Marketing

4.1 The role of marketing

4.1.0 The big picture

Marketing is defined as 'The management process responsible for identifying, anticipating and
satisfying customer requirements profitably'. To put this in simple terms, marketing has two
functions: finding out customer needs and fulfilling those needs.

4.1.1 Relationship with other business functions

The human resources function: marketing and human resources functions will be to determine
whether the business has the right quantity and quality of staff to meet its marketing objectives.

The finance and accounts function: An ongoing dialogue with the finance department is
essential if effective marketing objectives and strategies are to be created.

The operations management function: Market research will tell the operations management
department where to focus its research and development. In turn, these innovations will be passed
back to the marketing department so that appropriate campaigns can be carried out. Finally, sales
forecasts will have to be passed on to the operations management functions so that they can ensure
there is sufficient capacity to meet the forecast demand.

4.1.2 The market

In Business Management, the term 'market' has three distinctly different meanings:
 A place where buyers and sellers come together or interact.
 A location.
 A type of product.

A place where buyers and sellers come together: It is a place where sellers of goods gather in an
attempt to sell their goods to local consumers.

Certain products will be sold only to certain markets, and location is important for the image of
the product and the company. Sometimes products are changed according to location and the
culture of the region in order to satisfy customers.

We might consider differentiate market by product type – for example, we refer to the market for
mobile phones or soft drinks. These broad definitions can also be made narrower. Being able to
understand what is happening to markets defined in this way is important for a business because it
can find out whether there is growth, how competitive the market is or whether there are new
entrants to the market.

Market characteristics:
Once the scope of a market has been defined, the characteristics of the market can then be
analyzed for its attractiveness. An attractive market is one that has many potential customers and
relatively weak competition.
The product life cycle:
The product life cycle is a model that is designed to help product
managers make strategic decisions concerning a product’s
marketing mix. As successful products move through the stages,
different elements of the marketing mix will grow in
importance. The product life cycle is split into five sections:
research and development, introduction, growth, maturity and
decline.

The Boston Consulting Group matrix:

Market share is the percentage of total market
sales controlled by a particular product.
Market growth is the how fast the total demand
for a product is expanding or contracting within
one year.
Cash cows (high market share, low market
growth) are successful products in mature
markets. They enjoy high sales revenue from an
established customer base. Customer loyalty is
likely to be high. Therefore, less money is
needed for marketing. Promotion is likely to focus on replacement products and maintaining
loyalty. Cash cows produce a significant positive cash flow.
Dogs (low market share, low market growth) have little market share in low growth markets.
These products may be at the end of their life cycle, or perhaps they are niche products competing
in mature markets. Apple's MacBook are an example of a dog product. Depending upon the year,
about 7% of all laptops sold will be made by Apple. Dogs have a small positive cash flow.
Stars (high market share, high market growth)
Stars have a significant proportion of fast-growing markets. Revenues should be equally as fast
growing. Netflix can be considered a star product, as it's the market leader in the rapidly growing
streaming market. This type of product also requires significant investment to sustain growth.
Marketing will focus on attracting new customers and establishing a brand image. Profitability
will depend on how much its revenue is reinvested in future growth. Certainly, high growth firms
will be spending heavily to keep expanding their operations and sales. Therefore, it is possible for
a star to have a negative cash flow.
Problem child (low market share, high market growth) have small market share but operate in
high growth markets. These products are often recently launched in response to the rapidly
growing revenues of competitors. In the streaming market, Amazon's Prime or Hulu can be
considered in this category. If they are to gain market share, considerable investment will be
required. Therefore, they are likely to have a negative cash flow.
The Boston Consulting Group (BCG) matrix is a tool to help companies with multiple products
decide their marketing strategies. Products are placed on the matrix depending on two variables:
market share and market growth. Markets with high market growth may be seen as attractive as
new customers will not yet be brand loyal and therefore could be easily targeted.
STEEPLE analysis:
STEEPLE analysis looks at the external factors
that could affect a company's future success.
Anything that is out of a company's direct control
can be considered an external factor. The model
breaks these down into seven groups: social,
technological, economic, ethical, political, legal
and environmental.

SWOT analysis:
'SWOT' stands for strengths,
weaknesses, opportunities and threats.
Strengths and weaknesses are internal
factors that could help or hinder future
growth. Examples include a loyal
customer base (a strength) or a lack of
retained profits (a weakness).
Opportunities and threats are both
external factors. These would have been
identified from a STEEPLE analysis.
Ansoff matrix:
When making the decision to
develop a new product for a new
market, the firm must recognize that
it is choosing a riskier strategy. A lot
of planning will be necessary, and
the marketing department needs to
carry out a significant amount of
research to make sure that the
product is well suited to its chosen
audience. Risks can pay off, of
course, but it is a bad idea to start a
project without doing the work beforehand.

Marketing goods and services:

"Marketing is the management process responsible for identifying, anticipating and satisfying
customer requirements profitably." Marketing between goods and services are slightly different.
4.1.3 Market orientation vs. product orientation
Product orientation: Companies are considered to have a product orientation if they priorities
research and development over market research.

