MARKETING (REVISION SUMMARY)

Revision Summary


Asset-led marketing

This bases the marketing strategy of a business on its existing strengths, rather than on what the customer wants (e.g. Nestle developing a mousse-style dessert, based on its successful Smarties brand).

Base year

This refers to index number data, and it relates to the year that is chosen for comparison with other years (it has an index number of 100).

Confidence level.

This is a measurement of the degree of certainty to be attached to a conclusion which is drawn from a sample finding. The most common type is a 95% confidence level (i.e. the sample findings will be correct for 19 times out of every 20 attempts).

Correlation.

This measures the relationship that exists between two or more variables. A positive (or direct) correlation is said to exist where one variable increases along with the other, and vice versa (e.g. as disposable income per head rises, then so too does expenditure on food products). A negative (or indirect) correlation is said to exist where one variable declines as the other rises, and vice versa (e.g. as the price of new cars falls, demand for new cars will tend to rise).

Extension strategy

This is an attempt by a business to lengthen the product life-cycle for a particular brand. It is likely to be used at either the maturity or early decline stages of the life-cycle. Types of extension strategy include:

redesigning the product
adding an extra feature
changing the price
changing the packaging and advertising

Extrapolation

This means calculating and analysing recent trends, and assuming that these trends will continue into the future. They can then be used to predict, to a reasonable level of accuracy, how a particular variable (such as sales) will change in the future.

Index number

This is a statistical measure which is designed to make changes in a set of data (such as sales figures) easier to manage and interpret. It involves giving one item of data a value of 100 (the base period), and adjusting the other items of data in proportion to it.

Innovation

This means the commercial exploitation of an invention (i.e. altering an invention, so that it appeals to consumers and meets their needs).

Market orientation

This is a strategy that involves researching consumers' needs, and then developing new products and processes based around these needs. The main alternative is production orientation, where the business develops products based on its production capability and ignores consumers' needs.

Market penetration

This is a pricing strategy for a new product. The product is launched onto the market at a low price in order to build up a strong customer following. This low price aims to steal market share from existing competitors and it deters new competitors from entering the industry.

Market research

This is the process of gathering data on the habits, lifestyle and attitudes of actual and potential customers, with a view to developing products to meet their needs.

Market segmentation

This involves breaking the market down using various criteria, in order to identify distinct groups of customers. The main ways in which a market can be segmented are :

Demographically (such as occupation or age)
Psychographically (by peoples' attitudes and tastes)
Geographically (by region)

Market share

This measures the percentage of all the sales within a particular market that are held by one product or by one company.

Market size

This is the total sales of all the businesses in a particular industry.

Marketing mix

This is often known as "The 4 Ps" (product, price, promotion and place) and it is the term given to the main variables with which a firm carries out its marketing strategy and meets customers' needs.

Marketing model

This is a framework for making marketing decisions in a scientific manner. It is derived from F W Taylor's method of decision-making. The model has five stages.

Stage 1 - Set the marketing objective
Stage 2 - Gather the data that will be needed to help make the decision
Stage 3 - Form hypotheses
Stage 4 - Test the hypotheses
Stage 5 - Control and review the whole process

Marketing plan

This outlines the marketing objectives and strategy of a business. The plan is normally developed in three stages :

carrying out a marketing audit
setting clear objectives for the next year
developing a strategy for achieving the objectives

Marketing strategy

This is a medium- to long-term plan for meeting marketing objectives. A marketing strategy is implemented through the marketing mix (product, price, promotion and place).

Moving average

This is a method of identifying the trend that exists within a series of data. It calculates an average figure for every few items of data - therefore eliminating any fluctuations which may exist, in order to show the underlying trend.

Niche marketing

This is a business strategy that involves identifying consumers' needs and providing products to meet these needs in small, lucrative market segments. It is the opposite strategy to mass marketing.

Primary data

This is first-hand information that is specifically related to a firm's needs.

Primary research

This involves gathering first-hand data that is specifically concerned with a firm's products, customers or markets. It is gathered through questionnaires, observation or experimentation (e.g. test markets).

Product life cycle

This theory states that all products follow a number of stages during their commercialisation (introduction, growth, maturity, saturation and decline). Each product will pass through these stages at different speeds.

Product portfolio

This refers to the range of products produced by a business. This portfolio should range over a variety of markets and a variety of stages in the product life cycle. One way of analysing the product portfolio of a business is through the Boston Matrix.

Qualitative research

This is detailed research into the motivations behind consumers' attitudes and behaviour. It is carried out through interviews and discussion groups.

Quantitative research

This means carrying out research into consumers' buying habits, trying to investigate such issues as a product's consumer profile, likely levels of sale at different price levels, and predicted sales of new products.

Quota sample

This involves segmenting the population and interviewing a given number of people in each segment, according to their demographic characteristics

Random sample

This involves giving every person in the population an equal chance of being interviewed to find out their tastes, shopping habits, etc.

Retail prices index (RPI)

This shows changes in the price of the average person's shopping basket. The RPI is the main measurement of inflation in the UK and is calculated through a weighted average of each month's price changes.

Sample

This is a group of people who are chosen to take part in a market research campaign. Their views and opinions are assumed to be representative of the population as a whole.

Secondary data

This is market research information which is collected from second-hand sources (e.g. reference books, company reports, or government statistics).

Stratified sample

This is a method of sampling that interviews people from a specific subgroup of the population, rather than from the population as a whole. This method of sampling would be chosen buy a business if the buyers of its products fell into a certain age-group or geographic area, rather than being spread across the whole population.

Test market

This is the launch of a new product within a small geographic area (rather than nationally), in order to measure its potential sales and profitability. This reduces the risk and the costs associated with a national failure.

Value added

This is the difference between the cost of the raw materials / inputs and the price that customers are prepared to pay for the final product (i.e. value added = selling price - bought-in goods and services).