OCR Marketing Past Paper PDF

UNIT 3: MARKETING CHAPTER 17 THE NATURE OF MARKETING  CHAPTER 17 The link between marketing objectives and corporate objectives Marketing objectives How markets may differ: such as consumer/producer markets; national, regional and internatio...

UNIT 3: MARKETING CHAPTER 17 THE NATURE OF MARKETING  CHAPTER 17 The link between marketing objectives and corporate objectives Marketing objectives How markets may differ: such as consumer/producer markets; national, regional and international markets Difference between product and customer orientation Factors influencing the supply and demand for the products/services of a business Interactions between price, supply and demand Problems associated with measuring market share and market growth Implications of changes in market share and growth Classification of products How marketing might differ for different types of goods and services Product differentiation and USP (Unique Selling Point) Tactics such as mass versus niche marketing, market segmentation, product differentiation  WHAT IS MARKETING? Marketing is one of the important functional departments of all businesses. Marketing is more than just “selling” Marketing plays a vital role in a profit seeking business + find out what customers are prepared to buy + communicate this to other departments + sell the product(good or service) to customers at a profit  MARKETING OBJECTIVES THE GOAL SET BY THE MARKETING DEPARTMENT TO HELP THE BUSINESS ACHIEVE ITS OVERALL OBJECTIVES. EXAMPLE: INCREASE MARKET SHARE, INCREASE TOTAL VALUE OF SALES, BRAND IDENTITY Its important for marketing objectives to be 1.linked to corporate objective 2.Realistic , measurable,motivating, achievable and clearly communicated to other departments 3.be determined by senior management 4.Coordinated with other departments  WHY ARE MARKETING OBJECTIVES IMPORTANT? They provide a sense of focused direction for the marketing department and help the business to achieve its overall corporate objectives. Business success can be measured against the targets set by the objectives. Marketing objectives can be broken down into regional and product sales targets. Marketing objectives form the basis of marketing strategy. Marketing objectives will impact on the marketing strategies adopted. It is necessary to have a clear vision of the business’s objectives in order to discuss how marketing decisions can help to achieve them. Examples of marketing strategies include: penetrating existing markets more fully by selling more to existing and new customers entering new markets in other countries developing new, or updating existing, products.  DEMAND, SUPPLY AND PRICE DEMAND: Apart from price changes, the level of demand for a product can vary due to a change in any of these determinants of demand: Changes in consumers incomes Changes in the prices of substitute goods and complementary goods Changes in population size and structure Fashion and taste changes Advertising and promotion spending  SHIFTS IN DEMAND CURVE All of these changes can result in a new demand curve. For example demand for holidays increases to D1 after an increase in consumer incomes.  DEMAND, SUPPLY AND PRICE Supply Apart from changes in price – which cause a new position on the supply curve as shown above – the level of supply of a product can vary due to a change in any of these determinants of supply – Costs of production Taxes imposed on the suppliers by the government, which raise their costs Subsidies paid by government which reduce their costs Weather conditions/natural factors Advances in technology –lower cost  EQUILIBRIUM Equilibrium price is at the point where demand equals supply (the point at which the demand and supply curves intersect) If the price is higher than the equilibrium price, there will be unsold inventory – excess supply. Suppliers do not want unsold products. They will lower the price. If the price is lower than the equilibrium price, then inventories will run out, leaving excess demand. Suppliers could make a higher profit by raising the price to the equilibrium level.  APPROACHES TO MARKETING MARKET ORIENTATION- bases product decisions on consumer demand as established by market research. PRODUCT ORIENTATION- focuses on products that can be made or have been made for a long time and then tries to sell them  DIFFERENCE BETWEEN MARKET -LED & PRODUCT- LED APPROACHES MARKET ORIENTED PRODUCT ORIENTED MARKET -LED PRODUCT-LED Product designed to meet Product design first customer’s needs Based on company’s skills, Use of Market Research to knowledge and product find what customers want Homogenous products sold Lower risk with no adaptation to Widens customer base, as consumer needs firm produces what market Business produces according needs to company’s strength & Lots of adaptation with abilities regional, cultural and Saves on market research financial influences catered costs for. Can stretch the resources of Get the product then find a business as many options market need to be included Higher risk High expenditure on market  EVALUATION OF THESE TWO APPROACHES:  Market orientation may over stretch business resources trying to meet every consumer need, trends and fashion Development of innovative products can be a great success; Dyson, Apple All Mkt. Oriented businesses may not succeed as market research and identification of consumer needs are not a guarantee of success Business success and survival depends on the whole marketing process  DISTINCTION B/W CONSUMER AND INDUSTRIAL MARKETS BUSINESSES CAN SELL PRODUCTS IN - CONSUMER MARKET i.e. final users of the product - INDUSTRIAL MARKET i.e. where the businesses buy the product to be used in production. # WHY IS THIS DISTINCTION IMPORTANT? Characteristics Communications / Marketing Industrial  Buy raw material  Direct communication  Buy in bulk to individual firms.  