Sampling

  • Created by: B-raa
  • Created on: 31-01-19 18:41

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Marketing-The process of identifying, anticipating and satisfying the customer needs profitably 

Customer look for:

  • value
  • are generally loyal
  • tastes change frequently

Marketing objectives:

  • Increase sales volumes = difference/original x 100
  • Increase brand loyalty 
  • Increase Market Size

Niche Marketing

Niche marketing-where a business targets a smaller segment of a larger market where customers have specific needs and wants

Positives and Negatives:

+less competition

+customer base is loyal

+you can become well-known for that product

-less exposure

-lack of economic scale

-vunerable to market changes

Mass Marketing

Mass marketing-where a business sells into the largest part of the market where there are many similar products on offer

Positives and Negatives:

+larger customer base to reach

+does get economic scale

+easier to meet general customer needs

-customers aren't loyal

-a lot of competition so prices have to be low

-difficult to develop a product

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B2C- Business to customer 

-Retailing     -Personal banking

-Family Tourism   -House building

  • The product is more important than relationships
  • Usually large market
  • Short buying process
  • Less sophisticated buyers
  • ESP is the most important factor
  • Brands very important

B2B- Business to business

-wholesaling    -business banking

-business travel   -commercial property

  • Based on relationships with business buyers 
  • Often small & focused market
  • More complex & longer buying process
  • More sophisticated buyers
  • Aim is to turn prospects into buying customers 
  • Educational element to promotion
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Increase Sales Volume (number of items sold)

Sales growth % = Sales this year - sales last year    x100

                                         Sales Last Year

Increase Sales Value (financial worth of items sold)

Sales value = Sales Volume x Average Price

Increase Market Size (the total volume or value of sales of products)

Market Growth % = Market size this year - Market size last year   x 100

                                                 Market size last year

Increase Market Share (% of total sales of a product achieved by 1 firm)

Market Share = Sales of product by 1 company

                              total sales in the market 

Increase Brand Loyalty 

  • Get regular repeat customers
  • Spend less money
  • Charge high prices
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Benefits social media marketing

  • Tightly targeted at precise tastes and habits
  • Provides interactivity
  • Gain a fuller understanding of customers and the market
  • Increased brand loyalty 
  • Different generations can be targeted through different social media 
  • "Profit comes from repeat customers"

Customer Relationship Marketing (CRM)

Online adverts are all tailored to you, as are the junk email in your inbox. A CRM database holds all the knowledge about all individual customers-the idea is to be able to build a relationship and get you to spend more and hold onto customers for longer.

Dynamic Pricing

No price list - price moves continuously with supply and demand - ensures high capacity utilisation, E.g. public transport, leisure and tourism.

Ethical marketing

Honest open mindset - the willingness to sacrifice profit where it is incompatible with morality. Companies portray themselves as moral and responsible as long as the customer cares 

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Market Mapping

Market mapping involves plotting similar products/services in a two-dimensional plane. The dimensions represent key attributes or variables in their market. E.g. high price vs low price / high quality vs low quality / old vs young.

How is a market map constructed?

  • You need to know the key features of that market
  • You need to be able to identify markets in that area
  • You need to do more research into these brands
  • Then positions the brands on the map

What are the advantages and disadvantages of market mapping?

Positives:

  • You can see gaps in the market

Negatives:

  • You can only compare 2 factors
  • The map can be subjective
  • You're looking at other brands instead of being unique

Interesting:

  • You're looking at other brands
  • It's visual
  • It's only 2 dimensional
  • Identifying gap doesn't mean you should invest in it because there are many other factors as well
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Why market research is carried out?

  • Descriptive reasons - what is happening?
  • Explanatory reasons - Why is something happening?
  • Predictive reasons - What is likely to happen?
  • Exploratory reasons - What would you like to happen?

Primary vs Secondary data

Primary data - data collected first-hand for a specific purpose by the business

Secondary data - data that already exists and which has been collected for a different purpose

Secondary data sources:

  • Google
  • Government sources
  • Competitor materials 

Advantages and Disadvantages

Positives:

  • Primary data is tailored to your business
  • Secondary data is readily available
  • Secondary data is less time consuming and less costly
  • Primary data can choose the way it's collected
  • Primary data is recent
  • Secondary data has a worldwide reach so more data is available

Negative:

  • Secondary data is not tailored 
  • Primary data is not readily available
  • Secondary data that is needed may not exist
  • Secondary data was not up to date

Interesting:

  • Leading questions ruin data
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Primary data is best used by a start-up to fill in the gaps of secondary research.

