glossary ''B & C" (marketing and finance)

MARKETING

Behavioural segmentation	Behavioural segmentation divides customers into groups based on the way they respond to, use or know of a product.
Below the line	“Below the line” is a term commonly used to refer to non-media advertising or promotion when no commission has been paid to the advertising agency. This includes direct mail, point of sale displays, and other sales promotions.
Benchmarking	The process of comparing the products and services of a business against those of competitors in a market, or leading businesses in other markets, in order to find ways of improving quality and performance
Benefit segmentation	Benefit segmentation relates to the process of dividing a market based on the specific benefits consumers seek from a product. For example, some car buyers want safety and security from their car, while others look for comfort or speed. A car manufacturer, therefore, has to decide which benefits to offer – and how these benefits should be communicated to the customer
Boston Group Matrix	A means of analysing and categorizing the performance of business units in large diversified firms by reference to market share and growth rates. It was developed by the Boston Consultancy Group (BCG)
Brand	A brand is the specific type of the product form. A brand – represented by a brand name, symbol, design, logo, packaging – is the identity of a particular product form that customers recognise as being different from others.
Brand building	Developing a brand's image and standing with a view to creating long term benefits for brand awareness and brand value
Brand equity	Brand equity refers to the value of a brand. Brand equity is based on the extent to which the brand has high brand loyalty, name awareness, perceived quality and strong product associations. Brand equity also includes other “intangible” assets such as patents, trademarks and channel relationships.
Brand extension	Brand extension refers to the use of a successful brand name to launch a new or modified product in a new market. Virgin is perhaps the best example of how brand extension can be applied into quite diverse and distinct markets.
Brand image	Brand image refers to the set of beliefs that customers hold about a particular brand. These are important to develop well since a negative brand image can be very difficult to shake off.
Brand loyalty	A strongly motivated and long standing decision to purchase a particular product or service
Brand recognition	A customer's awareness that a brand exists and is an alternative to purchase
Breakeven	Breakeven is achieved when total contribution is equal to total fixed costs. Addition contribution earned after this point becomes profit
Break-even pricing	Setting a price to achieve break-even on the costs of making and marketing a product (direct costs). Breakeven is achieved when the total contribution from sales priced in this way at least equal the fixed costs of the business
Build share	A strategy based on the Boston Matrix. Here the company can invest to increase market share (for example turning a "question mark" into a star)
Business portfolio	The business portfolio is the collection of businesses and products that make up the business.
Business to business	Marketing activity directed from one business to another (as opposed to a consumer). This term is often shortened to “B2B”
Buying behaviour	Buying behaviour concerns the process that buyers go through when deciding whether or not to purchase goods or services. Buying behaviour can be influenced by a variety of external factors and motivations, including marketing activity.

 

Cash Cows	A term used in the Boston Group Matrix. Cash cows are low-growth businesses or products with a relatively high market share. These are mature, successful businesses with relatively little need for investment. They need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars.
Channel conflict	Disagreement among members of a distribution channel about who should be paid what and what roles each should play. Channel conflict often occurs when a business uses a multi-channel approach to distribution
Cognitive dissonance	Cognitive dissonance is an customer effect commonly observed after a major purchase whereby the customer feels uncertainty about whether the purchase should have been made. Post-purchase promotion (particularly advertising) has a role to play to reduce the incidence and effect of cognitive dissonance
Combination brand	A combination brand name brings together a family brand name and an individual brand name. The idea here is to provide some association for the product with a strong family brand name but maintaining some distinctiveness so that customers know what they are getting
Competitive advantage	A competitive advantage is a clear performance differential over the competition on factors that are important to customers
Competitor benchmarking	Competitor benchmarking compares customer satisfaction with the products, services and relationships of the business with those of key competitors
Consumer buyers	Consumer buyers are those who purchase items for their personal consumption
Consumer durables	Consumer durables have low volume but high unit value. Consumer durables are often further divided into White goods (e.g. fridge-freezers; cookers; dishwashers; microwaves) and Brown goods (e.g. DVD players; games consoles; personal computers)
Consumer markets	Consumer markets are the markets for products and services bought by individuals for their own or family use
Continuous market research	Continuous research involves interviewing the same sample of people, repeatedly
Contribution	Contribution per unit can be defined as selling price less variable costs. Overall contribution is the difference between total sales revenues and variable costs
Core product	The set of problem-solving or need-meeting benefits that customers are buying when they purchase a product. Customers are rarely prepared to pay a premium for these elements of a product.
Cost leadership	A strategy of producing goods at a lower cost than the competition. This usually requires the business to enjoy higher economies of scale or have some kind of productivity advantage
Cross-selling	Using a customer’s buying history to select them for related offers, e.g. a car alarm for new car buyers.
Customer demand	Consumer demand is a want for a specific product supported by an ability and willingness to pay for it.
Customer loyalty	Feelings or attitudes that incline a customer either to return to a company, shop or outlet to purchase there again, or else to re-purchase a particular product, service or brand.
Customer need	A need is a basic requirement that an individual wishes to satisfy.
Customer satisfaction	The provision of goods or services which fulfil the customer’s expectations in terms of quality and service, in relation to price paid
Customer wants	A want is a desire for a specific product or service to satisfy the underlying need.

