IGCSE Business

Studies
Topic 3 – Marketing
 Overview

3.2 Market research

3.1 Marketing, competition and the customer ● 3.2.1 The role of market research and
methods used
● 3.1.1 The role of marketing
● 3.2.2 Presentation and use of market
research results
● 3.1.2 Market changes
3.3 Marketing mix
● 3.1.3 Concepts of niche marketing
● 3.3.1 Product
and mass marketing
● 3.3.2 Price
● 3.1.4 How and why market
● 3.3.3 Place – distribution channels
segmentation is undertaken
● 3.3.4 Promotion

● 3.3.5 Technology and the marketing mix

 Overview

3.4 Marketing Strategy

● 3.4.1 Justify marketing strategies appropriate to a given situation

● 3.4.2 The nature and impact of legal controls related to marketing

● 3.4.3 The opportunities and problems of entering new foreign markets

 3.1 Marketing, competition and the customer
3.1.1 The role of marketing:

● Identifying customer needs

● Satisfying customer needs

● Maintaining customer loyalty

● Building customer relationships

3.1.2 Market changes:

● Why customer/consumer spending patterns may change

● The importance of changing customer needs

● Why some markets have become more competitive

● How businesses can respond to changing spending patterns and increased competition
 3.1 Marketing, competition and the customer
3.1.3 Concepts of niche marketing and mass marketing:

● Benefits and limitations of both approaches to marketing

3.1.4 How and why market segmentation is undertaken:

● How markets can be segmented, e.g. according to age, socio-economic grouping,

location, gender

● Potential benefits of segmentation to business

● Recommend and justify an appropriate method of segmentation in given

circumstances
Marketing
● “Marketing” is identifying customer wants and satisfying them profitably.
○ A “customer” is a person, business or other organisation which buys goods or services from
a business.
 Identify customer needs

Satisfy customer needs

Role of Maintain customer loyalty

marketing Build customer relationships to

gain information about
customers

Anticipate changes in customer

needs
Role of marketing
● If the Marketing department is successful in identifying customer requirements and predicting
future customer needs, it should enable the business to:

○ raise customer awareness of a product or service of the business

○ increase revenue and profitability

○ increase or maintain “market share” – the percentage of total market sales held by one
brand or business.

○ maintain or improve the image of products or a business

○ target a new market or market segment

○ enter new markets at home or abroad

○ develop new products or improve existing products.

Understanding market changes
Why customer/consumer spending patterns change

Consumer tastes and Changes in technology

fashions change ● With new products being developed, such as
iPads, tablets and smartwatches, sales of desk
● A “consumer” buys goods or services computer/standalone computers have fallen in
many countries.
for personal use – not to re-sell.
● New products mean old versions/alternatives do
not have high sales anymore.

Change in incomes Ageing populations

● If an economy has high unemployment then many ● The age structure of the population in many
consumers will buy cheaper products. countries is changing to a greater percentage of
older people, which has changed the type of
● If the economy then grows and unemployment
falls, the sales of more expensive products will products which are increasing in demand, such as
increase. anti-ageing face creams for women.
Why have some markets become more competitive?

Globalisation Transportation E-commerce

● Globalisation of ● Transportation ● Internet/e-commerce has

meant that consumers can
markets has meant improvements have search for products and buy
from overseas markets.
that products are meant that it is easier
increasingly sold all and cheaper to ● Even some services such as
insurance can be bought from
over the world. transport products businesses based in another
from one part of the country.

world to another. ● Increased consumer information

about products and the different
international businesses that
produce them makes a market
much more competitive.
How can businesses respond to changing spending patterns
and increased competition?
Maintain good customer Keep improving its existing
relationships product

Bring out new products to Keep costs low to maintain

keep customers’ interest competitiveness
Niche vs Mass Marketing
● A “market” for a particular good or service is made up of the total number of customers and
potential customers, as well as sellers, for that particular good or service. It can be measured by:

○ the total number of sales

○ the value of the sales for that good or service by all suppliers of that particular good or
service

● Markets can be either mass markets or niche markets.

○ “Mass market” is where there is a very large number of sales of a product.

○ A “niche market” is a small, usually specialised, segment of a much larger market.

Mass Marketing – Pros & Cons
Advantages Disadvantages

High levels of competition between

Total sales in mass markets are very high
businesses selling similar products

Businesses can benefit from economies of scale High costs of advertising and promotion

Risks can be spread, as often the business will Standardised products or services are
sell several different variations of products to produced and so may not meet the
the mass market, and if one variety of the specific needs of all customers or
product fails then the other products may still potential customers, therefore leading to
sell well lost sales.

Opportunities for growth for businesses due to

large potential sales
Niche Marketing – Pros & Cons
Advantages Disadvantages

Small businesses may be able to sell Niche markets are usually relatively small and
successfully in niche markets as larger therefore have limited sales potential, meaning it is
businesses may not have identified them but likely that only small businesses can operate
concentrated on the mass markets instead. profitably in these markets. If the business wants
This will reduce competition from the larger to grow it will need to look outside the niche
businesses in niche markets. market to develop products for mass markets.

