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3.3 Decision making to improve marketing performance - Coggle Diagram
3.3 Decision making to improve marketing performance
3.3.1 Marketing Objectives- Targets that a company sets itself
Related too-
Sales Volume and Sales Value- Such as reaching certain sales volume over a period of time
Market Size- When market size increases market is growing
Market and Sales Growth- Company might set objectives to stimulate market growth. A business might aim for a growth in sales of a certain volume/value.
Market Share- Objective to increase market share, how well a business is doing compared to competitors
Brand Loyalty- Connecting with customers to keep them coming back
Corporate Objectives- Relate to the business as a whole
Value of setting marketing objectives
Ensure functional activities consistent with corporate objectives
Provide a focus for marketing decision-making and effort
Provide incentives for marketing team and a measure of success / failure
Establish priorities for marketing resources and effort
Potential problems of setting marketing objectives
Fast-changing external environment
Potential conflict between marketing objectives
Easy to be too ambitious with marketing objectives
Examples of marketing objectives
Maintaining or increasing market share
Developing new products / innovation
Meeting the needs of customers
Entering a new market / market positioning
Gaining an advantage over competitors
Internal Influences on marketing objectives
Corporate objectives
Finance
Human resources
Operational issues
Business culture
External Influences
Economic environment
Competitor actions
Market dynamics
Technological change
Social & political change
Marketing Size
Indicates the potential sales for a firm
Usually measured in terms of both volume (units) and value (sales)
Size of individual segments within the overall market can also be measured
Not normally a marketing objective – since a firm cannot influence it
3.3.2 Price and Income Elasticity of demand
Elasticity measures the responsiveness of demand to a change in the relevant variable- such as price or income
Price elasticity of demand measures the extent to which the quantity of a product demanded is affected by a change in price
PED calculation - % change in quantity demanded
/ % change in price
Demand falls by less then a change in price = inelastic
0-1 = Inelastic (eg 0.5)
Change in price is less then change in demand = elastic
Higher then -1 = Elastic (eg 2.5)
Income elasticity of demand measures the extent to which the quantity demanded is affected by a change in income
YED calculation- % change in quantity demanded / % change in income
Luxuries- Income elasticity more then 1 - Elastic
As income grows proportionally more is spent on luxuries
Necessities - Income elasticity less then 1 but more then 0 - Inelastic
As income grows proportionally less is spent on necessities
Inferior goods - Income elasticity negative less then 0
As income grows less is spent on customers switch to luxury goods
3.3.4 Making market decisions using the marketing mix
Product Portfolio/Product mix- The combination of all product lines that a business produce
Product Line- Consists of related products with similar characteristics, uses or target customers
Product Portfolio Analysis- asses the position of each product or brand in a firms portfolio to help determine the right marketing strategy
Boston Matrix
Problem Child- High market Growth, Low Market Share.
Low share of rapidly growing market
Cash flow is negative
Have potential in future but uncertain
Could become star or dog
Star- High market Growth, High Market Share
High share of fast growing market
Position of leadership in high growth market
Product is strong/Market for product is growing
High marketing spend
Net cash flow is positive of neutral
Dog- Low market Growth, Low market share
Dogs are either products that have failed/ or products that are in decline
Low share of slow growing market
Not going anywhere/ no real potential
Cash Cow- Low market growth, High market share
High share of slow growing market
Mature stage in lifecycle
Mature successful product
Little potential for growth
Large positive cash inflow
Product Lifecycle- Shows the sale of product over time, Marketing decisions based on product lifecycle
Development
Marketing department does research
R & D develop products
Costs are high
High failure rate
Introduction
Product is launched
Promoted heavily
Initial price could be low to encourage spending (Price Penetration) or high (Price Skimming)
Growth
New customers as well as repeat customers
Product may be improved or developed
Maturity
Sales reach peak
Profitability Increases as development prices have been paid off
Sales may suffer as more competitor rise
Decline
Doesn't appeal to customers anymore
Sales fall rapidly
Product may be withdrawn
Extension Strategy- Try to prolong lifetime of product by changing the marketing mix eg marketing or product development
Price- how much customer pays for the product
Place- how the product is distributed to the customer
Promotion- how the customer is found and persuaded to buy
Product- the product or service that a customer buys
People- the people who make contact with the customers in delivering the product
Process- the systems and processes that deliver a product to a customer
Physical Environment- the elements of the physical environment the customer experiences
Distribution - To make products available in the right place at the right time in the right quantities
What is a distribution channel?
A distribution channel moves a product through the stages from production to final consumption
Retailers- directly to customer
Wholesalers- Producers to retailers
Distributers- Sell on products and serve as a local sales point
Multi-channel distribution involves a business using more than one type of distribution channel
Price
Price Skimming - set a high price to maximise profits
Penetration pricing- Offer a low introductory price
Dynamic Pricing- Dynamic pricing is a pricing strategy in which businesses set flexible prices for products or services based on current market demands
Promotional Mix
Advertising (offline & online)
Sales promotion & merchandising
Personal selling
Public relations/publicity / Sponsorship
Direct marketing
3.3.2 Interpreting Marketing Data
Extrapolation- Uses trends established from historical data to forecast the future
A moving average takes a data series and “smoothes” the fluctuations in data to show an average
The aim is to take out the extremes of data from period to period
Advantages
A simple method of forecasting
Not much data required
Quick and cheap
Disadvantages
Unreliable if there are significant fluctuations in historical data
Assumes past trend will continue into the future – unlikely in many competitive business environments
Ignores qualitative factors (e.g. changes in tastes & fashions)
Correlation- looks at the strength of a relationship between two variables
Independent Variable
The factor that causes the dependent variable to change
Dependent Variable
The variable that is influenced by the independent variable
Types of Correlation
Positive correlation, Positive correlation
A positive relationship exists where as the independent variable increases in value, so does the dependent variable
Negative correlation, A negative relationship exists where as the independent variable increases in value, the dependent variable falls in value
No correlation, There is no discernible relationship between the independent and dependent variable
Strong correlation means that there is little room between the data points and the line
Weak correlation means that the data points are spread quite wide and far away from the line of best fit
A confidence interval gives the percentage probability that an estimated range of possible values in fact includes the actual value being estimated
A confidence interval helps a business evaluate the reliability of a particular estimate
Because no estimate can be 100% reliable, businesses need to know how confident they should be in their estimates and whether or not to act on them
3.3.2 Marketing Research
Primary Research- Data collected first-hand for a specific research purpose
Advantages
Directly focused to research objectives
Kept private – not publicly available
More detailed insights – particularly into customer views
Drawbacks
Time-consuming and costly to obtain
Risk of survey bias
Sampling may not be representative
Secondary Research- Data that already exists and which has been collected for a different purpose
Advantages
Often free and easy to obtain
Good source of market insights
Quick to access and use
Disadvantages
Can quickly become out of date
Not tailored to business needs
Sampling may not be representative
Specialist reports often quite expensive
Main sources- Google, Government departments, Trade associations
Quantitative Data- Concerned with data
Qualitative Research- Based on opinions, attitudes beliefs and intentions
Sampling involves the gathering of data from a sample of respondents, the results of which should be representative of the population (e.g. target market) as a whole
A market (or positioning) map illustrates the range of “positions” that a product can take in a market based on two dimensions that are important to customers
3.3.3 Segmentation, Targeting and Positioning
Market segmentation involves dividing a market into parts that reflect different customer needs and wants
Demographical
Geographic segments
Income segments
Behavioural segments
