Unit 3 – pg 1 CIE – Busienss Studies

Unit 3. Marketing
Sub topics:
A. The role of marketing
B. Niche marketing and mass marketing
C. Why markets change and how businesses respond
D. Market segmentation

This chapter talks about: the role of marketing in business. Most businesses operate in markets that are constantly
changing due to changes in consumer needs and wants, competition, regulatory environment, development in
technology. Businesses need to find out the needs and wants of consumers through market research. Business need
to use the results of the market research to have a marketing strategy to penetrate and increase the market share.
The marketing decisions involve the 4Ps of the marketing mix. Product, Price, Promotion and Place. You will also learn
about the impact of technology on the marketing mix.

A. The role of marketing

What is a market? Not just the market where goods are bought and sold.
The market for any given product, whether a good or a service, consists of all those consumers willing and able to buy
the product and all those producers willing and able to supply it, wherever they are located it.

e.g. identify and define a market for Rolls-Royce, A new soya milk product,
_______________________________________________________________________________________________

_______________________________________________________________________________________________

So, what is marketing? It is much more than just advertising or selling.

Marketing involves:
1. Identifying consumer needs and wants
 Finding out what the group of consumers need and want, the quality they want, the prices they are
willing to pay for, where and how they want to buy these products, how their wants to influenced by
different promotions and the after sales service they require.
2. Satisfying consumer needs and wants
 Goods (products) and Services to be available for consumers at the right place, at the right time and
at the right price. Businesses compete to satisfy the consumers’ requirements.
3. Anticipating changes in consumer needs and wants
 Businesses need to constantly monitor this to adapt their products/services. They can use this to
identify any gaps in the market or areas where there is nothing to satisfy the consumers’ needs and
wants
4. Creating and maintaining customer loyalty/in other words, keeping the sales momentum
 Many businesses rely on repeat sales. How to generate repeat and recurring sales is important.
Keeping existing customers and meeting their needs and understanding their habits and preferences
is important. New customers are more expensive to acquire.
5. Generating revenues and profits
 The purpose of marketing is to generate sales, which would lead to profits. Marketing is only
successful if additional revenue it generates exceeds the cost of marketing activities.
Unit 3 – pg 2 CIE – Business Studies

Product-oriented firms Market-oriented firms

Focuses on products first. Usually commodities or basic Focuses on researching whether there will be enough
items such as foodstuff (sugar, oil) and materials such market/demand for the products/services.
as steel, corn, cotton. Advertising and other promotions Usually spend a lot of money on research before they
less likely to be effective. Producers, retailers, commit on product development, production,
consumers are more likely to be interested in price, distribution and marketing.
quality and availability. These firms will probably have large marketing
e.g. departments and budgets.
e.g.

Some marketing objectives:

B. Niche marketing and mass marketing

Mass market – product/service for a very large group. Mass marketing is a strategy to target that group consumers.

e.g. ____________________________________________________________________________________

Benefits of mass marketing Limitations of mass marketing

Unit 3 – pg 3 CIE – Business Studies

Niche Market – product/service for a much smaller group. Therefore, niche marketing strategies to target the
selected group will be different to those of mass market.

Benefits of niche marketing Limitations of niche marketing

C. Why market changes and how businesses respond

Business environment is constantly changing. This means the market for goods/services are also changing over time.
Two factors affect this change, supply side and demand side. Consumer demand, spending patterns and how people
shop are always changing. Businesses need to monitor changes in market conditions and respond accordingly.

o Demand side factors – changes in consumer preferences and spending

o Supply side factors – changes in the number, prices and quality of competition and their products/services

Businesses will anticipate these changes and supply products/services to the consumer before their competitors do.
A business that fails to adapt to the changes in market will ultimately fail.

E.g. ___________________________________________________________________________________________

Draw Expanding market trend and contracting market trend.

Unit 3 – pg 4 CIE – Business Studies

Factors that affect consumer spending patterns

 The price of the product (draw demand curve)

 The price of competitors’ products

Most businesses are in competitive markets. Consumers will likely buy the cheapest products, all things being
equal/similar.

 Changes in consumer income

 Changes in population size and structure

 Changes in taste, habits and fashion

 Changes in social and cultural factors

 Seasonal changes

 Technological change

 Affect of branding, advertising and promotions

Work in groups to come up with at least 3 examples for each of the above.
Unit 3 – pg 5 CIE – Business Studies

The competitive environment

A competitive market is one where many businesses are going after/looking to serve the same consumers, in other
words fighting for the same market. In these circumstances, the market becomes crowded with suppliers looking to
satisfy/supply the needs of the same consumers. Competition is good for consumers. They always benefit when
businesses compete. e.g. name a few competitive markets around the world/in Myanmar.

Signs of a competitive market

In a competitive market, businesses compete on features of marketing mix: Price, Product, Promotions, Place.
 Several firms produce similar but differentiated products.
 Innovation in product, design, technology/features and production to out compete rivals.
 Price cutting/changes, discounts happen often.
 Market share of firms changes all the time.
 New firms enter the market, causing those who are resistant to change to fail.
 High marketing costs and product development costs.
 Competition will increase in a market where there are fat profit margins to be gained.
 New entrants to the market with a distinctive competitive advantage. E.g. developing economies with
cheaper labour.
 Availability of new technologies, making it easier to compete.
 E-commerce and information availability to consumers.

Why businesses compete?

 To increase market share/ customer base.
 To increase sales / revenue.
 To enhance their image.
 To maximize their profits.
 Ultimately to survive.

How do they compete?