The needs of consumers can be more closely

Often businesses in a niche market will specialise
focused on, and therefore targeted, by
in just one product, meaning that if the product is
businesses in a niche market. This may lead to
no longer in demand the business will fail as the
high levels of consumer loyalty and good
business has not spread its risks.
customer relations.
Market segments
● “Market segmentation” is when a market is broken down into sub-groups
which share similar characteristics.

● “Market segment” is an identifiable subgroup of a whole market in which

consumers have similar characteristics or preferences.

● Example: Chocolates are eaten by young children, teenagers and adults of

both sexes.

○ Different brands of chocolates will appeal to these different groups of

people.
Segmenting a market can help a business to:

Make marketing Enjoy higher Identify a market

expenditure cost sales and profits segment which is
effective not having its
● Accomplished by ● Result of
needs fully met
producing a product cost-effective
● Presents opportunities
which closely meets marketing
to increase sales
the needs of these
customers and
targeting its
marketing efforts only
on this segment
 ● Socio-economic group

● Age
Common
ways of ● Region/location

segmenting ● Gender

a market ● Use of the product

● Lifestyle
Factors affecting method of segmentation
chosen
Detailed analysis Company image Cost of entering
of the market and and brand image each segment
the ‘size’ of each
potential segment ● a ‘high-tech’ business ● for example, with a
in terms of with an excellent specially designed
consumers and reputation for product and
innovation will not advertising campaign
likely sales want to produce
low-priced goods for
low-income
consumers
 3.2 Market research
3.2.1 The role of market research and methods used:

● Market-orientated businesses (uses of market research information to a business)

● Primary research and secondary research (benefits and limitations of each)

● Methods of primary research, e.g. postal questionnaire, online survey, interviews, focus groups

● The need for sampling

● Methods of secondary research, e.g. online, accessing government sources, paying for commercial
market research reports

● Factors influencing the accuracy of market research data

3.2.2 Presentation and use of market research results:

● Analyse market research data shown in the form of graphs, charts and diagrams; draw simple
conclusions from such data
The role of market research
● “Market research” is the process of gathering, analysing and interpreting information
about a market.

● The role of market research is to try to find out answers to these questions:
○ Would customers be willing to buy my product?
○ What price would they be prepared to pay?
○ Where would they be most likely to buy my product?
○ What feature of my product do customers most like or dislike?
○ What type of customer would buy my product?
○ What type of promotion would be effective with these types of customers?
○ How strong is the competition and who are the main competing businesses?

● Customer needs can be identified by carrying out market research, which is essential for
businesses to remain competitive.
Product-orientated and market-orientated businesses

Product-orientated Market-orientated
● A “product-orientated” business is ● A “market-orientated” business is one
one whose main focus of activity is which carries out market research to
find out consumer wants before a
on the product itself. product is developed and produced.

● Produce the product first and then ● Requires businesses to have a

“marketing budget” – a financial plan
try to find a market for it for the marketing of a product or
product range for some specified period
● Often produce basic necessities of time.
required for living, such as ● Market-orientated businesses are better
agricultural tools or fresh foods able to survive in the market and be
successful because they are usually
more adaptable to changes in customer
tastes.
Market research methods
Primary Secondary
● “Primary research”, also called ● “Secondary research”, also called
“field research”, is the collection “desk research” uses information
and collation of original data via that has already been collected and
direct contact with potential or is available for use by others.
existing customers.
● Types of secondary research:
● Types of primary research: ○ Internal
○ Questionnaires ○ External
○ Surveys
○ Interviews
○ Focus groups
Primary market research – Benefits & Limitations

Benefits Limitations

Can be expensive
Up to date and relevant to business undertaking it
(e.g., individually interviewing many people)

Usually planned and carried out by the people who want

Not available immediately – takes time to collect
to use the data; it is first-hand

Most effective when used to gather information which

will help the business with a specific problem, (e.g., test
market to see if a new product would to succeed)

Not available to other businesses

Process of primary research
Methods of primary research
Questionnaires Online surveys
● A set of questions to be answered as a means of ● Requires the target sample to answer a
collecting data for market research series of questions over the internet

● Can be conducted face-to-face (e.g., in the ● Can be carried out on specialised

street), by telephone, by post or on the internet
websites using any internet-connected
device, including mobile phones

Interviews Focus groups

● Involves asking individuals a series of questions, ● Groups of people who agree to provide
often face-to-face or over the phone information through a group discussion
with a researcher present
● The interviewer (the person asking the questions)
will have ready-prepared questions for the ● Helps businesses with making future
interviewee (the person answering the questions)
marketing decisions
Questionnaires – Pros & Cons
Advantages Disadvantages

Detailed qualitative information can be gathered about If questions are not well thought out, the
the product or service. answers to them will not be very accurate. It may
be very misleading for the business if it is
thought that a product is liked by consumers,
Customers’ opinions about the product or service can be when in fact the respondents were only saying
obtained. they thought the product was quite attractive
but they would not actually buy it.

Can be carried out online.

