3.3 key terms

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  • Created on: 28-12-18 16:07
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  • 3.3 Decision-making to improve marketing performances
    • Marketing - the process of identifying, anticipating (predicting) and satisfying customer needs profitably
    • Objectives - statements of specific outcomes that are to be achieved
    • Market research - conducting research to gain information about consumers' needs and what they expect from a product/ service
      • Primary research - research that has been conducted by yourself
      • Secondary research - pre-existing data where the research has been conducted by someone else
      • Qualitative data - data expressed in words, opinions and thoughts
      • Quantitative data - data expressed numerically
      • Market map - a technique used to understand how products/ businesses are viewed relative to competitors based on two relevant characteristics
      • Sampling - involves the gathering of data from a sample of respondents, the results of which should be representative of the population as a whole
    • Extrapolation - uses trends established from historical data to forecast the future
    • Correlation - looks at the strength of a relationship between two variables
      • Strong correlation - little room between the data points and the line
      • Weak correlation - data points are spread quite wide and far away from the line of best fit
    • Confidence level - the probability that the research finds are correct e.g. 95% confidence level
    • Confidence interval - the possible range of outcomes for a given confidence level e.g. 95% confidence that sales will be between £500,000 and £700,000
    • Elasticity - measures the responsiveness of demand to a change in a relevant variable - such as price/ income
      • Price elasticity of demand - measures the extent to which the quantity of a product demanded is affected by a change by change in price
        • Price elastic - a product that if a 1% change in price happens, then it would result in a 2% change in demand  - happens to luxury items
        • Price inelastic - a product that if a 1% change in price happens, then it would result in only a 0.5% change in demand - happens to necessities
      • Income elasticity of demand - measures the extent to which the quantity of a product demanded is affected by a change in income
        • Income elastic - a product that if a 1% change in income happens, then it results in a 3% change in demand - happens to luxury items. It is used to classify goods as 'normal' or 'inferior'. Goods with an income elasticity greater than 1 can be classified as luxuries instead of necessities
          • Normal good - when income rises, so does demand equally when income decreases, so does the demand - luxuries
          • Inferior good - when income rises, demand decreases - consumers switch to better goods
        • Income inelastic - a product that if a 1% change in income happens, then it results in only a 0.2% change in demand - such as necessities
    • The Marketing Mix - the 7 P's
      • Product - everything that the customer buys - brand, features and benefits of a good or service
      • Promotion -  creating an awareness and desire to buy the product
      • People - adding to the product by using the right people in the transaction
      • Physical environment - matching the physical environment in which the transaction takes place to the product and brand
      • Process - making the transaction convenient, efficient for the customer
      • Place - using the right channels to get the product to the customer
      • Price - set to match the expectations of customers and the features of the product
    • Convenience items - goods that are bought on impulse e.g. chocolate
    • Shopping goods - consumers will take their time to compare the product features e.g. shoes
    • Speciality products - consumers take a long time to process information and make a decision e.g. phone
    • Product Portfolio Analysis PPA - can be used to analyse and track the development of multiple products over time taking into account a number of factors such as growth, sales and market conditions
    • Dynamic pricing - applied to products where price can fluctuate with the level of demand, such as hotel rooms
    • Penetration pricing - applied to a new product attempting to enter the market. Initial price is low in order to penetrate the market by undercutting competitors. Over time price may increase as demand grows and reputation/ popularity builds
    • Price skimming - the initial price is high so the profit in the established brands where anticipation for a new product is high. Particularly effective in technology markets

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