Quantitative vs Qualitative 

Quantitative concerned with data

Qualitative based on opinion

Technology to gather data

  • Internet
  • Loyalty Cards
  • Social Media
  • Competitors website

Sampling

A sample is a group of people that is intended to represent the overall target population.

Random Sample: +Completely random (use large sample)

                             -A group can be missed

Quota Sample: +Break population in groups and sample

                          -Can be biased 

Stratified Sample: +Proportionate to the population 

                              -Complicated and needs lots of data 

Factors affecting sample size:

  • finance and cost
  • type of product
  • level of risk
  • target market
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Market Segmentation

Dividing a market into distinct groups of buyers on the basis of needs, characteristics or behaviour who might require separate products or marketing mixes.

Subdividing markets into smaller groups within which are broadly homogenous pattern of needs.

A segment is a group of customers who share certain relevant characteristics and respond in a similar way to a given set of marketing efforts.

The segment must be:

  • relatively homogenous group
  • distinctive and identifiable 
  • accessible 
  • actionable
  • measurable 
  • profitable - sufficiently large

Segment a market:

  • Age 
  • Gender
  • Income
  • Area
  • Ethnic, cultural and religious
  • Socio-economic groupings

Main bases of segmentation:

> Geographic             >Behavioural >Demographic           >Psychographic 

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Extrapolation

Extrapolation involves taking past and present data about a market and uses an identified underlying trend to predict future sales.

Benefit:

  • Forecasting can help the marketing function with distribution
  • All sectors will be better informed if the business has an idea of future sales

Drawbacks:

  • forecasting relies on what has happened in the past
  • not good for fast changing markets
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Trends - the pattern of change indicated within a set of numerical data

Confidence Intervals

If a sample concludes that 36% of the population would buy a product with a confidence interval of + or - 4% then the conclusion drawn is that between 32% and 40% of the population will buy the product.

Confidence levels are the degree to which the statistics can be considered reliable.

Correlation - an *apparent relationship between 2 factors which can be either positive or negative

*correlation is not equivalent to causation

Negative = Inverse Relationship

Statistical Techniques:

  • Confidence Intervals 
  • Correlation
  • Extrapolation
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Why use market segmentation?

  • To develop different strategies for different parts of the market
  • To tailor the marketing mix to meet the needs of distinct groups
  • To increase sales and profits by serving particular segments
  • To identify marketing opportunities
  • To dominate niche segments
  • To reflect differences in customer tastes
  • To prioritise on those segments most likely to provide a higher return

Limitations of market segmentation:

  • Lack of information and data
  • Difficulty in measuring and predicting consumer behaviour
  • Hard to reach customer segments once identified

Positioning

Can pitch to the whole segment, aiming centrally and hoping for a broad response. It may be more effective to identify a position within the segment that appeals strongly to the minority, rather than appealing a bit to the majority.

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PED & YED

What are the factors that affect the demand for a product or service?

  • Limited availability and substitutes 
  • Price changes
  • Trend
  • Income - economy
  • Location
  • Advertising
  • Product Differentiation

Demand - The quantity of a good or service that consumers choose to buy at any possible price in a given period.

Elasticity - the sensitivity of demand

> a measure of the sensitivity of one variable to changes in another variable

PED - Price Elasticity of Demand

% Change in quantity demand

        % Change in price

PED will always be negative.

Elastic- If PED is greater than 1, then the good or service is considered as being relatively elastic and therefore it is highly price sensitive

Inelastic- When demand is not sensitive to price th elastically will be smaller than 1 as is referred to as being inelastic

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Income Elasticity Demand

YED = %Change in quantity demanded

            %Change in consumer income

Normal good - YED is positive 

A luxury good has a YED > 1.5 as demand rises more proportionally with income

Inferior good - YED is negative 

If income elasticity is negative then marketing should focus on changing the product's image reposition to appeal to higher income sectors

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The 7p's of the marketing mix

Product - Promotion - Price - Place - Physical environment - People - Process

A product is a service or good.