FINANCE :-

Bailout The financial rescue of a struggling borrower. A bailout can be achieved in various ways:

• providing loans to a borrower that markets will no longer lend to
• guaranteeing a borrower's debts
• guaranteeing the value of a borrower's risky assets
• providing help to absorb potential losses, such as in a bank recapitalisation

Bankruptcy A legal process in which the assets of a borrower who cannot repay its debts - which can be an individual, a company or a bank - are valued, and possibly sold off (liquidated), in order to repay debts.

Where the borrower's assets are insufficient to repay its debts, the debts have to be written off. This means the lenders must accept that some of their loans will never be repaid, and the borrower is freed of its debts. Bankruptcy varies greatly from one country to another, some countries have laws that are very friendly to borrowers, while others are much more friendly to lenders.

Basis point One hundred basis points make up a percentage point, so an interest rate cut of 25 basis points might take the rate, for example, from 3% to 2.75%.

BBA The British Bankers' Association is an organisation representing the major banks in the UK - including foreign banks with a major presence in London. It is responsible for the daily Liborinterest rate which determines the rate at which banks lend to each other. 

Bear market In a bear market, prices are falling and investors, fearing losses, tend to sell. This can create a self-sustaining downward spiral.

Bill A debt security- or more simply an IOU. It is very similar to a bond, but has a maturity of less than one year when first issued.

BIS The Bank for International Settlements is an international association of central banks based in Basel, Switzerland. Crucially, it agrees international standards for the capital adequacyof banks - that is, the minimum buffer banks must have to withstand any losses. In response to the financial crisis, the BIS has agreed a much stricter set of rules. As these are the third such set of regulations, they are known as "Basel III".

Bond A debt security, or more simply, an IOU. The bond states when a loan must be repaid and what interest the borrower (issuer) must pay to the holder. They can be issued by companies, banks or governments to raise money. Banks and investors buy and trade bonds.

BRIC An acronym used to describe the fast-growing economies of Brazil, Russia, India and China.

Bull market A bull market is one in which prices are generally rising and investor confidence is high.

C

Capital For investors, it refers to their stock of wealth, which can be put to work in order to earn income. For companies, it typically refers to sources of financing such as newly issued shares.

For banks, it refers to their ability to absorb losses in their accounts. Banks normally obtain capital either by issuing new shares, or by keeping hold of profits instead of paying them out as dividends. If a bank writes off a loss on one of its assets - for example, if it makes a loan that is not repaid - then the bank must also write off a corresponding amount of its capital. If a bank runs out of capital, then it is insolvent, meaning it does not have enough assets to repay its debts.

Capital adequacy ratio A measure of a bank's ability to absorb losses. It is defined as the value of its capital divided by the value of risk-weighted assets (ie taking into account how risky they are). A low capital adequacy ratio suggests that a bank has a limited ability to absorb losses, given the amount and the riskiness of the loans it has made.