 Price competition – e.g. cutting prices, offering discounts, free delivery, special offers, buy one get one free,
buy one get a second item 50% off, buy 4 get 1 free. 50% sale discount, 40% off membership fees for this
month. E.g.

 Non-price competition – quality, after sales service, packaging, product design, perceived image,
advertising, how the product makes you feel, branding. E.g.

Competition drives down profit for businesses.

Unit 3 – pg 6 CIE – Business Studies

When faced with competition/ changing consumer spending patterns, what do businesses do?

 Product development
Do your market research to identify the needs/wants of the consumers and don’t forget they are changing. Use this
info in your product development. With the products that the consumers need/want, the business will remain
competitive.

 Improve efficiency
Efficient use of resources will help business reduce costs. This reduced production cost can be passed onto the
consumers which hopefully will help the business gain customers/ increase demand and sales. In a very competitive
market, price may be the only factor that customers use to choose a product.

 Increase promotion
Increased advertising, branding, promotion will increase consumers’ awareness of the business products and
services. When businesses are faced with more competition, this is how they would react to entice customers to buy
their products instead of the competition. See above section on how businesses promote?

 Look for new markets

Sometimes, this is the only way or the easiest next alternative for the business. Consumer spending patterns may
change so much, or the level of competition becomes too great in a market. In those cases, businesses can look
elsewhere for markets where competition is less fierce, and consumers are more likely to buy the product/ services.

Role of government in markets & affects on competition

Competition in a market can be influenced by the government.

 Anti-competition laws
 Deregulation – removal of government controls, leveling the playing field among the players in the market
 Privatization
 Provide assistance to SMEs.

E.g.

Competition forces businesses to become more efficient. When faced with competition, they cut costs, increase
productivity in order to survive and grow.
Unit 3 – pg 7 CIE – Business Studies

Market Segmentation

Main limitation with mass marketing is that it may not give individual consumers exactly the product that they want.
Market segmentation allows businesses to produce products that meets the needs of different groups of consumers.

Market segmentation (def): Grouping together consumers who have similar characteristics, preferences and buying
habits.

How markets can be segmented

 Geographic segmentation
- Segmentation according to the regions in a country, country, parts of the world
 Demographic segmentation
- Gender, Age, Income, Social (socio-economic) class, ethnic background, family size
 Lifestyle segmentation
- Personality, beliefs, hobbies, health consciousness, education, how they spend free time.

Benefits of segmentation

 Segmented market of a mass market can be a niche market. Small firms that may not be able to compete in
a mass market might be able to compete here.
 Marketing is more effective.
 Marketing strategies can be developed to better target each segment. This leads to increase sales and
ultimately more profits.
 Businesses can adapt the products/services to meet the needs of the consumers for each segment and
therefore increase sales. E.g. Tesco everyday value VS Tesco finest. Mercedes C class VS Toyota Vios.
 Gaps in the market can be identified more easily through segmentation of consumers who may have
specialized needs.
 Possibility of charging higher prices for similar products in one segment than the other. Known as price
discrimination. E.g. air travel. Economy vs. First or business class fares.

Have you tried to put a Facebook advert?

Unit 3 – pg 8 CIE – Business Studies

Market Research

Market research (def): the collection and analysis of data about consumers’ preferences, spending patterns and
other market conditions. Market research is used to identify customer preferences and spending patterns,
competitive threats from rival producers and how they are changing. In other words, market research gives a
business information about:
 Its customers
 Its competitors
 Its market.

Now, think about what a market research report should contain and discuss in your own groups.

Information gathered from market research can be used to help a business to:
 Identify consumer needs, tastes and preferences. This reduces the risk when developing and launching new
products because the product has been designed and produced based on the market research information
provided by potential consumers. example of this_____________________________________________
 Information on consumers’ like and dislike about their products
 Discover the current and future the size of the market for the product/service
 Decide on the best promotion, packaging and distribution methods for its products
 Identify the main competitors and what is special about their products, their USPs, the strengths and
weaknesses of their products/service offering. This info can be used in product development to your
advantage.
 Once Product related decisions are made, decide on how to price the product, promote the product and
how best to distribute the product to consumers.
 Explain the reason for the sales of its current products
 Predict how the demand for its products may change in the future with the changes in consumers tastes and
fashion.

AR! Market-oriented Business. They will always use market research to figure out before they design/produce their
products/services and set the marketing strategies.
Benefit of market-oriented business using market research to make business decisions:
- Reduces the risk of new products/services and the business itself from failing as data from market research
would be used which identifies consumer needs.
- Products that meet the needs of consumers are likely to last longer in the market than products which have
been produced with a product-oriented approach. This leads to higher sales and profits.

Quantitative data (def): Statistics, numbers, prices, values. Numerical info. Quantity related -> Quantitative.
Qualitative data (def): written or verbal info/responses to questions that express consumers’ opinions, judgements,
feelings, reactions. Quality related -> Qualitative. E.g. What does this product make you feel?
Product oriented firm (def): firm decides on and focuses on what products to produce and then tries to find buyers
for that product.
Primary research (def): the collection of first-hand data for the specific needs of the firm. First hand data means field
research.
Secondary research (def): the collection of data from second hand sources. Desk based research using data from
existing sources.
Unit 3 – pg 9 CIE – Business Studies

AR! How is market research used in business?

Primary research (or field research)

Methods of
primary
research

Focus groups /
Consumer
Consumer Observation Test market
surveys
Panels

Interviews

Postal surveys

Online surveys

Telephone
surverys

Consumer surverys
One of the most common methods to use for primary market research. Questionnaire that is carefully designed is
used. Could involve surveying quantitative data as well as for qualitative data.