Product Differentiation

Products that are the same tend to have similar prices

Challenges for a business

  • To make products different from competitors
  • Ensure that customers recognise that the product is different

Ways of differentiating a product

  • Distinctive design E.g. Dyson, Apple Ipod
  • Branding E.g. Nike,Reebok
  • Performance E.g. Mercedes 

Brands

  • A product with unique character for instance in design or image
  • It is consistent and well recognised

Benefits

  • Inspires customer loyalty leading to repeat sales 
  • Can change higher prices, especially if brand is market leader
  • Retailers or sales service want to stock brands

Own label brands

  • A retailer which uses their own name on product rather than manufacturers E.g. Tesco tea or Sansbury's Cola

Brand Extension

  • When a brand name is used on a new product that has some of brand's characteristics E.g.Dove soap and shampoo, Lucozade and lucozade sport

Case Study - Brand Stretching - Virgin 

  • Where brand is used for a diverse range of products, not necessarily connected
  • Virgin is perhaps the best example of how far a brand can be stretched into distinct markets

Advantages:

  • Increase brand loyalty
  • Appeal to a wider range of audience

Disadvanatges:

  • Might feel distant and cold/uncaring
  • If one product fails then the whole brand does
  • Less likely to do well in all of them
  • Needs a lot of money
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Product Life Cycle-A theoretical modle which describes the stages a product goes through 

1) Research and Development

  • Often complex 
  • Absorbs a lot of resources
  • May not be successful
  • involves a long lead time before sales begin

Causes of elimination:

  • Inadequate demand
  • Action of competitors
  • Change in external environment
  • Production problem
  • High costs
  • Does not fit firm range
  • Life cycle too short

2) Introduction

  • New product launched
  • Low level of sales
  • High unit costs
  • Usually negative cash flow
  • distributors reluctant
  • Heavy promotion needed

3) Growth

  • Expanding market and arrival of competition
  • Fast growing sales
  • Rise in capacity utilisation
  • Cash flow is positive
  • Unit costs fall with economies of scale

4) Maturity

  • Slower slaes growth as rivals enter the market 
  • High level of capacity utilisation
  • High profits for those with high market share
  • Cash flow should be strongly positive 
  • Weaker competitors leave the market
  • Prices and profits fall

5) Decline

  • Falling sales
  • Market saturation/competition
  • Decline in profit and and weak cash flow
  • Decline in capacity utilisation - switch capacity to alternative products

6) Termination/Rejuevenation

  • Can let the product die or rejuevenate it

Models are oversimplified generalisations of the world.

Implications of each stage:

  • Net cash flow
  • Profit
  • Marketing strategy
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Product Portfolios

  • Collection of businesses/subsiduaries or products that make up a business

>Examples: Cadbury's,Coca Cola, Virgin, Apple, Unilever Advantages of product portfolios:

  • Own more of the market share
  • If one product fails the business won't be badly affected by the lack of profit - product life cycle
  • Reach new customers

The Boston Consulting Group

The Boston Consulting Group is designed as a tool for analysis

Products are categorised as:

  • Question marks/Problem children
  • Stars
  • Cash Cows
  • Dogs

The ideal is a balanced portfolio with some products in each category. Question marks/Problem children - Has a high growth rate but a low market share. Cash absorbing - needs to be built Dogs - Has a low growth rate and a low market share Stars - Has a high growth rate and a high market share. Cash neutral - hold Cash Cows - Has a low market growth rate and a high market share. Cash generating - harvest/milk

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Question Marks

> Must increase market share in fast market

Cash absorbing - need to plough funds into them to grow market share

  • You need high profile people to promote your product
  • Must invest in promotion + other aspects of marketing 
  • Build selectively

Stars

>Investment to sustain growth

  • Build sales/keep market share
  • Spend to keep competitors at bay
  • Invest to maintain/increase leadership position
  • Repel challenges from competitors

Cash Cows

>Harvest 

  • Defend market share
  • Aim for short term profits
  • Little need for investment
  • Reduce investment in order to maximise short term cash flow and profits
  • Use profits from cash cows to invest in new products

Dogs

  • Phase out or sell off
  • Not worth investing in
  • Any profit made has to be re-invested just to maintain market share
  • Use up more management time and resources than can be justified
  • Divest or at the most focus on a defendable niche market
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Advantages:

  • Its broad and covers a lot of markets
  • It helps categorise our products
  • Lets you understand how to get a balanced portfolio

Disadvantages:

  • Difficult to find information about the market
  • External factors affect the market which changes very quickly - just a snapshot

Assumptions underlying the Boston Matrix:

  • Market share can be gained by investment in marketing
  • Market share gains will always generate cash surpluses
  • Cash surpluses will be generated when the product's in the maturity stage of the life cycle
  • The best opportunity to build a dominant market position is during the growth phase.

Criticisms of Boston Matrix:

  • Market growth is an inadequeate measure of a market's attractiveness
  • Market share is an inadequate measure of a product's ability to generate cash
  • The focus on market share and market growth ignores issues such as developing sustainable competitive advantages
  • The product life cycle varies
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