BM Unit 2 - LO21 Higher Business Management Unit 2 Learning Outcome 2 Marketing.
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Transcript of BM Unit 2 - LO21 Higher Business Management Unit 2 Learning Outcome 2 Marketing.
BM Unit 2 - LO2 1
Higher Business Management
Unit 2Learning Outcome 2
Marketing
BM Unit 2 - LO2 2
Marketing
“The process involved in identifying, anticipating and satisfying consumer requirements profitably”.
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Marketing
Role and Importance of Marketing
Identify consumer’ requirements – find out exactly what consumers want
Anticipate consumers’ requirements – future needs
Satisfy consumers’ requirements – service, quality + value for money?
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Marketing
Anticipating Consumers’ Requirements
What do they want today? What do they want in the future? Trends must be considered to anticipate
future needs Volatile markets - fashion, toys, technology
(mobile phones, computers, etc)
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MarketingIdentifying Consumers’ Requirements What do they want? Consumers must buy
products and continue to do so Fierce competition and consumers’
expectations mean that products must be constantly updated and altered to suit
Other factors - price, quality, prompt delivery, attractive packaging and after-sales service
Advertising and promotion play a big part
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MarketingSatisfying Consumers’ Requirements
“The customer is king!” Businesses must be customer-focused No customers no business Must offer - good service, quality products,
value for money, prompt delivery, good after-sales service (eg returns), well presented and packaged goods, at the right price and available at the right place
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Marketing
“Marketing involves anticipating customers' needs and finding the right product or service to meet those needs, thereby encouraging high sales levels. Vodafone goes further by looking to impress on its customers not merely what its products are i.e. features, but also what they can increasingly do i.e, benefits. This involves effective communication. “
The essentials of marketing
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Marketing
Role and Importance of Marketing
All organisations need to carry out marketing activities to meet their objectives:
Public Sector – may develop services if research shows that is what the community wants
Private Sector – meet customers’ needs through market research
Voluntary Sector – competition for donations, therefore charities spend huge amount of money on marketing.
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Marketing
Importance of Marketing
Poor marketing can lead to failure:
The American car industry
The British motor cycle industry
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Marketing
Good marketing can lead to success:
Importance of Marketing
Swatch
Easyjet and Ryanair
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Marketing
Marketing as a strategic activity
Using marketing, organisations hope to achieve a number of objectives which are essential for success:
To increase sales revenue and profitability To increase or maintain market share To maintain or improve the image of the
business, its brand or its product To target a new market or a new segment of
the market To develop new and improved products.
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Marketing – concerned with: Inception/design
Price
Selling and promotion
Distribution
After-sales services
Marketing
What
How
When
Where
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Marketing
Market – a meeting place for buyers (consumers) and sellers
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Marketing
Consumer MarketConsumer market are made up of individuals who buy goods or services for their personal or domestic use. The 3 classifications are:
Convenience goods – non-durable goods Shopping goods – durable goods Speciality goods – eg cosmetics, fashion items.
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Marketing
Industrial Market
Goods and services bought on the industrial market can be similar to those in the consumer markets, eg consumers use banking services and so do businesses. However, industrial goods also include plant and machinery, raw materials, consumable supplies and business services.
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Product-led - Product Orientated Putting a product on the market
without prior market research
Assumption of best available and no real competition
Often new inventions like Dyson vacuum cleaners or Playstation 2
A risky approach which can fail - British motor bikes
Marketing
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Market-led - Customer Orientated
Considering what the customers want before putting a product on to the market
Competition has led to companies focusing on the needs of the customer
Also looks at the influences on purchasing decisions
Marketing
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The Marketing Environment
THE MARKET
Consumer trends and behaviour
Technology
GovernmentCompetition
The economy
Marketing
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Marketing Environment – Government Influence on marketing
Trade Descriptions Monopolies and Mergers Act Fair Trading and Competition Acts Consumer Protection Laws Code of Advertising Practice Advertising Standards
Marketing
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Marketing Environment – Competition
Close substitutes Markets – Some markets dominated
by a few big producers; other markets have many producers.
Unique Selling Points (USP) Emotional Selling Proposition (ESP)
Marketing
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Marketing Environment – Technology
Use latest technology to keep up with competition Technological advances create new markets and
cause decline of others, eg video tapes and DVDs Sophisticated production methods allow high
quality, faster and cheaper production Improved communications and information Unique
Selling Points (USP) Internet and saturation usage of mobile phones
allow businesses new ways to tap into new markets
Marketing
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Marketing Environment – Economic forces
Interest rates – high rates, consumers buy less; organisations reduce borrowing and spending
Exchange rates affect - £ is low, UK exports become cheaper
Economic growth high consumer confidence and spending.