Advantages of interviews and surveys Disadvantages of interviews and surveys

+ Better communication for face to face interviews. - Customers may not be willing to take part.
+ Interviewer can also read the expressions from - Could be expensive to get correct and substantial
those being interviewed and discard any dishonest data and if response rates are poor.
ones and record qualitative data. - Time consuming.
+ Wide range of consumers can be targeted for - Poorly designed questionnaires could be
information gathering. misleading or misunderstood.
- In the case of face to face interviews, interviewers
must be neutral and not to mislead.

Postal and online surveys

Lower cost compared to face to face options.
Either postal or online questionnaires could be regarded as junk mail and ignored.
Could be some bias as only people who are really interested will bother doing it.

Online surveys could be used more effectively as you might be able to collect data of those who did the survey.
Quicker to get results compiled and computed if you are using an online survey service.
Unit 3 – pg 10 CIE – Business Studies

Focus groups / Consumer panels

Usually this research method is used to get feedback from consumer groups. For e.g. manufacturer of consumer
products such as hand soap or new flavor of coffee. These consumer groups will discuss/ give feedback about
product characteristics, packaging, branding, advertisements.
e.g. _________________________________________________

Advantages focused groups / consumer panels Disadvantages focus groups / consumer panels
+ Useful as qualitative data can be collected.  Time consuming and not easy to set up.
+ Good way of collecting a range of opinions.  Need to give goodies or freebies for their
+ Group together similar demographic consumers participation.
 Participating members being influenced by other
member’s opinions.

Observation
Behaviour of consumers secretly observed and recorded by market researchers.
Usually in shopping malls and supermarkets. Consumer behaviours are observed. For e.g. footfall numbers during
various times of day, pricing of competitors, how people choose various similar items from supermarket shelves.
e.g. favourite restaurant in a food court, best-selling soft drink brand

Test marketing / Field trials

Test marketing is a good way to test the water by offering a limited quantity to carefully selected area of the market.
The feedback of the consumers are used to make changes to the products as well as marketing mix before the
product is launched to the entire market.
Limited damage if there are problems with the test marketing.
e.g._________________________________________________

Advantages observation / trials Disadvantages observation / trials

+ Quantitative data on consumer behaviour can be  Time consuming
collected.  Could be expensive to conduct depending on a
+ Good feedback on the products. Use that info to few variables such as how long and wide is the
your advantage. research period
+ Data on how patterns change over time  No opportunity to ask the consumers reasons for
+ Observing on what consumers do is more accurate why they did something by observing
than answers by them on a questionnaire  Consumers in one region may behave differently
+ Should a trial fail, limited damage to others

Above are all examples of Primary research.

Do activity 3.8 on page 206. Design a market research questionnaire for your group’s company. You are planning to
build a new hotel in Yangon.
Unit 3 – pg 11 CIE – Business Studies

Secondary research (or desk research)

Internet
e.g. stock
market

Business
Government
records /
publications
company
/ statistics
accounts
Sources of
secondary
research
data
Newspaper
Trade
and
associations
magazines

Market
reserach
agencies

Internet
A lot of info can be found from the internet, made easier by search engines such as Google and Bing. However, care
must be taken to ensure that data taken off internet is reliable, up to date and is still relevant.

Trade associations
Trade associations such as Myanmar Garment Manufacturers’ Association or Myanmar Edible Oil Entrepreneurs
Association or Chamber of Commerce such as UMFCCI have a lot of information on their member businesses.
Information from these sources are often reliable, relevant and up to date. They are usually a good starting point to
do research. Some government departments that are pro-trade and pro-business can also be a good source for
business related economic data.

Government publications / Statistics

Government Ministry or Departments websites. Myanmar Government Website. (https://myanmar.gov.mm/)
MMSIS – Myanmar Statistical Information Service (http://www.mmsis.gov.mm/)
CSO – Central Statistical Organisation (https://www.csostat.gov.mm/)

Market research agencies / Market research report

Information from others’ market research report can be used for information collection and research purposes. As
data is taken from a published source, this would be considered as secondary data.

Business records / Company accounts

Many businesses and companies have websites and many information about the business can be found there.
Companies that are transparent have an edge over other companies on transparency.

Stock market / public disclosure documents

Public companies have to disclose many documents to the general public. This would include regular updates on
their business and financial performance, business outlook, management updates. All of this info are available
nowadays on the internet.
Unit 3 – pg 12 CIE – Business Studies

Sampling
Involves choosing who you approach for survey. It is impossible to interview the entire target market and hence
sampling. Data is gathered from a sample group that mimics the entire market segment. Sample group should include
various different people that would be representative of the larger group.

Random sampling: easy to understand. Picking consumers/participants at random. This reduces bias but could
include people who may not be relevant to the survey.

Quota sampling: means choosing consumers according to their characteristics such as age, sex, income. E.g.
interview females between 25- 35 years of age with average monthly income of more than 1 million kyats.

Sampling bias:

Questionnaire bias:

Response bias:

Analysing, Using and Presenting data

Tables, Bar charts, Pie Charts, Pictograms, Line graphs. Do activity 3.11 on page 215.
Unit 3 – pg 13 CIE – Business Studies

Marketing Mix: Product

Generally referred to as 4Ps of marketing. Marketing mix consists of key decisions that business must make to
market the products effectively.

Key elements of marketing mix:

 The product itself

 Price of the product
 Place or places where the product is sold
 Promotions used to make the product aware

In order to sell, make sure it is the right product, at the right price, with the right promotion in the right place.

Successful products are bought again and again by the consumers. This helps to build the brand and develop
customer loyalty and brand loyalty.