Can take up a lot of time and money (e.g.,
carrying out the research, collating & analysing
To encourage people to fill in the questionnaire, vouchers
the results etc.).
can be offered or participants entered into a ‘prize draw’.
Online surveys – Pros & Cons
Advantages Disadvantages

Absence of interviewer to explain

open-ended questions or to ask
Fast, with quicker response times than other forms of survey.
follow-up question to gain more
detailed information.

Cannot reach potential respondents

Cheaper than interviews or postal questionnaires. who do not have access to the
internet.

Easy to complete for the participant. Scope for fraud – some people will
just answer an online survey to gain
any incentives being offered and
Data collected can be quickly presented and analysed using IT tools. not give honest answers, or they
complete the survey carelessly.
Interviews – Pros & Cons
Advantages Disadvantages

Whether consciously or unconsciously, the

Interviewer is able to explain any questions that the interviewer could lead the interviewee into
interviewee does not understand answering in a certain way, resulting in
inaccurate results due to interviewer bias

Very time-consuming to carry out and, therefore,

Detailed information can be gathered about what the
they are often an expensive way of gathering
interviewees like and dislike about the product
information
Focus groups – Pros & Cons
Advantages Disadvantages

Provide detailed information about consumers’ tastes and Can be time-consuming and expensive if
preferences. conducted by a specialist market research agency.

Interaction between members of the group can help the Discussion could be biased if some people on the
business understand the reasons for people’s opinions. panel are influenced by the opinions of others.

Can be dominated by just a few people so the

Quicker and cheaper than individual interviews. researcher will need to be experienced to deal with
this.
The need for sampling
● When deciding whom to ask to fill in a questionnaire or survey or whom to interview, a sample has
to be selected, as it would be too expensive and time-consuming to try to include all the relevant
population in the research.

● A “sample” is the group of people who are selected to respond to a market research exercise, such
as a questionnaire.

● Two common sampling methods:

○ “Random sampling” – people are selected at random as a source of information for market
research.

■ Advantage is that everyone has an even chance of being picked, but not everyone in
the population may be a consumer of the particular product being investigated.

○ “Quota sampling” – people are selected on the basis of certain characteristics (such as age,
gender or income) as a source of information for market research.
Secondary market research – Benefits & Limitations

Benefits Limitations

Often a much cheaper way of gathering information

Data may have been collected several years ago
than primary research, as the data collection has
and be out of date.
already been done by others.

Can be used to help assess the total size of a market by

finding out the size of the population and its age Data is available to all businesses – not just
structure, information that could not be obtained by collected for the sole use of one business.
primary research.

Newspapers may carry vital economic forecasts if you

Data may not be completely relevant as it was not
are trying to assess when a recession is coming to an
collected with the needs of one business in mind.
end and your sales are likely to increase again.

Usually quicker to obtain secondary data than to

undertake primary research.
Internal sources of secondary data
● Information available from the business’s own records

● Examples of internal sources of information include:

○ Sales department records, pricing data, customer records, sales reports

○ Opinions of Distribution and Public Relations personnel

○ Finance department

○ Customer Service department

External sources of secondary data
● Information obtained from outside the business

● Examples of internal sources of information include:

○ Government statistics

○ Newspapers

○ Trade associations

○ Market research agencies

○ Online sources
Factors influencing the accuracy of market research data

How carefully the sample Way in which questions in

was drawn up questionnaire were phrased
to ensure honest responses

Sample selected Sample size

● Unlikely to be truly representative of ● The larger the sample, the more accurate the results
are likely to be, but the more expensive will be the
the total population, but it needs to be research.
as near as is possible ● If only a small sample is asked, the results are unlikely
to be as accurate, meaning researchers need to decide
how many people will give them the accuracy they
want and can afford.
Factors influencing the accuracy of market research data

Wording of questions Who carried out the

● Trying out questionnaires on a small
research
● Secondary research may not be as
group of people before using them on accurate as first thought because it
a large sample can help show if any was initially carried out for some other
question can be misinterpreted purpose and you would not know how
the information was actually gathered

Bias Age of the information

● Articles in newspapers sometimes ● Statistics can quickly become out of
have a bias and important information date, no longer relating to current
may be deliberately left out trends in consumers’ buying habits,
but reflecting what they used to be
spending their money on
Presentation of data from market research
 3.3 Marketing mix
3.3.1 Product:

● The limitations and benefits of developing new products

● Brand image; impact on sales and customer loyalty

● The role of packaging

● The product life cycle: main stages and extension strategies; draw and interpret a product life cycle diagram

● How stages of the product life cycle can influence marketing decisions, e.g. promotion and pricing decisions

3.3.2 Price:

● Pricing methods (benefits and limitations of different methods), e.g. cost plus, competitive, penetration, skimming, and
promotional

● Recommend and justify an appropriate pricing method in given circumstances

● Understand the significance of price elasticity: difference between price elastic demand and price inelastic demand;
importance of the concept in pricing decisions (knowledge of the formula and calculations of PED will not be assessed)
 3.3 Marketing mix
3.3.3 Place – distribution channels:

● Advantages and disadvantages of different channels, e.g. use of wholesalers, retailers or direct to consumers

● Recommend and justify an appropriate distribution channel in given circumstances

3.3.4 Promotion:

● The aims of promotion

● Different forms of promotion and how they influence sales, e.g. advertising, sales promotion

● The need for cost-effectiveness in spending the marketing budget on promotion

3.3.5 Technology and the marketing mix:

● Define and explain the concept of e-commerce

● The opportunities and threats of e-commerce to business and consumers

● Use of the internet and social media networks for promotion

Marketing mix
● The “marketing mix” is a term which is used to describe all the activities which go into marketing
a product or service.