Intention is to add  Focus on technical value and resell. specifications and price Consumer  Buy finished products  Often mass media/  Buy individual /few above the line items  Promotions may be  Intention is to use , from retailers not make profit  Promotions focus on desirability or  CONSUMER & INDUSTRIAL MARKET Consumer products are often classified into: convenience products – purchased frequently, often bought on impulse and sold to a large target market (e.g. sweets, soft drinks) shopping products – usually require some planning and research by consumers before being purchased; consumers do not buy these frequently (e.g. washing machines) speciality products – bought infrequently, often expensive and with strong brand loyalty (e.g. cars and designer clothing). Industrial products are often classified into: materials and components – needed for production to take place (e.g. steel and electric motors for washing machines) capital items – equipment, machinery and vehicles (e.g. lathes, IT systems and industrial buildings) services and supplies – business services and utilities (e.g. power supplies and IT support/maintenance).  KEY DIFFERENCES BETWEEN B2B AND B2C SELLING 1. Product Complexity: B2B products, like equipment for power stations, are often much more complex. They require knowledgeable salespeople and specialized support to guide buyers through the process. 2. Buyer Expertise: Business buyers typically know more and have more negotiating power than regular consumers. This means they require experienced, well-trained salespeople who can address their specific needs. 3. Long Sales Cycle: In B2B, purchases are rarely spontaneous. Buyers usually take their time, carefully analyzing their options and weighing the pros and cons before making a decision. 4. Selling Methods: B2B companies don’t rely much on mass advertising. Instead, they often engage buyers directly through trade fairs, personal contact, or online interactions. 5. Target Market Size: Industrial markets usually have fewer buyers than consumer markets. As a result, B2B companies may need to tailor their products to fit the unique requirements of each business, like customizing an elevator system for a high-rise hotel.  LOCAL, NATIONAL AND INTERNATIONAL MARKETS National Companies that sell their products and services in more than on geographical location within one country’s borders. Often have multiple sales outlets and advertising on national television channels, national newspapers and advertise heavily online. Regional Companies which sell their product or service in a region which has its own identifiable characteristics and needs. This could be a small market or a larger market such as Europe, North America, or Asia. Products and services will often be similar but have minor variations to cater for individual customer needs. International Often larger companies that sell their product or service globally. Products and services must have a common identifiable message across cultures and regions, although products and services may be altered as with regional businesses.  MARKET SHARE AND MARKET GROWTH o Definition- the % of sales in the total market sold by one business. FORMULA: firm’s sales in time period X 100 total market sales in time period  Benefits of high market share  Higher sales and possibly profits compared to competitors  Retailers keen to stock goods  Possible discount on retailers commissions  Use in advertising and other promotional material  Problems associated with measuring market share and market growth  Not easy to measure depending on value or volume of sales  Manufacturer will use measure which is more favourable towards it hence difficult to compare businesses  Firm’s mkt. share can fall even though sales are rising  MARKET SIZE MARKET SIZE is the total level or value of sales of all producers within a market MARKET GROWTH is the percentage change in total market size over a period of time IT IS THEREFORE VERY IMPORTANT FOR A MARKETING MANAGER TO KNOW:  How big is the market in which we sell our products?  Is it getting bigger or smaller/  Are our sales a greater or smaller share of the total market than last year?  It is often easier for a business to increase sales if the total market is growing but increasing product sales does not mean market share has increased for the business. As competitors might have increased sales at an even faster rate!!!!  