Products must satisfy consumer needs/wants. It needs to be fit for purpose and cost of production must be cheaper
than the selling price/what consumers are willing to pay. Otherwise, no matter what price, place and promotion is
done, it will not sell in the market.

Below are some examples of the most successful products in the history.

Figure 1. Rubik's cube. Since 1980s, Figure 2. Toyota Corolla. First introduced in 1966, it is the
350 million Rubik's cubes have been sold, best selling car of all cars modles. Over 40 million units have
been sold.
making it the bestselling toy of all time.

Figure 4. Apple iPhone X. Apple has sold more

Figure 3. Sony Play Station 4. First introduced in than a billion iPhones from 2007-2017, making
1995, it is the best selling game console of all time it the most successful product in the history of
at 344 million units to date. mankind.

Examples of some of the more recent product failures

https://www.businessinsider.com/biggest-product-flops-in-history-2016-12
Unit 3 – pg 14 CIE – Business Studies

Brands
A brand is the name given by the business to its product or range of products and services.
It allows the business to distinguish its products from those of competitors.
Creating, developing a brand image increases a business’s sales because:
 Consumers recognize their product more easily versus lesser known brands (brand awareness)
e.g. ____________________________________________________________________________________
 Branding allows the business to price high for their products (brand loyalty) because consumers may
associate the brand with quality, trust, durability, status, or other desirable qualities they want.
e.g. ____________________________________________________________________________________
 Easier to launch new products under the same brand because consumers are already familiar with the brand
and trust the brand. Hence, more likely to try the brand than unknown brand. (brand recognition)
e.g. ____________________________________________________________________________________

Cost and benefits of developing new products

Businesses operate in competitive markets. Ability to develop new products is a requirement for business to survive
and thrive in this environment. To continually meet the needs/wants/demands of the consumers, companies may
have to:
 Develop new products
 Modify and update existing products to meet the changing taste and preferences
 Change existing product to enter new markets

Developing new products can be expensive and time consuming. No guaranteed success even with market research
properly done. Should the product fail after launch, it will cost the company money as well as loss of reputation.
Sometimes, competitors will try to improve their products to offer a better proposition/product rather than creating
a completely new rival product. See page 223 for some examples of new products.

Costs of new product development Benefits of new product development

Market research needs to be carried out to identify In fast changing markets, usually with high tech
consumer needs. Can be expensive. products, a business will not survive unless it meets the
needs and wants of consumers
Development of a new product often require large Developing new product before competitors will bring
capital expenditure (capex). competitive advantages. Business may be able to
charge higher price, higher sales and higher profits.
No guarantee that new product will be a success. Some New products developed for new markets increase
products never make it to market or are taken off the potential sales, revenue and profit.
market quickly.
If product development is financed by borrowing and Developing new products extends the existing product
the product fails to become a success, this could offering and hence spread the risk. Careful planning and
threaten the survival of business. testing will reduce risk of new products developed from
being a failure.
Development of new products might help to achieve
growth and bring benefits from economies of scale.
Unit 3 – pg 15 CIE – Business Studies

The world’s top 10 brands – 2018

Figure 5. The world's most valuable brands - 2018 by Forbes.com

Unit 3 – pg 16 CIE – Business Studies

Packaging
Packaging in its simplest form is:
 to protect the product during transportation and storage,
 to provide information about the product
 to help consumers recognize the product

More and more people are increasingly aware of the environmental impacts caused by packaging materials mainly
plastics. Key consideration here is the cost of packaging. If it is too high, it could make the product itself
uncompetitively priced. That’s why plastic works so well because it is cheap, very light, durable and waterproof.

Poorly designed and poorly packaged product may influence consumers to think that the product is not very good.
Well designed, imaginative packaging using quality materials may send the message to consumers that the product is
of good quality. E.g. ______________________________________________________________________________

Figure 6. A Zara leather wallet and its packaging Figure 7. A Gucci leather wallet and its packaging

Read page 221 and points related to packaging.

Product Lifecycle
All products have a life cycle. Below are the stages during a life cycle. Knowing this would allow you to plan your
marketing strategy better to maintain/enhance sales. Different products have different product life cycle graphs.
See chart on page 225. Draw one below.
Unit 3 – pg 17 CIE – Business Studies

Stage 1: Introductory.
Product is introduced to market. Prices may be kept low to drive sales or marketing campaigns conducted to
introduce product to the market. Sales are low at this stage.

Stage 2: Growth.
Product is now better known in the market. Sales are increasing. Product usually start to earn profit during this
stage.

Stage 3: Maturity.
Growth in sales have slowed significantly. But are not falling either. Most profitable stage of a product’s life cycle.
Brand is now better known.
Stage 4: Decline
Due to new products, other competitor’s promotions, sales will start to decline. Some companies may choose to
leave the market at this stage.

Stage 5: Extension
Extension strategies are used to give the product a new life. Marketing is used to entice consumers to buy the new
product. Successful extension strategies will start even before the Product’s decline.

Extension strategies – to prolong the profit

 Finding a new market for the product, e.g. overseas
 Change the product packaging to make it more appealing and give the product a fresh image
 Increase promotional activities and advertising
 Find new sales channel, e.g. local distributor or shops or online
 Longer warranties, fast and free delivery
 Introduce line extensions, e.g. vanilla latte to ordinary latte. New flavor of ice cream.

