Unit 2: Marketing

22 terms. Say what each one means, then open the card to check.

• Marketing concept

  The idea that a business should start by finding out what customers need and want, then design and sell products that meet those needs better than rivals do.

  Example. Before choosing new flavors, a fictional ice-cream shop asks regulars what they wish it sold, then adds the dairy-free option most of them ask for.

• Market segmentation

  Dividing a market into groups of buyers with similar needs or traits, by demographic, geographic, psychographic or behavioral variables.

  Example. A fictional bank splits its customers into students, young families and retirees, because each group needs different accounts.

• Psychographic segmentation

  Grouping buyers by their lifestyles, values, interests and personalities, rather than by facts such as age or income.

  Example. A fictional outdoor brand targets people who see themselves as adventurous and plan weekends around hiking, whatever their age.

• Positioning

  The place a business wants its product to hold in customers’ minds compared with competing products, such as the cheapest, the safest or the most stylish.

  Example. A fictional car maker wants buyers to think of its cars first when they think of safety, so every ad shows crash-test results.

• Customer lifetime value

  The total profit a business expects to earn from one customer over the whole time that customer keeps buying from it.

  Example. A fictional barber earns about 9 dollars of profit per haircut, and a typical client comes 10 times a year for 5 years, a lifetime value of about 450 dollars.

• Consumer decision process

  The usual steps of a purchase: recognize a need, search for information, evaluate the options, buy, and then judge the purchase afterward.

  Example. Noor’s fictional bike is stolen (need), she reads reviews (search), compares three models (evaluate), buys one, and later decides whether she is happy with it.

• Cognitive dissonance

  The doubt or worry a buyer can feel after a purchase, especially an expensive one, about whether it was the right choice.

  Example. After paying for a fictional sofa, Tariq keeps wondering whether a cheaper one would have been just as comfortable.

• Maslow’s hierarchy of needs

  A model of human needs in five levels: physiological, safety, love and belonging, esteem, and self-actualization. Ads often appeal to one level.

  Example. An ad for a fictional night school shows a worker finally earning the degree she always wanted, an appeal to self-actualization.

• Primary research

  New information a business collects itself for its own question, through surveys, interviews, focus groups, observation or experiments.

  Example. A fictional food truck owner counts how many people walk past two possible parking spots at lunchtime for a week.

• Secondary research

  Information that someone else already collected for another purpose, such as government statistics, industry reports or news articles.

  Example. A fictional daycare founder reads census figures on how many children under five live in each part of her city.

• Sampling bias

  A problem that arises when the people studied are not representative of the whole group the business cares about, so the results lean one way.

  Example. A fictional mall asks only weekday-morning shoppers about weekend hours, missing the people who shop on weekends.

• Product life cycle

  The stages a product’s sales usually pass through: introduction, growth, maturity and decline. Profits and the best marketing goals change at each stage.

  Example. A fictional fitness tracker sells slowly in its first year, quickly for the next three, levels off as rivals copy it, then fades as phones add the same features.

• Augmented product

  Extra services and benefits added around the actual product, such as delivery, setup, a warranty or customer support.

  Example. A fictional mattress store adds free delivery, removal of the old mattress and a 10-year warranty to every mattress it sells.

• Brand equity

  The extra value a well-known, trusted brand name adds to a product, so that customers will choose it or pay more for it than for an unknown brand.

  Example. Shoppers pay a fictional brand of batteries more than a no-name pack with the same power rating, because they trust its name.

• Break-even point

  The number of units a business must sell to cover all its costs, with zero profit: fixed costs divided by (price minus variable cost per unit).

  Example. A fictional kite seller with 5,000 dollars of fixed costs, a 10 dollar price and a 6 dollar variable cost breaks even at 5,000 / 4 = 1,250 kites.

• Price skimming

  Setting a high price for a new product to earn the most from eager early buyers, then lowering it over time to reach more customers.

  Example. A fictional gaming headset launches at a high price for fans who want it first, and its price is cut a year later.

• Penetration pricing

  Setting a low price for a new product to win many customers and a large market share quickly, often planning to raise the price later.

  Example. A fictional streaming service charges a very low price for its first year to pull viewers away from bigger rivals.

• Price elasticity of demand

  How strongly the amount buyers purchase responds to a price change. Demand is elastic when sales change by a larger percentage than the price, and inelastic when they change by less.

  Example. When a fictional town raises the price of its only bus pass a little, riders barely change; when a café raises its cookie price, many buy elsewhere.

• Distribution intensity

  How many stores sell a product: intensive (as many outlets as possible), selective (a chosen few in each area) or exclusive (one or very few outlets).

  Example. A fictional gum brand is in every gas station and grocery (intensive), while a fictional luxury piano is sold by one dealer per region (exclusive).

• Intermediary

  A business between the producer and the final customer, such as a wholesaler, retailer, agent or broker, that helps move or sell the product.

  Example. A fictional hot-sauce maker sells cases to a wholesaler, which sells smaller lots to corner shops, which sell single bottles to shoppers.

• Promotion mix

  The mix of tools a business uses to communicate with customers: advertising, personal selling, sales promotion, public relations, and direct and digital marketing.

  Example. A fictional gym runs online ads, gives free trial passes, and has staff give tours to people who walk in.

• Push and pull strategies

  A push strategy promotes a product to stores and other sellers so they stock and sell it; a pull strategy promotes to final customers so they ask stores for it.

  Example. A fictional cereal maker pays stores for shelf space (push) and also runs TV ads for children’s parents (pull).