● Often summarised as the four Ps:

○ Product
○ Price
○ Place
○ Promotion
Product
The role of product decisions in the marketing mix
● The product itself is probably the most important element in the marketing mix – without a product
that meets customer needs, the rest of the marketing mix is unlikely to be able to achieve
marketing success.

● Types of products:

○ Consumer goods – goods which are bought by consumers for their own use. They can be
goods that do not last long, such as food and cleaning materials. Some goods last a relatively
long time and give enjoyment over a long time, such as furniture and computers.

○ Consumer services – services that are bought by consumers for their own use. Examples
include repairing cars, hairdressing and education.

○ Producer goods – goods that are produced for other businesses to use. They are bought to
help with the production process. Examples include trucks, machinery and components.

○ Producer services – services that are produced to help other businesses. Examples include
accounting, insurance and advertising agencies.
Product development
Benefits & Costs of developing new products
Benefits Costs

Unique Selling Point (USP)* will mean the business Costs of carrying out market research and
will be first into the market with the new product. analysing the findings.

Diversification for the business, giving it a broader Costs of producing trial products, including
range of products to sell. the costs of waste materials.

Allows the business to expand into new markets. Lack of sales if the target market is wrong.

May allow the business to expand into existing Loss of company image if the new product
markets. fails to meet customer needs.

* The “USP” is the special feature of a product that differentiates it from the products of
competitors.
Importance of brand image
● The “brand name” is the unique name of a product that distinguishes it from other brands.

● “Brand loyalty” is when consumers keep buying the same brand again and again instead of choosing a
competitor’s brand.

● “Brand image” is an image or identity given to a product which gives it a personality of its own and
distinguishes it from its competitors’ brands.
The role of packaging
● “Packaging” is the physical container or wrapping for a product. It is also used for promotion and selling appeal.

● Packaging has two functions to perform:

○ Suitable for the product to be put in

■ Packaging has to give protection to the product and not allow it to spoil

■ Has to allow the product to be used easily

● Example: It is no good having hair shampoo in a tin which will not allow the liquid to pour out
easily

■ Has to be suitable for transporting the product from the factory to the shops, so preferably the
packaging should not be too delicate or the product could easily get damaged

○ Promote the product

■ Has to appeal to the consumer, therefore the colour and shape of the container is very important
The role of packaging
Product Life Cycle (PLC)
● The “product life cycle” describes the stages a product will pass through from its introduction,
through its growth until it is mature, and then finally its decline.
Product Life Cycle (PLC)
● “Extension strategy” is a way of keeping a product at the maturity stage of the life cycle and
extending the cycle.
Product Life Cycle (PLC)
● “Extension strategy” is a way of keeping a product at the maturity stage of the life cycle and
extending the cycle.
Price
Pricing strategies
● A business can adopt new pricing strategies for several reasons, including:

○ to try to break into a new market

○ to try to increase its market share

○ to try to increase its profits

○ to make sure all its costs are covered and a target profit is earned.
Cost-plus pricing
“Cost-plus pricing” is the cost of manufacturing the product plus a profit mark-up.

Benefits Limitations

● The method is easy to apply. ● Businesses could lose sales if the

selling price is higher than
● Different profit mark-ups could be competitors’ prices.
used in different markets.
● A total profit will only be made if
sufficient units of the product are
● Each product earns a profit for the
sold.
business.
● There is no incentive to reduce costs
– any increase in costs is just passed
on to the customer as a higher price.
Competitive pricing
“Competitive pricing” is when the product is priced in line with or just below competitors’
prices to try to capture more of the market.

Benefits Limitations
● Sales are likely to be high as the price ● If the costs of production for a business
is at a realistic level and the product are higher than those of competitors –
is not under- or over-priced. perhaps because the product is of a
higher quality – then a competitive price
● Avoids price competition, which can could lead to losses being made.
reduce profits for all businesses in
● A higher quality product might need to
the industry. be sold at a price above competitors’
prices to give it a higher quality image.
● Often used when it is difficult for
consumers to tell the difference ● In order to decide what this price should
between the products of different be, detailed research would be needed
businesses. into what prices competitors are
charging, and this research costs time
and money.
Penetration pricing
“Penetration pricing” is when the price is set lower than the competitors’ prices in order to be
able to enter a new market.

Benefits Limitations
● Often used for newly launched ● The product is sold at a low price and
products to create an impact with therefore the profit per unit may be
customers. low.