Can you think of 3 examples of extension strategies that you can relate to?
______________________________________________________________________________________________

______________________________________________________________________________________________

Draw the product life cycle diagram for a product that has used the extension strategy.
Unit 3 – pg 18 CIE – Business Studies

Marketing decisions and product lifecycle:

Introduction Growth Maturity Decline
Product Only a basic model of Changes made to Extension strategies Product and packaging
product. product based on used to keep the are not altered.
consumer feedback product in this stage.
Most profitable stage.
Price Prices might be lower than Brand image helps to Price will remain Price might be
competitor to attract create customer loyalty. similar to competitors. reduced to maintain
consumers. OR if the product Price if low originally can But if original price is sales or sell off the
has no competition, it may be be increased to similar high due to the remaining stock
priced high. competitors’ products. uniqueness of the before withdrawing
product, then it may product from the
need to be decreased market.
as competitors catch
up and introduce
similar products.
Promotion High activity, such as Promotional activity still Promotional activities Only promotional
advertising to create product high to continue are aimed at activity is to advertise
awareness and inform persuade consumers to reminding consumers lower price or
consumers that product is buy again and to attract that product is still promotions aimed to
available in market. new consumers. available and how it is clear the remaining
different from stock.
competitors. As part of
the extension strategy,
promotional activities
may be used for a
short time.
Place Limited availability in outlets. Product is more widely Product is now The product is only
available which help available through a available in profitable
increase sales. wide distribution outlets.
network.

Some key words:

Brand image: general impression of a product held by consumers.
Branding: the process of creating distinctive and durable perceptions of a product in the minds of consumers.
Reverse engineering: taking apart product of competitors to discover their strengths and weakness and how they
were made.
Product benchmarking: comparing your product with those of the rival firms in order to improve on them.
Product portfolio: range of different products produced and marketed by a business at a given time.

Worksheet questions. AR!

 Why do business develop new products?
 Explain the role of packaging to a product. How can it affect the sale of a product?
 Draw a product lifecycle and explain the different stages.
 Give a few examples of extension strategies for a product’s lifecycle.
Unit 3 – pg 19 CIE – Business Studies

Marketing Mix: Price

How influential is the price in your buying decision?

Very important part of the marketing mix and often is the

most influential part in creating consumer demand for a
product.

Factors to consider when setting prices:

 Market conditions (mass or niche, target market; new or existing product?)
 Unique product (use price skimming strategy)
 Perceived branding (how well established is the brand in the market)
 The strength of consumer demand
 The degree of competition (what firms and products are competing in the market?)
 The costs of production (what are the costs of making and supplying to the market?)
 The marketing mix (where is the product in the product cycle and what are the objectives for other Ps?)

If you set a price too high, customers will not want to buy the product.
If you set a price too low, you may not be able to cover all your costs and result in a financial loss in the business.
Scenarios:
 Product quality and everything else being equal or similar, consumers will choose the product with the
lowest price. E.g. ____________________________________
 Consumers know that a product has superior quality, but they may not be able to afford the higher quality,
higher price product. E.g. __________________________________
 Customers buy a product because of its high price! This gives status to the customer. E.g. _______________
 Price of a product is also dependent on the supply. If there is a food shortage due to bad harvest, price of
basic food items such as rice, flour will rise. This is due to scarcity.

Price: the amount paid by the customer to the supplier when buying a product or service.
Unit 3 – pg 20 CIE – Business Studies

Activity:
Select a market where there are at least six similar suppliers in the chosen market and explain why there are six
similar products. (e.g. cars, mobile phones, fast food, computers).
Explain why there is a difference between the product with the highest price and the lowest price.

Pricing Strategies
 Cost based pricing
Cost–plus pricing: based on the cost of making the product or buying the product for resale to the final consumer
and adding a certain mark up or a % for profit.
 Mark up pricing. E.g. add 25% to the cost of each product
 Full cost pricing. E.g. write formula here ____________________________________________________________

Activity:
Paulo owns a grocery store and he buy all the goods from the wholesale market. He mark up 30% in all his products.
If he paid 30p for an apple, how much would he sell the apple for? ____________________________________

Simon runs a shoe store. He buys all the shoes from the factory in China. He adopts a mark up of 40%. He spends
5000$ on marketing, 3000$ on the running costs for his store. He buys 2000 shoes a month from China at an average
cost of 20$. Use cost plus pricing to determine his average selling price. __________________________________

_____________________________________________________________________________________________

_____________________________________________________________________________________________

 Demand based pricing

Market/ Price skimming
Setting a high price for a new product which is unique or different from everyone in the market. This is done to
recover the development costs for the new product. Business yield a high profit margin from this market/price
skimming.
e.g. Tesla roadster (picture below) was first released in 2008 cost 100,000 USD. Only 2500 units were sold
worldwide.
e.g. Samsung galaxy fold (released in 2019) is the first folding touch screen phone introduced to the market. It costs
$2000 at launch.
Unit 3 – pg 21 CIE – Business Studies

Penetrative pricing
Usually used for new products at launch to encourage consumers to try the product. Price is set at a lower level from
similar products already on the market. Once the product have achieved a certain following of customers, prices are
increased to a similar level in the market.
e.g. Android vs. Apple. Broadband companies (Myanmar NET, 5BB Broadband)

Competitive pricing
Used for new and existing products in markets where competition is intense. Pricing your products competitively.
Similar to those products by large companies which have an established brand and consumer following. By setting
similar prices to those established products, consumers will believe your products to be of similar quality. Smaller
firms may use this method.
e.g. E-Lan detergent, Head & Shoulders shampoo, Good Morning bread

Promotional pricing
Setting low prices for a short period of time to boost sales. Used for various reasons such as renewing consumer
interest in a product after sales decline, selling off old or unwanted stock to make way for new stock.
e.g. End of season SALE. Buy one, get one FREE. 30% discount on every second purchase. 15% off ALL items.
- Loss leader pricing usually seen in supermarkets where there is uneven distribution on prices of products
depending on their popularity. Household items may be priced very competitively to attract shoppers for perceived
value who will hopefully buy other higher priced items.