A banking regulator - typically the central bank - sets a minimum capital adequacy ratio for the banks in each country, and an international minimum standard is set by the BIS. A bank that fails to meet this minimum standard must be recapitalised, for example by issuing new shares.

Capitulation (market). The point when a flurry of panic selling induces a final collapse - and ultimately a bottoming out - of prices.

Carry trade Typically, the borrowing of currency with a low interest rate, converting it into currency with a high interest rate and then lending it. The most common carry trade currency used to be the yen, with traders seeking to benefit from Japan's low interest rates. Now the dollar, euro and pound can also serve the same purpose. The element of risk is in the fluctuations in the currency market.

Chapter 11 The term for bankruptcy protection in the US. It postpones a company's obligations to its creditors, giving it time to reorganise its debts or sell parts of the business, for example.

Collateralised debt obligations (CDOs) A financial structure that groups individual loans, bonds or other assets in a portfolio, which can then be traded. In theory, CDOs attract a stronger credit rating than individual assets due to the risk being more diversified. But as the performance of many assets fell during the financial crisis, the value of many CDOs was also reduced.

Commercial paper Unsecured, short-term loans taken out by companies. The funds are typically used for working capital, rather than fixed assets such as a new building. The loans take the form of IOUs that can be bought and traded by banks and investors, similar to bonds.

Commodities Commodities are products that, in their basic form, are all the same so it makes little difference from whom you buy them. That means that they can have a common market price. You would be unlikely to pay more for iron ore just because it came from a particular mine, for example.

Contracts to buy and sell commodities usually specify minimum common standards, such as the form and purity of the product, and where and when it must be delivered.

The commodities markets range from soft commodities such as sugar, cotton and pork bellies to industrial metals such as iron and zinc.

Core inflation A measure of CPI inflation that strips out more volatile items (typically food and energy prices). The core inflation rate is watched closely by central bankers, as it tends to give a clearer indication of long-term inflation trends.

Correction (market) A short-term drop in stock market prices. The term comes from the notion that, when this happens, overpriced or underpriced stocks are returning to their "correct" values.

CPI The Consumer Prices Index is a measure of the price of a bundle of goods and services from across the economy. It is the most common measure used to identify inflation in a country. CPI is used as the target measure of inflation by the Bank of England and the ECB.

Credit crunch A situation where banks and other lenders all cut back their lending at the same time, because of widespread fears about the ability of borrowers to repay.

If heavily-indebted borrowers are cut off from new lending, they may find it impossible to repay existing debts. Reduced lending also slows down economic growth, which also makes it harder for all businesses to repay their debts. 

Credit default swap (CDS) A financial contract that provides insurance-like protection against the risk of a third-party borrower defaulting on its debts. For example, a bank that has made a loan to Greece may choose to hedge the loan by buying CDS protection on Greece. The bank makes periodic payments to the CDS seller. If Greece defaultson its debts, the CDS seller must buy the loans from the bank at their full face value. CDSs are not just used for hedging - they are used by investors to speculate on whether a borrower such as Greece will default.

Credit rating The assessment given to debts and borrowers by a ratings agency according to their safety from an investment standpoint - based on their creditworthiness, or the ability of the company or government that is borrowing to repay. Ratings range from AAA, the safest, down to D, a company that has already defaulted. Ratings of BBB- or higher are considered "investment grade". Below that level, they are considered "speculative grade" or more colloquially as junk.

Currency peg A commitment by a government to maintain its currency at a fixed value in relation to another currency. Sometimes pegs are used to keep a currency strong, in order to help reduce inflation. In this case, a central bank may have to sell its reserves of foreign currency and buy up domestic currency in order to defend the peg. If the central bank runs out of foreign currency reserves, then the peg will collapse.

Pegs can also be used to help keep a currency weak in order to gain a competitive advantage in trade and boost exports. China has been accused of doing this. The People's Bank of China has accumulated trillions of dollars in US government bonds, because of its policy of selling yuan and buying dollars - a policy that has the effect of keeping the yuan weak.