● It should ensure that sales are made ● Customers might ‘get used’ to low
prices and reject the product if the
and the new product enters the
business starts to raise the price
market successfully.
after the product’s early success.

● Market share should build up quickly. ● Might not be appropriate for a

branded product with a reputation
for quality.
Price skimming
“Price skimming” is where a high price is set for a new product on the market.

Benefits Limitations
● Skimming can help to establish the ● The high price may discourage some
product as being of good quality. potential customers from buying it.

● High research and development costs ● The high price and high profitability
can be rapidly recouped from the profit
may encourage more competitors to
made on the product at the high price.
enter the market.
● If the product is unique, a high price will
lead to profits being made before
competitors launch similar products –
then the price will have to be reduced.
Promotional pricing
“Promotional pricing” is when a product is sold at a very low price for a short period of time.

Benefits Limitations
● It is useful for getting rid of ● The revenue will be lower because
unwanted inventory that will not sell. the price of each item will be
reduced.
● It can help to renew interest in a
product if sales are falling, for ● It might lead to a price competition
example during an economic with competitors – so the business
recession. might have to reduce prices again.
The impact of psychology on price decisions
● The price of a product can have a significant psychological impact upon consumers’ perceptions of
the product.

○ A very high price for a high-quality product may mean that high-income customers wish to
purchase it as a status symbol.

○ If a price for a product is set just below a whole number, for example, 99¢ is just below $1, this
creates the impression of it being much cheaper.

○ Supermarkets may charge low prices for products purchased on a regular basis, which will
give customers the impression of being given good value for money.

○ Repeat sales are often made when the price reinforces consumers’ perceptions of the
product – this may be its brand image when the price is set high.
Dynamic pricing
● “Dynamic pricing” is when businesses change product prices, usually when selling online,
depending on the level of demand.

○ Example: American football games ticket prices sold online often change to reflect the
increased demand for tickets at popular games and when a game is less popular the price is
reduced to encourage sales and fill the stadium seats.

● Often customers can be split into two or more groups and are charged different prices for the same
product or service because they have different abilities or willingness to pay these prices.

○ Example: Airlines regularly use dynamic pricing and charge different prices for flights to the
same airport at different times of the day or different times of the year.

● Ethical issues:

○ Technology firms can track the buying history of customers and then charge higher prices for
products when they buy them online, compared to other customers who appear to have
lower income from their past buying history and are charged lower prices for the same
product.
Price elasticity of demand (PED)
Price elastic demand Price inelastic demand

● Consumers are very sensitive to changes in ● Consumers are not sensitive to changes in
price price

● Many close substitutes available ● Few close substitutes available

● Example: If the price of a electricity rose by

● Example: If the price of a chocolate bar
15%, the fall in sales will not be as much,
rose by 5%, some customers would buy
perhaps 5% as most consumers will carry on
alternative chocolate bars and sales might buying this product at the higher price.
fall by 15%. Since the percentage change in Since the percentage change in quantity
quantity demanded is greater than the demanded is less than the percentage
percentage change in price, this product is change in price, this product is said to have
said to have price elastic demand. price inelastic demand.
Place
Distribution channels
● A “distribution channel” is the means by which a product is passed from the place of production
to the customer.
Distribution channels - Direct to consumer (D2C)

Advantages Disadvantages

Usually impractical for most products -

Simple distribution channel - involves
consumers probably do not live near
manufacturers selling their products
factories where they can go directly to the
directly to the consumer.
manufacturer to buy the products.

Lower price - intermediaries such as Unsuitable method suitable for products

wholesalers and retailers are cut out. which cannot easily be sent by post.

May not be cost effective - can be very

More delivery options - Products can be sold
expensive to send products by post or
by mail order catalogue or via the internet.
courier.
Distribution channels - Using a retailer as the only
intermediary

Advantages Disadvantages

Producer sells large quantities to

No direct contact with customers.
retailers.

Price is often higher than ‘direct selling’ as

Reduced distribution costs compared
the retailer has to cover its costs and make
to selling D2C.
a profit.
Distribution channels - Using a wholesaler and
retailer as intermediaries

● This distribution channel involves

using a wholesaler, who performs the
function of “breaking bulk” - where
wholesalers buy products from
manufacturers in large quantities and
then divide up the inventory into
much smaller quantities for retailers
to buy.
Distribution channels - Using a wholesaler and
retailer as intermediaries

Advantages Disadvantages

Wholesaler saves storage space for small retailer and reduces May be more expensive for the small shop to buy from a wholesaler
storage costs. than if it bought straight from the manufacturer.

Small retailers can purchase fresh products in small quantities

from wholesaler because they have a relatively short ‘shelf life’ Wholesaler may not have the full range of products to sell.
before they deteriorate.

Wholesaler may give credit to retail customers so they can take Takes longer for fresh produce to reach the shops, so may not be as
the goods straightaway and pay at a later date. good quality.

Wholesaler may deliver to the small retailer thus saving on

Wholesaler may be a long way from the small shops.
transport costs.