A TALE OF TWO MARKETS Total sales in market A in 2020 were 54 000 units. The average selling price was $3. Total sales of market B in 2020 were 10 000 units. The average selling price was $15. In 2021, sales volume of market A increased by 5% and the selling price increased by 10%. In 2021, total sales value of market B was $180 000, despite the average price falling to $12. 1.Calculate the percentage increase in the total value of sales for market A between 2020 and 2021. 2.Calculate the percentage increase in total sales volume in market B between 2020 and 2021.  TACTICS TO ACHIEVE MARKETING OBJECTIVES Tactics such as mass versus niche marketing, market segmentation, product differentiation and portfolio analysis as ways of achieving marketing objectives Mass marketing versus niche marketing Market segmentation Product differentiation  NICHE AND MASS MARKETING Niche marketing : identifying and exploiting a small segment of a larger market by developing products to suit it Mass marketing: selling the same products to the whole market with no attempt to target groups within it. Niche marketing is increasingly common because modern production techniques allow much more product flexibility of design and built.  NICHE MARKETING + Small firms are often able to survive by exploiting niche markets + Allows big business to create separate and exclusive images for products; for e.g Lexus by Toyota + Unexploited niche markets may allow higher prices to be charged to the business that enters them first - No economies of scale in production & marketing - Quite a risky strategy if the tastes of niche market consumer changes -Total sales and possibly profits will be lower than mass marketing -Cost of developing products to suit different niche markets  MARKET SEGMENTATION Market segmentation is the process of identifying different segments within a market with similar characteristics and targeting different products or services to them This marketing concept is becoming much more important for many consumer products. As consumer incomes rise in most of the world, so expectations change. Many consumer would prefer to buy products that are specifically designed for their needs supported by a marketing strategy that focuses on them and their needs. Market segmentation is customer focused, so it is consistent with the concept of customer orientation. Sometimes segmentation is referred to as differentiated marketing. MARKET SEGMENTATION BENEFITS & LIMITATIONS  CRM Customer relationship marketing (CRM) is a technique based on client relationships and customer loyalty. Using customer data and feedback, companies utilizing this marketing strategy develop long-term relationships with customers and develop laser-focused brand awareness Objective of CRM: is to develop customer loyalty to ensure that customers buy from the business in the future. WHY? Studies have shown that : it can cost between 4 and 10 times as much to gain new customers (with expensive promotions) as it does to keep existing ones if a business can secure the loyalty of many customers, it means that there will be fewer customers buying products from competitors  DEVELOPING EFFECTIVE LONG- TERM RELATIONSHIPS CAN BE ACHIEVED BY: Targeted marketing – giving each customer the products and services they have indicated, from records of past purchases, that they most need. Customer service and support – after-sales service and effective call centres are good examples of the support essential to building customer loyalty. Communicate regularly with customers – to give frequent updates on new products / special offers / new features / new promotions and support services. Using social media – some CRM systems use social media sites to track and communicate with customers. COSTS AND BENEFITS OF CRM  SOCIETAL MARKETING  Making marketing decisions based not just on consumer wants but “what is good for society” such as wooden furniture made from sustainably sourced materials.  Wider perspective than other approaches  Focuses on other stakeholders including business and its customers with greater focus on long term benefits rather than short term gain  Social responsibility is becoming increasingly important with growing awareness amongst consumers particularly in developing countries  Tries to balance company’s profits, customer wants and society’s interests  Can give business competitive advantage & a USP  Gives business ability to charge higher prices  OTHER APPROACHES ASSET- LED Basing new products on a firms existing products and strengths such as Apple focusing on consumer electronics  Also based on market research but doesn’t attempt to satisfy all consumers in all markets.  Firms focus on their own competencies & strengths instead of purely on what the customer wants  Examples: Black and Decker  CHAPTER 18 – MARKET RESEARCH Purpose of market research in determining customer characteristics, wants and needs Distinction between primary and secondary research, desk and field research, and the main features of each Printed, paid for and web based sources of information Limitations of sampling The reliability of data collection Analysis of results obtained from market research Presentation of information Cost effectiveness of market research in given situations (treated descriptively) MARKET RESEARCH TYPES OF MARKET RESEARCH PRIMARY RESEARCH SOURCES OF PRIMARY & SECONDARY RESEARCH PRIMARY DATA COLLECTION METHODS  PRIMARY AND SECONDARY RESEARCH ADVANTAGES DISADVANTAGES  Up to date and more  Costly useful  Time consuming  Relevant , collected for a  Doubts over accuracy and specific purpose, directly validity answers the questions a business wants  Confidential, no other business has access to it  Often obtainable cheaply  May not be updated except for Mkt.  