Dynamic pricing
Businesses charging different and flexible prices to different market segments depending on the demand and other
condition.
e.g. Air travel, Rail travel, Concert or Sport tickets.

Destructive pricing
Deep price cuts, usually below cost, in order to destroy competition. If a business is successful at removing
competition, it can raise prices again in future to recover for losses.
e.g. Amazon Mom vs Diapers.com

Price wars
Happens in highly competitive markets where businesses cut prices in order to win consumer base. Existing
businesses does this to kill of new entrants to the market. In these circumstances, consumers always benefit.
Businesses always suffer as they lower prices in a price war to outcompete each other on price. To avoid price wars,
businesses should focus on non-price competition such as product design and promotions.
e.g. Broadband market in Myanmar. U Narr Auk and Irrawaddy Flotilla company.

Do Activity 3.16 pg 232. Activity 3.17 on pg 235. See table overleaf.

What method of pricing would be most useful for the following business situations?
 Launch of a new yoghurt by a leading manufacturer
 Launch of a new electric car in your country.
 The opening of a new pizza takeaway in your area.
 Room rate for a new luxury hotel in Yangon.
 A local supermarket which has seen a fall in sales due to a competitor opening a new store nearby.
Unit 3 – pg 22 CIE – Business Studies

Price Elasticity of Demand

Price Elasticity of demand is the responsiveness of consumer demand to a small change in price. Measures by how
much demand (sales) for a product changes when there is a change in its price. Businesses want to know this to
adjust pricing strategy and predict the subsequent change in consumer demand.

Draw a demand curve. It shows the relationship between price and demand.

Price elastic demand: small increase in price causes demand and total sales revenue to fall significantly. Percentage
change in demand is greater than the percentage change in price. Demand is said to be price elastic. This is when:
- there are many close substitutes for the product. E.g. toothpaste.
- it is an expensive item. E.g. luxury hand bag.
- consumers don’t need to buy it regularly. Hence, they have time to look for alternatives when price goes up.

______________________________________________________________________________________________

Price inelastic demand: small increase in price causes only a minor decrease in demand and total sales of a product.
Percentage change in demand is less than the percentage change in price. Demand is said to be price inelastic. This is
when:
 Product has few substitutes, such as traveling by rail during peak hours.
 It is a low cost item, such as a box of matches.
 It is a necessity that consumers need to purchase regularly, such as basic food items and electricity.

______________________________________________________________________________________________

Change in price Price elasticity of demand Effect on revenue

Increase price Price inelastic demand

Decrease price Price inelastic demand

Increase price Price elastic demand

Decrease price Price elastic demand

Unit 3 – pg 23 CIE – Business Studies

Do Activity 3.18 on pg 237, 3.19 on page 238. Do exam prep 3.3 on page 238.

Marketing Mix: Place

Place (marketing mix) : Distribution channels

 Distribution: how to get the goods from the producer to consumer. It involves getting the right products to
the right consumers, in the right place in the right quantities and at the right time, as quickly and cheaply as
possible.
 Place where consumers will be able to buy the product/service. E.g. shopping mall.

Diagram showing different channels of distribution

Producers Producers Producers Producers

Agent

Wholesaler Wholesaler

Retailer Retailer Retailer

Consumers Consumers Consumers Consumers

_______________________________________________________________________________________________

_______________________________________________________________________________________________

Identify the middle man in the above diagram. Question: What’s the difference between a retailer and a wholesaler?
_______________________________________________________________________________________________
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Business aim: find the best (easiest, cheapest, fastest) way to get to the consumers.
Factors to consider when choosing a distribution method.

 Cost: transportation cost/ distribution costs need to be considered. This is the cost of getting the products to
the consumers. Deliver your own products using your own delivery vans or get another company to do it?

 Product nature: based on the nature of the product, they will require certain conditions such as storage and
time critical delivery for perishable products.

 The market: are your consumers spread over a large geographical area? If overseas, distribution through
agents may be a good idea. It would make things more efficient.

Do activity 3.20 on pg 245. Read adv and disadv summary (supplement page).
Unit 3 – pg 24 CIE – Business Studies

Activity
Goods4U Food Plc is a large manufacture of breakfast cereals in Country Y.
Compton is a sole trader in Country Y. He owns a poultry farm. His chickens produce an average of 500 eggs per
week.
Sunshine Holidays Ltd. supplies overseas package holidays to consumers in Country Y.

1. One of the above businesses uses only direct selling to get its products to the final consumer.
a. Which business is this most likely to be and why?
b. Explain one advantage to the owners of this business of using direct selling.
c. If business grows, do you think direct selling will still be the best channel of distribution for its products?
2. Another of the businesses above uses the longest channel of distribution for its products.
a. Which business is this likely to be and why?
b. Explain one advantage and one disadvantage to the management of the business of using this channel of
distribution.
3. The other business uses two different channels of distribution.
a. Identify this business.
b. Outline which two channels of distribution you think it uses.
c. Explain the benefits to the business of using more than one channel of distribution.

Question:
1. What is the main advantage to producers of direct selling?
2. The profit per unit is less when a producer uses middlemen to distribute its products to the final consumer.
However, the total profit is almost always higher. What is the explanation for this?