Wholesaler can give advice to small retailers about what is selling The consumer price is often higher than ‘direct selling’ as both the
well and advise the manufacturer what is selling well. wholesaler and retailer have to cover costs and make a profit.
Distribution channels - Using an additional
intermediary such as an agent
● An “agent” is an independent
person or business that is
appointed to deal with the sales
and distribution of a product or
range of products.

● When products are exported, the Advantages Disadvantages

manufacturer sometimes uses
an agent in the other country,
who sells the products on behalf Manufacturer may not know the
of the manufacturer, allowing best way to sell the product in
the manufacturer to have some The producer has less
other markets, making agents,
control over the way the product control over the way the
is sold to consumers. who are aware of local
product is sold to
conditions, to be in the best
● The agent will either put an customers.
position to select the most
additional amount on the price to
cover their expenses or will effective places in which to sell.
receive a commission on sales,
or even could act as the
wholesaler.
Methods of distribution
Factors affecting distribution channels
Promotion
Promotion
● “Promotion” is where marketing activities aim to raise customer awareness of a product or brand,
generating sales and helping to create brand loyalty.
Promotion – Advertising
● “Advertising”, also known as “above-the-line promotion”, communicates to the target audience
to encourage them to buy a product.

○ The “target audience” refers to people who are potential buyers of a product or service.

● Can be informative or persuasive:

○ “Informative advertising” is where the emphasis of advertising or sales promotion is to give

full information about the product.

○ “Persuasive advertising” is advertising or promotion which is trying to persuade the

consumer that they really need the product and should buy it.
Promotion – Advertising
Promotion – Advertising
Promotion – Advertising
Examples of suitable
Advertising products/services to
Advantages Disadvantages
media advertise using this
method

● Very ● Food products and

● Wide customer reach –
expensive drinks that are
Advert goes out to millions
form of bought by most
of people and can reach a
advertising people
target audience by
advertising at times when
● Young ● Cars that are bought
the programmes the
consumers by a large number of
Television potential buyers are likely to
often customers
watch are being shown
download
films/music ● Household products,
● Control of product’s image –
and may not for example, soap
Product can be shown in a
watch many powder, that are
very favourable way, making
television bought by most of
it look attractive
programmes the population
Promotion – Advertising
Examples of
suitable
Advertising
Advantages Disadvantages products/services
media
to advertise using
this method

● Cheaper than ● Cannot put across a visual

television message

● Usually ● Quite expensive relative to ● Local services or

reaches a large other methods of advertising events are often
audience advertised on the
Radio ● The advert needs to be radio on local
● Often uses a remembered, the customer channels (e.g.,
memorable cannot look back at a hard local shops, car
song or tune copy of the advert showrooms)
so that the
advert will be ● Not as wide an audience as
remembered television
 Promotion – Advertising
Examples of suitable
products/services to
Advertising media Advantages Disadvantages
advertise using this
method

● National newspapers are often bought by

particular customers and therefore the
● Often only in
newspaper in which the advertisement is placed
black and
can be selected to target a particular group of
white and
people
not
● Local products,
eye-catchin
● A large number of people purchase and read local events in
g
national newspapers local newspapers
Newspapers (national
or local) ● Many young
● Local newspapers are relatively cheap to place ● Cars, banks in
people do
adverts in and are a cost-effective way to national
not
advertise newspapers
purchase/re
ad
● Adverts are permanent and can be cut out and
traditional
kept
newspapers
● A lot of information can be put in the advert
Promotion – Advertising
Examples of
suitable
Advertising
Advantages Disadvantages products/services
media
to advertise using
this method

● Magazines are read by a

specific type of person or ● Magazines are ● Perfume in
business (e.g., bicycle often only specialist
enthusiasts read bicycle published once magazines for
magazines) – very effective a month or women
way to reach the target once a week
Magazines population if there are ● Golf equipment in
specialist magazines which ● Advertising in golf magazines
cover a particular activity magazines is
relatively more ● Medical equipment
● Magazine adverts are in expensive than in professional
colour and therefore can newspapers journals
look more attractive
Promotion – Advertising
Examples of
suitable
Advertising
Advantages Disadvantages products/services
media
to advertise using
this method

● Local events
● Can easily be
● They are permanent missed as
● Products
people go past
purchased by a
● Relatively cheap them
large section of
Poster/Billboards
the population as
● Potentially seen by ● No detailed
posters are seen
everyone who passes information can
by everyone
them be included in
passing the
the advert
advertisement
Promotion – Advertising
Examples of
suitable
Advertising
Advantages Disadvantages products/services
media
to advertise using
this method

● Can give visual image of

the product and show the ● Seen by only a
product in a positive way limited number
of people who ● Coca-Cola when a
Cinema, DVD and
● Relatively low cost go to watch the film for teenagers
Blu-ray discs
film or buy the is showing
● Can be very effective if DVD or Blu-ray
the target audience goes disc
to see particular films
Promotion – Advertising
Examples of suitable
Advertising products/services
Advantages Disadvantages
media to advertise using
this method