Marketing
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Marketing Environment – Consumer trends & behaviour Changes in the age distribution of the
population Disposable income Household status, eg rise in single households
– smaller ready meals Social class Location Lifestyle taste and fashion, eg environmental
issues, healthy lifestyle Political
Marketing
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The Marketing Mix
Promotion
Place
Price
Product
Marketing
In order to market or sell its product successfully, a business must develop a strategy based on 4 key elements:
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Product/Service Core
Actual
Augmented
The basic product - eg toothpaste cleans teeth
The way the product is presented - design, brand name, packaging, etc (Colgate toothpaste - red packaging)
Additional features - protection against decay, fresh breath, attracting the opposite sex, etc
Marketing
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The Product Life Cycle
Time
£000Costs/Sales Idea
NewProdu
ctLaunch/
Introduction
Decline
Saturation Death
Marketing
Growth Maturity
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Product Innovation Generating an idea
Analysing the idea
Producing a prototype
Test market
Adapt product to solve problems
Launch the product
Marketing
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Extending the Product Life Cycle/Extension Strategies
Developing new markets for existing products, eg computers
Providing line extensions - Mars: fun-sized, yoghurt, ice cream, mini-sized, giant-sized
Finding new uses for existing products Develop a wider range of products Develop styling changes Promoting more frequent use of the product –
mainly by reducing price
Marketing
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Extending the Product Life Cycle/Extension Strategies
Improve the product – think soap powder Change the packaging – perhaps to appeal to
different market segment Change the channel of distribution – internet
shopping Change product prices Change promotion method Rebrand the name of the product – Marathon
to Snickers
Marketing
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The Product Mix/Portfolio – range of products that a firm produces to spread risk. Very few companies have only one
product Some companies have a range of related
products eg Proctor & Gamble Some companies have totally unrelated
products in their product portfolios eg Imperial Group
It is important that you have new products being launched to replace products going into decline in your “Product Mix”
Marketing
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The Product Mix/PortfolioBoston Matrix – used by some firms to analyse
their product mix.
Marketing
Market Share
High Low
Market Growth
High Star Problem Child
Low Cash Cow Dog
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Branding
Branding distinguishes a product from its competitors – product differentiation
Instantly recognisable by consumers
Often linked to quality and reliability
Can command a premium price
Marketing
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Brands Benefits of branding:
Instant recognition, eg Cadbury
Brand loyalty, therefore repeat purchases
Charge higher prices because of brand loyalty
Easy to intro new products using brand name, eg Virgin
Strong brand has money value in Balance Sheet
Marketing
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Brands
Marketing
Drawbacks of branding: Time taken to establish brand Cost of promoting brand Bad publicity affects all products of same
brand Imitations/fakes difficult to combat Fashion brands can suffer when fashions
change
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Own Brands Products branded with
the name of the store selling them
Most of the big supermarkets (Tesco) and chain stores (Boots) have their own brands
Often cheaper alternatives to branded goods
Make a list of as many “own brands” you can think of. Indicate which branded product they are designed to rival
Eg “Wheat Bisks” by Safeway to rival “Weetabix”
Marketing
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Unique Selling Point (USP)
Marketing
This is a feature that allows a product to stand out from its rivals.
Should offer the consumer some unique benefit that may motivate them to switch brands
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Unique Selling Point (USP)
Try to identify the USP of each of the products listed opposite
Think of how they are presented to you in the advertising you see daily on TV, in newspapers and magazines
Coca Cola Nike Kit Kat Sunny D Skoda Cars Mercedes Cars Baxter’s Soups Fairy Liquid Finish
(dishwasher tablets)
Marketing
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Price of a Product? The price of a product is one of the main
factors in buying that product. Too low a price could give the impression of poor quality and too high a price may not give the feeling of value for money
Price is influenced by:- the product being new, what competitors are charging, the product’s stage in its life-cycle, the selling location, the market segment and many other factors
Marketing
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Long term pricing strategies: Low-price strategy
in a market with strong competition: price elasticity of demand.
Market-price strategypetrol – matching competitors
High-price strategyup-market, exclusive image
Marketing
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Short-term pricing strategies Skimming – high initial price for max
profit
Penetration pricing – low initial price for new product
Destroyer – eliminating the competition (‘Go’ and ‘EasyJet’/’Ryanair’)
Promotional – lowering prices for a period to ‘promote’ more sales
Marketing
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Short-term pricing strategies
Price discrimination (aka Demand-oriented) – charging different prices according to the level of demand eg cross-channel ferry fares in summer
Premium pricing – high prices to create exclusive image, eg Ferrari, Gucci
Loss leaders – use to entice customers
Competitive pricing – charge similar prices to avoid price war, eg petrol stations.