May not be entirely Intelligence Reports suitable to the business’s  Identifies nature of problem market & planning of  Data collection methods primary research and accuracy unknown  Obtainable quickly  May not be available for  Allows comparison of completely new products  IKEA IKEA will be able to predict the impact of demographic changes in society on its sales. For example, as IKEA knows that its core customers are aged between 25 and 50 years old, it can analyse demographic projections to see if this core group is increasing or decreasing in size. Such knowledge will contribute to decisions about the marketing mix. Understanding customers will help IKEA design products and store layouts to appeal to them. Research will also guide decisions about other elements of the marketing mix. For example, IKEA can identify the importance of designing products for children, as the majority of customers have children. The importance of value to customers is also understood from the research. This knowledge will help reduce the risks associated with new product launches.  IK As the nature of customers in the 24 countries in which IKEA currently operates is known, this will help in making decisions about entering new geographical markets. IKEA may focus expansion on countries with similar groups of customers to its current customers. Understanding customers will help identify remedial action that can be taken to support products that have declined in popularity. Alternatively, it will contribute to decisions to divest where it is felt that a product no longer has a viable future.  PRIMARY RESEARCH - FEATURES Primary research is the collection of first-hand data – original information gathered by the firm or on behalf of the firm. For example, a supermarket carrying out a survey to establish customer needs. The data collected have never been published in any form. The data will be directly related to a firm’s specific needs. A consumer survey will be designed to discover specific aspects of consumer needs relevant to the firm. Primary research is typically expensive to collect. This is because it requires significant labour input and expertise if the results are to be trusted.  SECONDARY RESEARCH Secondary research is the collection of data from second-hand sources, e.g. a supermarket using government statistics on the demographic profile of a particular region. These are pre-existing data that have already been published in some form. Data may, for example, be found on the internet, in libraries or sourced from the government. Usually the data have not been collected to meet the specific research needs of the firm – they were collected for some other purpose. Secondary research is relatively cheap to collect.  PRIMARY RESEARCH – Limitations of primary methods PART 1 Sampling Bias – Results from a sample maybe different from those that would have been obtained if the entire target population had been obtained. Questionnaire Bias – this is when the questions tend to lead respondents towards one particular answer. Other forms of Bias – maybe the respondent does not answer in a very truthful manner.  LIMITATIONS OF SAMPLING Sample may be too small To save on costs, a very small sample might be researched. This is likely to be too small to represent a true cross-section of the whole target population.Cost and time are the two major constraints for market research. Cost- effectiveness is an important consideration in market research. Risk of sampling bias The only really accurate method of primary research is to ask the entire target population, but this is expensive and time-consuming. Results from a sample may be different from those that would have been obtained if the whole target population had been questioned. This is called sampling bias. The less representative the sample, the greater the statistical bias that will exist. Researchers may not use the most appropriate methods of sampling Researchers need to know the best and most statistically accurate methods of selecting samples. If only convenience sampling is used (i.e. asking those people who are most conveniently and easily contactable), the research results are most unlikely to be accurate. PRIMARY RESEARCH – PART 2 Analysis of results obtained from market research Mean , mode and Median ? Arithmetic Mean – calculated by totalling all the results and dividing by the number of results Eg: 10, 5 , 3 Mean = (18/3) = 6 Mode – the value that occurs most frequently in a data set. Median – the value of the middle item when data have been ordered or ranked. It divides the data into two equal parts.  