AP® Business with Personal Finance Unit 2 flashcardsMarketing

Marketing

Everything a business does to find customers' problems, needs and wants and to promote, sell and deliver products to them.

Topic 2.1: Marketing to Customers

Demographic vs. psychographic data

Demographic data is measurable facts like age, income and location. Psychographic data is interests, values, activities and lifestyle.

Topic 2.1: Marketing to Customers

Market segmentation

Splitting a market into groups of customers who share demographic and psychographic traits, so a business can see what each group needs.

Topic 2.1: Marketing to Customers

Target customers

The group of buyers most likely to want a product and pay for it. Aiming at them is cheaper and more effective than aiming at everyone.

Topic 2.1: Marketing to Customers

Customer profile

A made-up description of one typical target customer, including demographic details, interests, needs and wants.

Topic 2.1: Marketing to Customers

Customer acquisition cost (CAC)

Marketing, advertising and sales costs ÷ number of customers gained. Example: $48,000 ÷ 1,600 customers = $30 each.

Topic 2.1: Marketing to Customers

Customer lifetime value

The estimated total a customer will spend with a business over time. Loyal, satisfied customers raise it.

Topic 2.1: Marketing to Customers

Data privacy

People's control over information about them. Collecting or storing customer data without care can lead to privacy violations, fraud and identity theft.

Topic 2.1: Marketing to Customers

Rational decision-making

Carefully comparing options before buying, as people often do for big purchases. It finds a better choice but takes time.

Topic 2.2: Consumer Behavior

Purchasing pattern

A person's usual routine for buying: when, how often and how much. Laws and new technology can change it.

Topic 2.2: Consumer Behavior

Situational influences

Temporary conditions that encourage or discourage buying, such as store noise, lighting and layout, timing and whether a product is in stock.

Topic 2.2: Consumer Behavior

Principles of influence

Robert Cialdini's seven reasons people say yes: scarcity, authority, consensus, liking, reciprocity, consistency and unity. Marketers build sales tactics on them.

Topic 2.2: Consumer Behavior

Scarcity principle

People want things more when they seem rare or about to run out. Example: "Only 2 left at this price!"

Topic 2.2: Consumer Behavior

Reciprocity principle

People feel they should give something back when they receive something of value. Example: free samples or free trials.

Topic 2.2: Consumer Behavior

Consensus principle

People tend to do what others like them are doing. Example: showing thousands of five-star reviews.

Topic 2.2: Consumer Behavior

Authority principle

People tend to follow experts and authority figures. Example: a doctor recommending a product.

Topic 2.2: Consumer Behavior

Quantitative vs. qualitative data

Quantitative data is numbers: how many, how much, how often. Qualitative data is words and images that explain why and how.

Topic 2.3: Market Research

Desirable, feasible and viable

A product is desirable if customers want it, feasible if the business can make it with its resources, and viable if it can earn a profit.

Topic 2.3: Market Research

Secondary research

Using information others have already published, like government reports or industry studies. It's usually cheaper than primary research.

Topic 2.3: Market Research

Primary research

Gathering your own new data through surveys, interviews, focus groups, experiments, observations or A/B tests.

Topic 2.3: Market Research

Business hypothesis

An assumption about customers, a product or a market that a business tests before acting on it.

Topic 2.3: Market Research

A/B testing

An experiment that shows customers two versions of something, like two ads, and measures which one gets the better real response.

Topic 2.3: Market Research

Biased sample

A group of research subjects that doesn't match the population being studied, so results are skewed. Leading questions also bias results.

Topic 2.3: Market Research

Product development stages

The six usual stages: ideation, validation, design, messaging, production and launch.

Topic 2.4: Product

Value proposition

A statement of who a product is for, what problem it solves and why it's better than the alternatives.

Topic 2.4: Product

Product-market fit

When customer demand for a product is big enough to make a profit.

Topic 2.4: Product

Branding

Building an identity for a business or product, through a name, symbol or design, to stand out, raise awareness and earn loyalty.

Topic 2.4: Product

Trademark

Legal protection for a brand's name, symbol or design, so rivals can't use it.

Topic 2.4: Product

Product life cycle

The stages a product goes through as demand changes: introduction, growth, maturity and decline. Marketing shifts at each stage.

Topic 2.4: Product

Pricing strategy

A way to decide what to charge. Main types: value-based, competitive, cost-based and penetration pricing.

Topic 2.5: Price

Value-based pricing

Setting a price by what the product is worth to customers. It fits highly differentiated or unique products.

Topic 2.5: Price

Cost-based pricing

Setting a price at per-unit cost plus a chosen profit per unit, without looking at rivals or customer value.

Topic 2.5: Price

Penetration pricing

Starting with a low price, sometimes below cost, to win customers fast and grow market share, then raising it later.

Topic 2.5: Price

Pricing power

The ability to raise prices without losing market share. It's greater with fewer rivals and more differentiated products.

Topic 2.5: Price

Price elasticity of demand

How strongly customers react to a price change. With elastic demand, a price rise can cut sales so much that revenue falls.

Topic 2.5: Price

Price gouging

Sharply raising prices on goods people urgently need during a crisis. It's illegal in many U.S. states.

Topic 2.5: Price

Direct vs. indirect channel

A direct channel sells straight to customers, like a company website. An indirect channel uses intermediaries like wholesalers and retailers.

Topic 2.6: Place and Channels

B2B vs. B2C

Business-to-business (B2B) channels sell to other businesses. Business-to-consumer (B2C) channels sell to individual consumers.

Topic 2.6: Place and Channels

Promotional mix

The five tools for talking to customers: media advertising, personal selling, sales promotion, direct marketing and public relations.

Topic 2.7: Promotion and Marketing Communications

Digital marketing

Using websites, email, social media and apps to reach customers. It allows targeting, personalization, lower costs and big data on what works.

Topic 2.7: Promotion and Marketing Communications