3.2.2 UNDERSTANDING MARKETS AND CUSTOMERS – MARKETING

DATAAQA Business

3 DECISION MAKING TO IMPROVE MARKETING PERFORMANCE

Is there a relationship between the following variables:• Amount of effort you put in and homework grades?• The cost of a gift and the pleasure of the recipient?• Hours sleeping and ability to concentrate?• Advertising expenditure and sales?• Your teacher’s car and the time it takes you to get to

college?

• How would you describe each relationship? How strong are the relationships?

3.2.2 UNDERSTANDING MARKETS AND CUSTOMERS

In this topic you will learn about

The interpretation of marketing data

The value of technology in gathering and analysing data for marketing decision making

THE INTERPRETATION OF MARKETING DATA

Inform decision making

Devising strategy

Understanding the market

Identify sales patterns

Realistic target setting

Keeping up to date with market changes

Review of competitors’ actions

Evaluation of past actions

CORRELATION

Identifying a relationship between 2 variables e.g. marketing budget and sales

Correlation can be: Positive

the 2 variables move in the same direction e.g. as temperature goes up ice cream sales go up

Negative the 2 variables move in opposite directions e.g. as road tax prices go up the sales of new 4 x 4s goes

down Zero

there is no relationship between the factors e.g. average rain fall and sales of text books

CORRELATION

The strength of correlation can be expressed on a spectrum from -1 to +1

It can also be shown on a graph by plotting the coordinates and then drawing a line of best fit

-1 0 +1Strong negative Zero Strong positive

Negative Positive

IN PAIRS

Plot each of the following combinations of variables on the spectrum above. Be prepared to justify your decision

a. Price of Coca Cola and sales of Tesco own brand cola

b. Advertising expenditure by Toyota and sales of the Toyota Prius

c. The launch of a new iPhone and profit margins at SuperDry

d. Fuel prices and price of used cars

-1 0 +1Strong negative Zero Strong positive

MULTIPLE CHOICE QUESTION

What is the most likely correlation between an increase in the selling price of a games console and the sales volume of the games that go with it?

a) +1.7

b) +0.4

c) -1.7

d) -0.4

Justify your answer.

CONFIDENCE LEVELS AND INTERVALS

When you sit an exam how confident do you feel about the results?

Are you confident you will achieve a specific grade e.g. a B grade?

Are you confident your grade will fall within certain parameters e.g. between an A and a C grade?

CONFIDENCE LEVELS

Confidence levels reflect the degree of certainty with which a business believes a stated outcome will happen

e.g. 90% confident that research findings are accurate and therefore 1 out of 3 customers will buy the new product

Confidence levels will be affected by factors such as the sampling technique, research method and expertise of the person carrying out and analysing the research

CONFIDENCE INTERVALS

Sampling will never give a 100% accurate picture of the whole population

There will be sampling error

The likely size or significance of this sampling error determines the confidence interval

Confidence intervals are the parameters within which a confidence level applies

This means the range of values within which the business is confident that the research results will be true

e.g. 95% confident that customers will be willing to pay between £1.00 and £1.60

CONFIDENCE INTERVALS

Assume 2 researchers carry out research into how much a customer is willing to pay for a new soft drink Each researcher randomly selects 10 people as representative of the population, the soft drink consumer The results of both surveys is shown below:

Researcher A Researcher B50p 55p50p 85p75p 95p80p 110p80p 75p90p 50p55p 40p60p 65p65p 60p75p 120p

What conclusion would researcher A make?(50 + 50 + 75 + 80 + 80 + 90 + 55 + 60 + 65 + 75)/10 = 68The mean (average) price a customer would be willing to pay is 68p.Researcher A might say that a consumer would be willing to pay 68p. But with what degree of confidence can they say this?

If we put the answers in order40 50 55 60 65 75 75 80 80 90 and took off the lowest 10% and the highest 10% i.e. the top and bottom answer they could now say they are 80% confident the consumer will pay between 50p and 80p (the confidence interval).

CONFIDENCE INTERVALS

Researcher A Researcher B50p 55p50p 85p75p 95p80p 110p80p 75p90p 50p55p 40p60p 65p65p 60p75p 120p

According to researcher B what is the mean (average) price a customer would be willing to pay?

Within what confidence interval would they have a 60% confidence level?

EXTRAPOLATION

Using past data to extend an identified trend into the future

A general slow upward trend has been identified and from this yr 6 and 7 have been extrapolated

EXTRAPOLATION

A useful technique when trends can clearly be identified

and

The market is relatively stable

However

The past is not always a good indication of the future

Conditions and trends can soon change

Competitors’ actions

Consumer tastes

Market conditions

THE VALUE OF TECHNOLOGY

Discuss the usefulness of social media in gathering and analysing data for marketing decisions.

THE VALUE OF TECHNOLOGY

Gather and analyse large volumes of data quickly and accurately

Track and interpret consumer spending habits

Collect consumer opinions from around the world

Encourage consumer feedback through social media and review sites

Enable two way communication

What is the role of big

data in retailing?

3.2.2 UNDERSTANDING MARKETS AND CUSTOMERS

In this topic you have learnt about

The interpretation of marketing data

The value of technology in gathering and analysing data for marketing decision making