Marketing
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Calculating a Selling PriceCost-plus pricingA manufacturer or
retailer will calculate the cost of making or buying a product and add a set percentage profit to arrive at their selling price.
Different businesses use different rates of mark-up.
Method used by small businesses as it is the simplest.
Contribution pricingA business will calculate
the direct costs of making or buying a product (wages & raw materials).
A contribution toward the fixed costs of the business (rent, loan repayments) are added.
Any amount after covering fixed costs is profit for the business.
Marketing
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Place
The nature of the product or service will determine where a firm decides to sell – referred to as DISTRIBUTION.
The Channel of Distribution is the route taken by a product as it passes from the producer to the consumer.
Marketing
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Place - Distribution Channels
Producer 1
Producer 2
Producer 3
Consumer Retailer Wholesaler
RetailerConsumer
Consumer
Marketing
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The Channel of Distribution chosen depends on:
o The nature of the product being soldo Finance available to the organisationo Reliability of companies in the chaino Desired image for the producto Government restrictionso Product’s life cycleo Manufacturer’s distribution capability
Marketing
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The Wholesaler Function Buys in bulk from producers (low transport
costs) and sells to retailers in smaller quantities
Bears stock-holding risk
Offers a wide variety of goods in small quantities
Packages and labels goods
Offers advice to both producers and retailers as to which goods are selling well
Marketing
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The Retailer Function Breaks down bulk to quantities consumers
wish to buy and store at home
Provides information to consumers through advertising, displays and trained staff
Stores a variety of goods, displays them and marks on prices
Offers range of related services - credit, HP, after-sales service and delivery
Marketing
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Types of Retailer Independent - convenience stores, corner
shops
Multiple Chains - M&S, Dixons, Boots
Supermarkets - Tesco, Asda, Safeway, etc
Co-operatives
Department Stores - Harrods, Selfridges
Franchises - Benetton, Body Shop, McDonald’s
Discount Store – Matalan, Primark and TK Maxx
Marketing
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Direct Selling Internet selling – allows a business to reach a
global market. Customer info is easily collected to target offers and promotions.
Mail Order – goods sold to customers through catalogues, Next, Kays. Credit facilities make this popular.
Direct mail – involves letters, brochures about products to homes, eg Reader’s Digest
Newspaper/magazine selling-customers respond directly to adverts.
Personal Selling – door-to-door or telephone, eg sales reps visit GPs, double-glazing sales.
Marketing
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Promotion
Promotion is the way in which customers are made aware of a product or service and is persuaded to purchase it.
Marketing
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Aims of Promotion
Persuading - to purchase the products
Informing - telling consumers about the product
Reminding - that the product still exists
Marketing
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Methods of Promotion
Advertising Sales promotions Public relations Exhibitions and trade fairs Merchandising Direct mail Personal selling
Marketing
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Types of Promotion are categorised as being:
Above the line: Use of independent media, eg TV and
newspapers to reach mass audience A lot of waste – not targeted
Below the line: Directly controlled by the business Sales promotion, direct mail, trade fairs
- targeted consumers who may be interested
Marketing
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Advertising
Informative advertising – new or improved products; Health info
Persuasive advertising – where consumers see little difference between one product and another
Corporate advertising – promoting whole company rather than single product, eg BA, BP
Marketing
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Advertising
Generic advertising – promoting whole industry, eg Scottish Beef
Product endorsement – famous sports or showbiz personalities are paid to wear particular product, eg Adidas pay David Beckham
Product placement – paying for products to be used in films or TV progs, eg BMW and James Bond
Marketing
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Advertising Decisions
The effect on Sales?
The target market?
Why do the consumers NOT buy the product?
Which is the best medium to use?
Marketing
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Advertising Decisions
Which is the best medium to use depends on:
Product Market segment Type of coverage – local, national Advertising budget How competitors advertise How technical the product is Size of the organisation Legal restrictions, eg tobacco
Marketing
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Types of Advertising Media
Print - newspapers and magazines, direct mail
Broadcast - TV, radio and cinema
Outdoor - billboards, posters, etc
Internet
Marketing
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Sales Promotion
Into the pipeline
Offered by manufacturers to retailers to encourage them to stock their products.
Point of sale displays
Sale or return
Dealer competitions/bonuses
Staff training
Credit facilities
Marketing
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Sales Promotion
Free samples Credit facilities Demonstrations Competitions Buy one, get one
free Bonus packs Free offers Coupons, vouchers
Out of the pipeline
Offered by the retailer to final customer to encourage purchases to be made.