MEAN USES Advantages Disadvantage s Used as an Includes all of Affected by indicator of the data in its one or two likely sales calculation. extreme levels per The most well- results. period of time. known Usually not a This could be average; it is whole number. used to help widely used If the mean determine re- and easily size of shoes order levels. sold by a shoe Used for retailer is 6.38, making is this useful comparisons for making between sets inventory- of data such as holding attendance at decisions?  MODE Uses Advantages Disadvantage s Could be used It is easily It does not for inventory observed and no consider all of ordering calculation is the data, purposes (e.g. a necessary. therefore it shoe shop would The result is a cannot be used order more pairs whole number for further of size 7 shoes and easily statistical than any other understood. analysis. size if this is the There may be modal size). more than one modal result, which could cause confusion.  MEDIAN Uses Advantages Disadvantage s Could be used in It is less Calculation from wage influenced by grouped data is negotiations extreme results complicated. (e.g. ‘Half of than the mean. An even number union members So, it is more of results means earn less than appropriate than the $50 per week’). the mean when value is Often used in there are a few approximated. advertising (e.g. very high or very It cannot be ‘our products low results. used for further are always in the statistical best-performing analysis. 50% of all  ACTIVITY 18.5 Mean: the arithmetic average. This could be useful as it would enable calculation of the cost of promotion if it is based on the number of visits to a petrol station. Mode: the value that occurs most frequently. This would be of limited value to planning the new promotion campaign. Median: the middle value. The median is the most important value when the data has several values that occur frequently, and several relatively high values. The mode will not give a unique answer and the mean will be skewed towards the higher values.  PRIMARY RESEARCH – Presentation of information PART 3 Market research produces data in numerate and descriptive form. However it is raw and unprocessed. There are methods of presenting the data in ways that it is more useful.  PRESENTATION OF Tables DATA Bar Charts Histograms Line Graphs Pie charts Pictograms  TABLES Image Uses ? This allows ease of reference and tables can be used to present a mass of data in a precise way However they lack the visual impact of a bar chart or a graph. BAR CHART MULTIPLE BAR CHART  BAR CHART Bar charts are one of the most frequently used forms of presenting data They use bands of equal width but varying length to represent values Uses ? They allow easy comparison over time or between different items. It would become rather complex and would be difficult to read if there were more than a few sub divisions of the data.  HISTOGRAMS Histograms are often confused with bar charts The difference: it is not the height of the bar that represents relative value but the area of each bar as histogram measures relative frequencies from grouped data.  HISTOGRAMS They can be used to visually present frequency data when the range of data is broken down into class ranges. They can be used for identifying the modal class.  LINE GRAPHS Line graphs are commonly used for showing changes in a variable over time – time series graphs Uses ? Allows easy reference to trends in the data and shows up seasonal or other fluctuations clearly PIE CHARTS  PIE CHARTS Pie charts are used to display data that need to be presented in a way that the proportions of the total are clearly shown. This is a useful way of showing the changing relative importance of values over time. It does not allow for changes in the total size of the pie and they are less useful than bar charts in showing precise values.  PICTOGRAMS They are really useful when the user wants to attract the reader towards looking at the data. They are imprecise when using one symbol to represent a large number of results. PRIMARY RESEARCH – PART 4 Cost effectiveness of market research in given situations (treated descriptively) The cost of research is an important consideration as all forms of research are time consuming and expensive. Internet and cell phones have made it much easier to contact a wide range of consumers. In spite of market research developments which have made research cheaper, the main question needs to be answered before research is undertaken and that is….”IS IT WORTH IT”…  QUESTIONS 2002 june AS - Why might firms choose to undertake both primary and secondary market research when entering a new market - 10 marks June 2005 Disuss the most suitable methods of market research for a new product being developed by a soft drinks manufacturer – 12 marks June 2009 Explain how market research might be used to reduce some of the problems faced by a new start up business – 12 marks  QUESTIONS Nov 2003 Distinguish between mean and median of a set of data – 2 marks Explain one business situation where the mode be a useful measure – 3 marks June 2006 Briefly distinguish between primary and secondary research - 2 Explain why a business might use quota sampling in market research – 3 June 2007 Distinguish between the mean and median – 2 marks Briefly describe one business in which the median might be a more useful measure than the mean – 3 marks