sell it if it is profitable and it funds other products
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what is a brand
a named product which consumers see as being different from other products and which they can identify/associate with
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3 benefits of a brand
consumers more willing to trial products in the brand range, consumers trust brands leading to repeat purchase, consumers have greater awareness of brands
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what is product differentiation
making a product different from others in some way
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how does product differentiation help a business
to position their products and target different market segments, to gain an advantage over rivals when faced with competition
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4 ways to differentiate a product
unique&catchy product name, quality, design; formulation or function, packaging
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what is the marketing mix
combination of factors which help and business to take into account the customer needs when selling a product
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4 p's of the marketing mix
product, promotion, price, place
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why is price important
indication of quality, price changes can have a significant influence on demand
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what to consider when differentiating a product
target? product range (variety)? usp? formula (ingredients/materials)?
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reasons for promoting a product/business
creating awareness, communicating product benefits and features to customers, build strong brand image, boost sales
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place - how do businesses make their product available to customers
direct (online shopping) retail (through retail so that good customer service) wholesale (suitable for businesses producing large product quantities)
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what are the variables that contribute to a successful design
function, cost, appearance
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what is a design mix
the variables that contribute to a successful design (function,cost,appearance)
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what can a design mix do to a product
differentiate that product from other products
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what is managing stock about
managing the materials that a business holds in the most efficient and effective way
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what is the maximum stock level
the maximum amount of stock a business is able to hold
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what is the re-order level
the point at which new stock will be ordered by the business
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what is the minimum stock level/ buffer stock
the lowest amount of stock the business will hold, its a safety net in case of surge in demand
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define JIT (just in time)
a stock management system where stock is delivered only when it is needed by the productive system, therefore no stock is kept by the business
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what is needed for JIT to work
good business-supplier relationships, well-organised production system, regular product demand
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who is JIT more appropriate for
large manufacturers
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3 benefits of holding stock
can meet unpredicted surges in demand, can replace damaged goods, discounts for bulk buying
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3 benefits of holding little/no stock
save money due to not having to store stock, less chance of damaged/stolen stock, can reduce price of production making product pricing more competitive
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define quality control
one part of the chain of production, the product is examined/tested for quality once the product has been made
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define quality assurance
focussing on quality at every stage of the production process
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3 benefits of good quality
premium price can be charged, builds strong brand image, quality can differentiate a product
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what is productivity
output per worker
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how to calculate productivity
total output / number of workers
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what does increasing productivity lead to
greater competitiveness in a market due to lower costs = lower prices
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4 methods of increasing output
train employees better, invest in better equipment, motivate employees, introduce more effective work practices
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4 methods of reducing costs
cheaper suppliers, cheaper labour costs, relocation, cutting overhead costs
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4 drawbacks to poor customer service
poor customer satisfaction, poor brand image, inability to charge a premium price, fall in repeat purchase/customer loyalty
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4 ways to effective customer service
provide high quality products/services, spot [potential] problems, deal effectively/quickly with complaints, listen to customers
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3 things the sale of goods act states
be of merchantable quality, match their description, be fit for purpose
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3 things the trade descriptions act states
(can't) give false information, fail to give important information, act aggressively
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4 benefits to consumer protection laws
business that follows law is less likely to be sued/fined, improve business's image, good publicity, improved relationship with stakeholders
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4 drawbacks to consumer protection laws
businesses must know/keep up to date with law, laws can restrict businesses operating how they wish, can be costly to change products/practices to comply with laws, bad publicity if not followed
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what is financial management
changing the monetary variables such as cash flows to achieve financial objectives such as improved cash flow
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why is cash important
trade will cease
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3 ways to improve cash outflows
delay paying invoices, lease rather then buy, reduce stock orders
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3 ways to improve cash flows
increase sales revenue, reduce credit terms with customers, use short term sources of finance
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what can techniques to raise revenue or cut costs cause
can affect performance of the business which could, in the long term, reduce profits
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2 examples of technique and cause
cutting material costs -> lower quality products, cutting labour costs -> lower motivation of work force
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two ways of improving profit
increasing revenue or lowering costs
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total revenue =
number of products sold X average price
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3 ways a business can increase revenues
improved marketing, better products, increasing selling price
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total costs =
fixed costs + variable costs
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2 ways a business could reduce its costs
cutting its marketing, cutting costs of raw materials, labour or research
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how to finance growth
from internal or external sources
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3 external sources of finance
overdraft, loans, trade credit
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3 internal sources of finance
retained profit, owners funds, asset sales
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Other cards in this set

Card 2


why market


reduces risk of product failure, helps them understand their customers, helps them communicate their products effectively to encourage customers to buy, keeps them up to date with market trends so products can continue to meet needs

Card 3


what is a market segment


Preview of the front of card 3

Card 4


market segmentation helps businesses:


Preview of the front of card 4

Card 5


what is market research


Preview of the front of card 5
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