_______________________________________________________________________________________________

_______________________________________________________________________________________________

_______________________________________________________________________________________________

_______________________________________________________________________________________________

_______________________________________________________________________________________________

_______________________________________________________________________________________________

_______________________________________________________________________________________________

Definitions:
Channel of distribution: How a product gets from the producer to the final consumer.
Wholesaler: a business that buys in bulk from producers and then sells them to retailers.
Retailer: shops that sell goods and services to the final consumer.
Middlemen: intermediaries in the channel of distribution. E.g. wholesaler, retailer.
Direct selling: product is sold by the producer directly to the final consumer without any middlemen.
Unit 3 – pg 25 CIE – Business Studies

Marketing Mix: Promotion

Promotion (def): Marketing activities used to communicate with customers and potential customers to inform and
persuade them to buy a business’s products.
Aim: the aim of promotion is to make and increase sales.
Promotion achieve this aim by
 Attracting the attention of consumers by making them aware of the product or reminding consumers that
the product is still on the market
 Persuading consumers to buy the product
 Explaining how a product is better than competitors’ products
 Creating and developing brand image
 Encouraging wholesalers and retailers to stock the product
 Reassuring consumers, following a problem with the product

Above the line promotions – basically all the typical advertising methods.

Involves marketing communications using mass advertising media such as TV, radio, newspapers, magazines, movies,
billboards, leaflets, internet and mobile phones to increase sales. Read page 251 & 252.

Advertising: involves communicating with the consumer through aforementioned media channels. Main
promotional method used by businesses.
Informative advertising: Giving information to potential consumers about product. Will include price, place info,
what product can be used for. Usually with new product launches. See e.g in the insert sheet.
Persuasive advertising: Most common type of advertising. Businesses use this to convince consumers that they need
their products and that their products are better than competitors’.

Below the line promotions

Below the line promotions are all of the other types and forms of promotion such as product placement,
endorsements by celebrities and social influencers, public relations, direct mail, personal selling, sales incentives
such as free gifts and competitions.

Methods of
Promotion

Sales
Advertising Personal selling Direct mail Sponsorships
promotion

Most common methods of promotion

Sales promotion: incentives used to encourage short-term increases in sales or repeat purchases. E.g. buy another
item and get % discounts, cash back, buy 3 get 1 free, Loyalty card.
Personal selling: sales staff communicate directly with the consumer to give information, persuade and achieve a
sale and develop long term relationship between the business and the consumer. E.g. watch salesmen, Real Estate
agents, Hair dressers.
Unit 3 – pg 26 CIE – Business Studies

Direct mail: mailing leaflets, letters, catalogues direct to customers. However, a lot of these are viewed as junk mail
or spam. Effectiveness questionable nowadays.

Public Relations (PR):

 Donations
 Sponsorships such as Barclays Bank sponsoring the Premier League and calling it Barclays Premier League.
 Events
 Press releases

Marketing budget

Marketing budget: the amount of money made available by business to conduct marketing activities for a period of
time.
Marketing communication can be expensive and need careful budgeting.
New businesses will usually have to spend more money to establish a brand name/ recognition, market share.
Spending or throwing money after marketing does not guarantee success. E.g. all the longyi advertisements on TV,
incense stick TV adverts.

Marketing budget usually consists of:

 Market research costs
 Design, preparation and analysis
 Conduct interviews and surveys
 Test marketing / Free samples to get feedback
 Subscription to get access to secondary data
 General expenses:
 Advertising agency fees
 Salaries for marketing team (manager to executives)
 Office space, furniture, computers and equipment
 Travel costs
 Marketing communication costs:
 Printing and mailing costs
 Development and hosting of website
 Brochure designing costs
 Advertising costs (TV, radio, online, print media and others)
 Below the line promotion costs (PR, sponsorships, events)
 Price reduction / Sale incentives
Unit 3 – pg 27 CIE – Business Studies

Technology and the marketing mix

E-commerce: the use of the internet and other technologies to market and sell goods/services to consumers. E-
commerce sites such as Amazon, Alibaba allows shops to be open 24/7 and many of the purchasing processes
automated through the use of technology and internet.
Digital Marketing:
 Social networking sites (e.g. Facebook, Instagram) allow businesses to market and interact with different
groups of consumers and reach to very specific groups very effectively. Nowadays this is known better as
digital marketing.
 Online blogs (e.g. Nay Chi Oo, social media influencers, video reviews) are all different ways and methods to
reach your products/brands to consumers. Promotions can be collaborated with these Place (digital
marketing channels).
 Coupons, Location based marketing

Opportunities of e- Threats of e-commerce Opportunities of e- Threats of e-commerce to

commerce to businesses for businesses commerce to consumers consumers
Increased market – Increased competition – Convenience – consumers Fraud – a website may
business is able to sell consumers can buy can order their products take the money and not
goods/services to products from around the from the comfort of their deliver the goods.
consumers from around world and not just their homes 24/7.
the world local market.
Reduced costs – staffing, Unfamiliarity – consumers Wider choice – consumers Hacking – consumer’s
rent, utility bills for are unlikely to buy are now able to buy goods personal details such as
running a shop are saved. products from new which they would not name, emails, addresses,
businesses they don’t have access to if they are credit card information
know. to use their local shops. might be stolen.
Better information – Lower prices – No personal service – no
website can provide competition worldwide face to face interaction
information of reduces prices. between seller and
goods/services to consumer.
potential consumers.
24/7 availability – Better information – Returning items – may be
websites allow consumers consumers are able to inconvenient to return
to browse or shop for 24 read information about goods which are below
hours a day, 7 days a goods/services from the the standard or are not
week, without closing websites of different what the seller claims to
time. businesses. They can also be when they sell or even
read reviews of different clothing that doesn’t fit.
products/services from
consumers who have
already made the
purchase.
Unit 3 – pg 28 CIE – Business Studies

Marketing Strategy

Marketing strategy: a plan to achieve the marketing objectives using a given level of resources. Marketing strategy is
somewhat restricted by the marketing budget.
A business should decide on a marketing strategy ONLY after careful market research and analysis.
SWOT analysis could be used to assess the competition and market opportunities.

