The Nature of Marketing (Cambridge (CIE) A Level Business): Flashcards

False.

Every advert, price or product change should support the corporate objective. If it does not, money and resources are wasted.

Demand is the number of goods or services customers are willing and able to buy at a given price.

There is an inverse relationship between price and quantity demanded. As price falls, the quantity demanded rises.

False.

A change in price causes a movement along the demand curve. Only a change in other factors, such as incomes or advertising, shifts the whole curve.

Factors other than price that shift the entire demand curve to the left or right are called non-price factors.

Complementary goods are consumed together, so a rise in the price of one (e.g. petrol) may reduce demand for the other (e.g. cars). This shifts its demand curve to the left.

True.

As incomes fall, consumers switch to cheaper alternatives, such as own-label products, so demand for inferior goods rises and their demand curve shifts to the right.

Supply is the number of goods or services businesses are willing to sell at a given price in a specific time period.

There is a direct relationship between price and quantity supplied. At higher prices, businesses are incentivised to supply more of the product.

False.

Indirect taxes increase the costs of production, so businesses supply less at each price and the supply curve shifts to the left.

A market is any place that brings buyers and sellers together to trade at an agreed price.

The equilibrium price is the price at which demand equals supply, so both buyers and sellers are satisfied.

If the price is set above equilibrium, supply is greater than demand and there is a surplus.

The demand curve shifts to the right, creating a shortage at the original price. The price rises and a new equilibrium forms at a higher price and higher quantity.

The supply curve shifts to the left, so the equilibrium price rises and the equilibrium quantity falls.

An industrial market is where businesses sell their products or services to other businesses, also known as B2B (business-to-business) selling.

True.

Industrial buyers usually purchase in bulk for use in production, while consumers usually buy single or few items for personal use.

A local market is where goods and services are bought and sold within a small geographical area, such as a town or city.

A national market is where a business operates and sells its products or services across the entire country.

They have to deal with different languages, cultures, laws and currencies in each country they sell in.

Product orientation is when a business focuses primarily on manufacturing a product rather than the needs of the consumer, creating the product first and then finding a market.

False.

Product-orientated businesses rely more on internal expertise than customer feedback, so they have less need for constant market research.

Customer (market) orientation is a business approach that focuses on consumer demand and designs products that meet customer needs.

Meeting customer expectations can lead to repeat purchases and positive word-of-mouth.

Market share is the proportion of the total sales of a product or service held by one business compared to the market as a whole.

Market share = Sales of a business in a time period ÷ Total market sales in a time period × 100

Market growth is the increase in the overall size, value or volume of a market over a period of time, usually expressed as a percentage.

Market growth = (This year's market sales − Last year's market sales) ÷ Last year's market sales × 100

If the market growth rate is negative, the market is getting smaller, or contracting.

Producing and selling more units often reduces the cost per unit, making the business more efficient and more profitable.

Businesses may fight harder over fewer customers, so competition increases and firms cut prices to protect their sales.

Consumer goods are goods and services produced for sale to households and individuals.

Convenience goods are non-durable goods that are used up quickly and bought frequently, such as bread or milk.

Products that last a long time and are used repeatedly, such as furniture or cars, are called durable goods.

Speciality goods are unique or high-end products that customers actively seek out, such as designer clothing or rare watches.

Industrial goods are goods and services produced for sale to other businesses.

Raw materials are natural resources used at the start of the production process. Components are parts used to make a finished product, such as tyres for a car.

False.

They are business services and utilities. Capital equipment means large, expensive machines or tools used to produce goods and services.

True.

B2C customers tend to make smaller, one-off purchases, whereas B2B customers often buy larger volumes with regular, repeat orders.

B2B purchases involve a more complex and formal process, often needing approval from several people. B2C buying is usually quicker and influenced by emotions, branding or price.

In B2B markets, marketing focuses more on product features, cost-effectiveness and long-term value.

B2B relationships tend to be long-term, built on trust and involve regular communication. B2C relationships are often short-term and based on single purchases.

False.

B2C consumers are often more price-sensitive and look for deals. B2B customers usually focus on value for money and may need customised pricing or contracts.

They often need detailed product specifications, demonstrations and performance data, whereas B2C customers usually need only basic information.

Mass marketing occurs when businesses sell their products to most of the available market, aiming at broad market segments.

False.

Mass-market products are less unique because they are aimed at broad market segments and are usually produced on a large scale.

Mass-market businesses have low average costs due to the economies of scale gained from large-scale production.

Mass-market products are sold at low prices, which leads to lower profit margins, although greater affordability brings higher sales volumes.

Niche marketing occurs when businesses identify and satisfy the demands of a small group of consumers within the wider market.

True.

Niche customers are often willing to pay more for exclusive or specialised products.

Products are tailored to meet specific needs, which helps build closer and more loyal customer relationships.

The same product and message can be used for all customers, which reduces the cost and complexity of marketing.

Reaching large audiences through national TV, billboards or online adverts is very costly, and businesses may need to spend heavily to stand out from rivals.

Fewer businesses operate in niche markets, so there is usually less competition.

False.

With fewer potential customers and higher unit costs, it can be difficult to make large profits in a niche market.

If the niche becomes less popular or trends change, the business could lose most of its customers quickly.

Market segmentation is the process in which a single market is divided into submarkets or "segments", each with a slightly different set of consumer characteristics.

Geographic segmentation involves breaking up a market into groups of customers who live, work or spend their leisure time in defined locations.

Their needs relate to their surroundings. For example, city-dwellers are likely to buy small, electric vehicles, while countryside residents tend to prefer larger, all-terrain vehicles.

Customers can be grouped by their lifestyle, health or dietary choices, their frequency of purchase and whether they are brand loyal.

Some purchasing decisions are based on thorough research, whereas others tend to be impulse buys.

Demographic segmentation involves breaking up a market into groups of customers with similar characteristics, such as age, gender and family circumstances.

Focusing marketing only on likely buyers saves money and avoids advertising to uninterested consumers.

It helps the business adapt products to suit different lifestyles, cultures and buying habits, and target its messages more precisely.

False.

People who share certain characteristics do not necessarily make the same buying choices. For example, two teenagers of the same age may have different interests.

True.

Researching segments takes time, money and expertise, although it can provide useful insights when done properly.

A segment may be identified but may be too small and unprofitable to cater to.

Consumers may belong to multiple segments, which makes it harder to design a focused marketing message that works for everyone.

Customer relationship marketing (CRM) involves focusing marketing efforts on building a deep understanding of customers, consistently meeting their needs and developing long-term customer loyalty.

Customer acquisition aims to attract interested consumers and convert them into customers, helping the business grow, make money and improve its chances of survival.

True.

Retaining existing customers is usually cheaper than winning new ones, and loyal customers tend to be valuable repeat customers.

Customer retention involves encouraging customers to remain loyal to a business and its brands over time.

Happy customers who recommend a brand to people they know provide word-of-mouth marketing, which is a form of free marketing.

Customer expansion is encouraging existing customers to increase the value and frequency of their spending over time.

Upselling encourages customers to upgrade to premium products. Cross-selling offers customers a related product or service.

Customer reactivation involves reaching out to customers who previously showed interest in or bought a product but have since become disengaged.

False.

CRM strategies and tactics cover four key areas: customer acquisition, retention, expansion and reactivation.

CRM builds a detailed understanding of customers' needs and preferences, so products, services and promotions can be tailored more precisely, increasing satisfaction and repeat sales.

Employees need to understand the CRM system and be committed to meeting customer expectations at every stage of the buying process.

CRM is unlikely to succeed without ongoing, expensive customer research.