● Cheap method of advertising

● Given out in the street to a wide range

of people ● Often used to
● May not be read advertise local
● Direct mail – could be delivered door to events
door or mailed to a large number of ● Direct mail, also
Leaflets people called junk mail, can ● Could be given out to
be annoying and put promote retail outlets
● Sometimes contain a money-off customers off and may contain a
voucher to encourage the reader to buying the product money-off voucher
keep the advert on the leaflet

● The adverts are permanent and can be

kept for future reference
Promotion – Advertising
Examples of suitable
Advertising products/services
Advantages Disadvantages
media to advertise using
this method

● Internet searches may

not highlight the website
● Products that
and it could be missed
● A large amount of information can customers are
be placed on a website, which can already familiar with,
● In some countries
be seen by a vast number of people (e.g., electrical goods,
internet access is limited
at home and abroad books, fashion
Internet clothes)
● There is a lot of
● Orders can be made instantly via
competition from other
the website ● Services such as
websites
train information and
● Direct mail sent via email is cheap ticketing, and
● Security issues may
insurance
discourage customers
from buying online
Promotion – Advertising
Examples of
suitable
Advertising
Advantages Disadvantages products/services
media
to advertise using
this method

● Shops use the

bags given out
● Very cheap form of ● May not be with purchases to
advertising (e.g. on seen by advertise their
Other forms of
delivery vehicles, T-shirts customers in name
publicity
and on the sides of bags the target
from shops) market ● Coca-Cola uses
neon signs to
advertise its name
Sales promotion
● “Sales promotions”, also known as “below-the-line promotion” are incentives such as special
offers or special deals aimed at consumers to achieve short-term increases in sales.
 ● Can promote sales at times in the
year when sales are traditionally
low (off-season purchases).

● Encourages new customers to try

Sales
an existing product.

● Encourages consumers to try a

promotion – new product.

Advantages ● Encourages existing customers to

buy a product more often or in
greater quantities, increasing
consumer loyalty.
● Encourages customers to buy your
product instead of a competing
brand.
The importance of the marketing budget
● A “marketing budget” is a financial plan for the marketing of a product or product range for a specified period of
time.

● Most important factor when deciding what type of promotion to use

○ Size of marketing budget is crucial, as it specifies how much money is available to market the product or
range

○ If the business cannot afford a very large budget, this will limit the places where the business can advertise.

■ Example: if the budget is small then television advertising will not be possible, and the number of times
adverts appear in a magazine could be higher if the budget was larger.

● Need for cost effectiveness in spending the marketing budget is very important

○ A business will need to compare the cost of advertising with the increase in expected sales. It is not good to
spend large amounts of money on an advertising campaign if there is only a small increase in sales.

○ Small businesses will find it very difficult to compete with larger ones because of the large marketing budget
available to them.
Factors affecting which promotion method is used

Stage of the product life cycle Nature of the product itself

● If the product is new and has just been ● If the product is a producer good, the
launched the advertising may be more type of promotion that would be used
informative, but if the product is well when promoting the product to other
established and is at maturity then the producers would be quite different to the
advertising may be persuasive. methods used with consumer goods.

Cultural issues involved in Nature of the target market

international marketing
● If the product is to be sold abroad then ● Whether it is local, national or
different types of promotion may be international and its size – a local
appropriate. market will require different media to a
national or international one.
Technology and the marketing mix
How technology influences the marketing mix
● Product – may be changed to respond to new technology

○ Example: New features added to mobile (cell) phones

● Promotion – businesses are using new ways to promote their business or its products on the internet using
social media marketing and viral marketing

○ Example: Social media networking sites such as Facebook, Twitter, pop-ups, sponsored links, paying
search engines to put your websites at the top of searches, posting reviews on own websites, blogs,
are changing the way businesses reach their potential customers.

● Price – internet allows businesses to gather information about customer purchasing habits

○ Example: Dynamic pricing can be used to increase revenue by changing prices frequently depending
on the level of demand for a product on the internet

● Place – new opportunities have been created thanks to the internet

○ Example: Internet has facilitated the widespread use of online purchasing & e-commerce.
How technology influences the marketing mix
● “Social media marketing” is a form of internet marketing that involves creating and
sharing content on social media networks in order to achieve marketing and branding
goals. It includes activities such as posting text and image updates, videos, and other
content that achieves audience engagement, as well as paid social media advertising.

● “Viral marketing” is when consumers are encouraged to share information online

about the products of a business.

● “E-commerce” is the ‘online’ buying and selling of goods and services using
computer systems linked to the internet and apps on mobile (cell) phones.
Social media advertising
Advantages Disadvantages

Targets specific demographic groups who will share Can alienate customers if they find the
product information through viral marketing adverts annoying

Target customers will see the advert when they go on Businesses have to pay for advertising if
social media using pop-ups

Speed in response to market changes – information can Potential customers may not use social
be updated regularly media networks

Cheap to use – it has low costs if just placing Lack of control of advertising if used by
advertisements others

Messages may be altered or used in a

Reaches groups that are difficult to reach any other way bad way and forwarded on to other
users, giving the business bad publicity
Personal website advertising
Advantages Disadvantages

Potential customers may not see the website as the page

No extra cost if own website is already set up may come up in a long list of results when using a search
engine such as Google