Marketing strategies should also be adaptable to the changes in market conditions and as products mature.
Common objectives of setting marketing strategy.
 Grow sales of existing product.
+ getting existing consumers to buy more.
+ getting new consumers to buy.
+ selling existing products to new markets including overseas.
 Grow sales with new products.
+ introduce updated versions or refinements to existing products.
+ introduce products that are extensions of current products.
+ introduce new and innovative products that are not previously marketed.
 Grow market shares. This can usually only be done by taking over/away other people’s market share
by taking sales away from competitor. Usually an expensive strategy and involves making aggressive
marketing tactics.
 Go into niche market. To obtain a commanding position in a segment of an overall market.
 Maintain status quo. This strategy aims to maintain current market position. More applicable if the
product in maturity or competition is heating up.
 Exit a market. Sometimes necessary if sales have fallen and there are many alternatives. One
possible solution is to sell it to another business.

Do activity 14.2, pg 191 from CIE Coursebook.

Consider this: pick a business and try to do marketing strategy for that particular business.
Unit 3 – pg 29 CIE – Business Studies

Legal controls related to marketing

Common legal controls on businesses to protect consumers. Without such protection, some businesses will exploit
consumers to make more profit.

 Protect consumers from faulty and dangerous goods

e.g. Smoking kills, Alcoholic advertisements being banned, unsafe foodstuff being sold in schools, unsafe
food dyes, dangerous chemicals used for manufacturing such as cyanide for gold processing.
 Prevent businesses from using misleading advertising
e.g. Businesses selling goods that are not what they claimed to be, goods that are below weight, not
according to specification, products that doesn’t do the job it claimed to be or poor quality, misleading
advertisements with hidden fees where the true costs are hidden, preparing and selling food in
unhygienic conditions.
 Protect consumers from being exploited in industries where there is little or no competition.
e.g. jade mining, human trafficking, government control over airline industry, telecoms.

Impact of legal controls on marketing strategy

- Costs may increase as products must meet the requirements set by the government controls/ consumer
protection laws.
- Antitrust or competition laws
- Businesses may be fined, and advertisements withdrawn if found to breach the laws.
- Businesses may be required to issue statements of apology in newspapers for breaching any laws.

Read Frontier article on ‘The Victims of Baby Formula’. https://frontiermyanmar.net/en/the-victims-of-baby-formula

Opportunities and Problems of entering markets abroad

Opportunity: Growth potential, new markets, bigger sales, more profits.

Problems of entering foreign markets:

 Differences in language & culture
 Economic differences (the cost of doing business, differences in wages, selling goods, transportation,
disposable income levels of the consumers in the foreign market)
 Social differences (population structure, age, importance of family, role of women)
 Differences in legal controls to protect consumers
 Lack of market knowledge (business doesn’t know the market and the consumers doesn’t know the
business)
 Exchange rate risks
 Risk of being swindled and non-payment (China in the 1980s)

Ways to reduce risk of international expansion

- Joint ventures (e.g. Unilever EAC, Mitsubishi Elevators Myanmar)
- Franchise (Feel in Bangkok, KFC in Myanmar, Lotteria in Myanmar)
- Takeovers/Acquisitions and Mergers (e.g. Coca Cola acquiring Max Cola, Laser toothpaste,
- Outsourcing a part of the business process
Unit 3 – pg 30 CIE – Business Studies

Unit 3 – Active Recall Questions

1. Identify and explain two reasons why a business might want to expand into other countries.
2. Identify and explain two problems a business might face when expanding into other countries.
3. Why are legal controls on the activities of business important to consumers?
4. Identify and explain two legal controls placed on business activity in your country.
5. What is meant by the term ‘marketing strategy’?
6. Why does a marketing strategy need SMAT objectives?
7. What is meant by the term e-commerce?
8. ‘’The benefits of e-commerce outweight the costs”. Do you agree? Justify your answer.
9. What are the main aims of promotion?
10. What is meant by the term ‘sales of promotion’?
11. Explain how a business might assess the effectiveness of its marketing budget.
12. What is the main advantage to producers of direct selling?
13. The profit per unit is less when a producer uses middlemen to distribute its products to the final consumer.
However, the total profit earned is almost always higher. What is the explanation for this?
14. Why is price important to both the producer and the consumer?
15. Why is it unlikely that a business will be able to use a market skimming strategy in the long run?
16. Why is the price elasticity of demand not the same for all products?
17. Why do business develop new products?
18. How can packaging affect the sales of a product?
19. What are the four stages of the product life cycle?
20. Explain why a business may use extension strategies.
21. Identify and explain one benefit of presenting market research data as a bar chart.
22. The market for a product was divided into 15 groups and a sample taken from each group. Why would it not
be appropriate to use a pie chart to present the market research data of these 15 groups?
23. Explain how and why a manufacturer of ice-cream products should be ‘market-oriented’.
24. Using examples explain the difference between qualitative market research methods and quantitative
market research methods.
25. Identify and explain three reasons why the results of market research may not be useful.
26. Identify two benefits fo market segmentation to businesses.
27. Identify and explain two methods of market segmentation.
28. What is the difference between a niche market and a mass market?
29. Identify two limitations of niche-marketing.
30. Identify two benefits of mass marketing.
31. Why can consumers’ need change?
32. Identify and explain two reasons for increased competition in some markets.
33. Why do businesses need to respond to changing patterns of consumer spending and competition?
34. What is meant by the term ‘marketing’?
35. Why is consumer loyalty important to business?