Marketing
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Public Relations (PR)
Improving the image of the product and organisation
Supporting and promoting a charity
Sponsoring sporting or cultural events
Product endorsement by celebrities
Press conferences and press releases in times of difficulty or when good publicity can be obtained
Marketing
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Target Markets
Differentiated marketing:Different products sold to different groups within total
market. Products altered to suit needs of different consumers. Market is split into different groups who have similar wants and needs – goods produced specifically for these groups. Use market segmentation.
Undifferentiated (mass) marketing:
Marketing directed at all consumers, the whole market. One product is sold to the entire market – high volume sales, economies of scale. Eg milk, Mars Bars
Marketing
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Target Markets
Marketing
Niche marketing
Niche marketing involves a business aiming a product at a particular, often very small, segment of the market (local or small national). Focus on needs of a market ignored or overlooked by other firms – no competition in short term.
Disadvantage – attract competition in long term. Market too small for competition. Small number of consumers – more frequent swings in consumer spending than larger markets.
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Market Segmentation
Advantages
Seller can meet buyers’ requirements Advertising can be focused - less wasteful Expertise developed for a specific market Higher sales Increased profits
“Breaking down of markets into sub-groups that can be targeted with a specific marketing mix.”
Marketing
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Methods of Segmentation
Age – Smash Hits Gender - Heat Socio-economic grouping – Daily Record Education level – SundayTimes Income – Ski Monthly Religion Residential area Lifestyle preferences - hobbies, politics
Marketing
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Methods of Segmentation
Socio-economic groupings:
Social classes are used by advertising and market research industries:
A Very senior managers or professionals, top civil servants
B Middle managers, owners of small businessesC1 Junior managers, non-manual workersC2 Skilled manual workersD Semi-skilled and un-skilled workers,
apprenticesE People on long term benefits, casual workers
Marketing
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Market share
Percentage of total sales of product/service achieved by one organisation.
Advantages:
• Larger the market, larger the profit
• Purchasing economies of scale – reduce costs
• R & D with large profits• Costs – marketing, transport
– spread over larger output
Marketing
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Assessment of the Market Where are the consumers of the product?
How many consumers are there?
What are their attitudes and preferences?
How effective are the distribution methods?
What are the strengths and weaknesses of competitors?
Marketing
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Market Research -Definitions
“Market research is the systematic gathering, recording and analysing of data about problems relating to the marketing of goods and services.”
“Market research is the means by which those who provide goods and services keep themselves in touch with the needs and wants of those who buy these goods and services.”
Marketing
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The Need for Market Research Predict changes required
in its product/service Identify what is selling Identify who is buying
the product/service Explain what is
happening in the market Investigate possible
courses of action Identify the size of the
market
Discover what consumers think of the product
Discover what consumers are willing to pay
Discover if a promotion is appropriate
Discover if the packaging is appropriate
Identify what competition exists - now and in the future
Marketing
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Methods of Research
PRIMARY RESEARCH
Information collected by the organisation itself or by a paid market research agency.
SECONDARY RESEARCH
Information already collected for another purpose, eg government statistics.
Marketing
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Methods of Research - PRIMARY
By observation or asking people questions
Up-to-date Collected for the exact purpose of the
organisation Not easily available to competitors Time-consuming Expensive
Primary data is gathered by field research
Marketing
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Techniques of field research
Surveys Personal interview, postal survey,
telephone survey, purchase survey Sampling – who, how many, how to choose
Random sampling, Stratified random sampling, Quota sampling
Test marketing Consumer panel Hall tests Questionnaire – see notes 48-50 Collection of customer data – observation,
loyalty cards, EPOS/bar codes, the internet
Marketing
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Market Research – SECONDARY
Sales figures Stock figures Accounting records Customer comments Sales reps reports Market research data
gathered previously
Government publications - social and economic trends, annual statistics, population census
Competitors’ data - annual reports, promotions, price lists, web sites
Newspapers, trade magazines, Mintel (research org), etc
External Sources
Internal Sources
Marketing
Secondary data is gathered by desk research
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Market Research – SECONDARY
Value and reliability is limited because: Much of the information is historic Collected for another purpose Available to competitors Cannot normally go back to the initial source
to check accuracy or ask follow-up questions
Marketing
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ICT and Market Research Databases compiled by research agencies
Electronic point of sale information (EPOS)
Supermarket loyalty cards
Stock control software gives sales breakdown
Web sites - customers can e-mail comments back to the company
Marketing
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Problems with Market Research
Sampling Bias - small sample can give a wrong impression
Human Behaviour - opinions change rapidly
Interviewer Bias - leading questions may be asked
Time taken for research - expensive
Difficult to access secondary – time wasted
Larger the sample, more reliable the information.
Marketing