Control of advertising as it is on your own site Relies on customers finding the website

Can change adverts quickly and update pictures/prices,

Design costs of the website may be high
and so on

Interactive adverts can be more attractive than those in

other forms of advertising media such as magazines and
posters

Can provide more information in adverts and link to other

pages with further information and pictures

Attracts funds/payments from companies that want to

advertise or be associated or linked with your website
E-Commerce
 3.4 Marketing strategy
3.4.1 Justify marketing strategies appropriate to a given situation:

● Importance of different elements of the marketing mix in influencing consumer decisions in given
circumstances

● Recommend and justify an appropriate marketing strategy in given circumstances

3.4.2 The nature and impact of legal controls related to marketing:

● Impact of legal controls on marketing strategy, e.g. misleading promotion, faulty and dangerous goods

3.4.3 The opportunities and problems of entering new foreign markets:

● Growth potential of new markets in other countries

● Problems of entering foreign markets, e.g. cultural differences and lack of knowledge

● Benefits and limitations of methods to overcome such problems, e.g. joint ventures, licensing
Marketing strategy
● A “marketing strategy” is a plan to combine the right combination of the four elements of the
marketing mix for a product or service to achieve a particular marketing objective(s).

● Appropriate strategy will depend on the size of the market and the number and size of competitors.

● Marketing objectives, target market and marketing budget need to be identified when
recommending and justifying a marketing strategy in given circumstances
Importance of the marketing mix in
influencing consumer decisions
Legal controls on marketing
● There are various laws that can affect marketing decisions on quality, price and the
contents of advertisements.

○ Laws that protect consumers from being sold faulty and dangerous goods

○ Laws that prevent the firms from using misleading information in advertising

■ Example: Volkswagen falsely advertised environmentally friendly diesel cars

and were legally forced to pull all cars from the market

○ Laws that protect consumers from being exploited in industries where there is
little or no competition, known as “monopolising”.
Growth potential of new markets in other countries
● Opportunities – These days a large number of businesses market their products in many different
countries. Why has there been this trend towards more globalisation of business?

○ Markets in other countries might have much greater growth potential than existing markets.
Countries in different parts of the world are now developing and seeing their populations
enjoying rising incomes. This provides opportunities for entering new markets abroad.

○ Home markets might be saturated and these new markets give the chance for higher sales.

○ There is a wider choice of location to produce products and this encourages businesses to
sell as well as produce in these countries. The business will have more information about
these markets and be better placed to sell to them as well.

○ Trade barriers have been lowered in many parts of the world, making it easier and more
profitable now to enter these markets.
Growth potential of new markets in other countries
● Problems of entering foreign markets

○ Lack of knowledge – the business may not be aware of competitors or the habits
of consumers in these markets. For example, where do most people do their
shopping?

○ Cultural differences – religion or culture may mean that some products won’t sell
in another market. For example, alcohol products will not be sold in most Middle
Eastern countries.

○ Exchange rate changes – if the exchange rate is not very stable then exchange
rate changes can mean the prices of imported goods change and the products
can become too expensive to sell in the new market.
Growth potential of new markets in other countries
● Problems of entering foreign markets

○ Import restrictions – if there are tariffs or quotas on imported products then the prices
of these products may be higher than domestically produced goods – reducing sales or
profits or both.

○ Increased risk of non-payment – methods of payment may be different in these new

markets and it may be more difficult to be certain that payment for imported goods will
be made.

○ Increased transport costs – as products have to be transported over long distances

the costs of getting products to market will increase. However, there have been
benefits from using containers to transport products and the container ships are
getting larger and all this has led to reductions in transport costs.
Growth potential of new markets in other countries
● Methods to overcome the problems of entering new markets abroad:

○ Joint ventures

■ Pros:
● Allows the business to gain important local knowledge so that culture and
customs can be adapted to enable a more successful entry into the new market

● Risk of entering new markets abroad are shared between business partners

■ Cons:
● Management conflict between the two businesses

● Shared profits
Growth potential of new markets in other countries
● Methods to overcome the problems of entering new markets abroad:

○ Licensing

■ Pros:
● Products do not have to be physically transported to the new market which saves
time and transport costs

● Trade restrictions are circumvented

■ Cons:
● Quality problems caused by an inexperienced licensee could damage brand
reputation

● Licensee now has access to information about how the product is made – could
develop a better version and become a competitor.
Growth potential of new markets in other countries
● Methods to overcome the problems of entering new markets abroad:

○ International franchising

■ Pros:
● Local knowledge is used to choose the best place to locate the business

■ Cons:
● Quality problems or poor service offered by franchisees could damage brand
image

● Training and support will need to be provided by franchisor

Growth potential of new markets in other countries
● Methods to overcome the problems of entering new markets abroad:

○ Local existing brands

■ Pros:
● Common brand image for the business but it has adapted to local tastes and
culture, therefore increasing sales.

■ Cons:
● May be less successful than a new product made to meet local cultures and
market conditions

● Expensive to change packaging, promotion, and so on for each market the

product is sold in
The End.
Topic 3 - Marketing