Advantages Disadvantages

Products are innovative and can apply for There is no guarantee that the product will be
patents. sold to the market.

It will be a USP for a business. It is expensive to conduct research and

development.

The product will be better quality. There may be other opportunities that are
missed.

There is likely to be investment in Branding is narrow.

technology at the firm.

There is little threat from competition. There is a risk of the product becoming obsolete.

There may be economies of scale.

Market orientation: When companies adopt a market-oriented approach, the needs of the
customer are put above everything else.

Advantages Disadvantages

Products are likely to conform to customers' needs Products are less likely to be unique.
and get sold.

It results in more focused production and strategy. There is more competition.

The quality of marketing activities is improved It becomes important to get market

because market needs are understood. research right.

Repeat custom is likely, which improves long-term There are challenges in quickly
profitability. responding to market changes.

There is a risk of underestimating the

customer or market.
4.1.4 Social marketing
Social marketing aims to influence behavior in a way that benefits society as a whole.

Differences between social and commercial marketing:

The fundamental difference between social and commercial marketing lies in the purpose of the
campaign. The aim of commercial marketing is to meet customers' needs. The aim of social
marketing, on the other hand, is to change people's behavior.

Commercial marketing
Typical marketing objectives are explored in more details in a later section. Commercial
marketing would usually focus on:
• increased market share
• brand recognition
• creating customer loyalty
Advertising campaigns are expensive and so should be successful in the above aims. A good
campaign can be pivotal in gaining more sales.
Social marketing
Social marketing campaigns focus on areas such as:
• protecting the environment
• promoting public health
• reducing anti-social behavior
• raising awareness of an individual issue
• public vaccinations
• smoking, alcohol and drug misuse

4.1.5 Market share and market leadership

Market share: It measures the value of a single company's sales compared with the sales of all
businesses in a market.
Market share = Product sales / Total market sales × 100 = _______ %

Market leadership: It is the product or brand with the highest market share. The leader will be
able to gain a lot of recognition for its products because the relevant market will already be aware
of them and know what they represent. There are also advantages for the business' productivity
and strategy.
The advantages for the leader include:
• ease of access to channels of distribution
• brand recognition
• economies of scale
• price leadership

4.1.6 Marketing objectives

An objective is a goal that is set for part or the whole of the business. Objectives can be corporate,
divisional or departmental.
For-profit organizations’ marketing objectives:

General objective Example of a SMART objective

Market share To gain a 25% market share within 2 years.

Sales targets To achieve $5 million in sales revenue this year.

Growth targets For sales revenue to grow by 10% each year.

Brand recognition At least 50% of our target market can name our brand when
surveyed.

Customer loyalty At least 15% of sales come from repeat customers each year.

Customer 95% of all customers respond positively in customer satisfaction

satisfaction surveys.

Product development To launch an updated product every 2 years.

Non-profit organizations’ marketing objectives:

General objective Example of a SMART objective

Fund raising To raise at least $100,000 during the next campaign.

Improve awareness At least 45% of the general public show awareness of the
issue when surveyed.

Reduction in the use of harmful A 10% drop in the sales of the product, by the end of the
products year.

Political action For 150,000 people to lobby their local politician within
six months.

4.1.7 Evolution of marketing strategies

To be effective, marketing strategies have to take into account the external environment. Managers
must continually carry out market research so they understand the changing conditions of their
markets. There are factors that may cause companies to update their marketing strategies.

Changing customer preferences: Influences such as fashion, technology and changing incomes
mean that the demands of consumers rarely remain constant. Therefore, it is essential that
companies continually carry out market research to ensure they keep up with the largest trends.

Innovation: Annually, product-oriented companies spend billions developing new and updated
products. This has led to the shortening of product life cycles. As a result, successful products
operating in mature markets can quickly find their sales tumbling and the product obsolete.
Ethical considerations: Different countries and consumer groups may also have different ethical
norms. By upholding high ethical standards, companies can develop a unique selling point, which
in turn can lead to improved customer loyalty and higher sales revenues. Ethical marketing
opportunities include:
Selling 'green' products
Treating workers fairly
Ethical treatment of suppliers
Sourcing from ethical suppliers

Cultural difference: Multinational companies target markets that consist of groups from all over
the world.

4.2 Marketing planning

4.2.1 The elements of a marketing plan
The main elements of the marketing plan include:
1. The marketing objective: This will provide direction for the marketing function. If
achieved, the marketing objective should help the company achieve its overall corporate
objective.
2. The marketing budgets: A budget is the amount of money that has been allocated to a task.
Objective based – an estimate of how much will be needed to achieve the objective.
sales based – a fixed percentage of the firm's sales revenue is allocated to marketing.
Incremental based – last year's marketing budget is used as a guide, with a percentage increase to
cover inflation.
3. Segmentation and the target market: Market segmentation involves breaking consumers
into groups that have similar characteristics and needs. Market segmentation allows a
company to analyze the most profitable market segments to target. Once target markets have
been identified, marketing strategies can then be developed in an attempt to fulfil those needs
directly.
4. Market research: It can be defined as gathering information about consumers' needs, tastes,
habits and preferences to aid marketing decisions.
5. Marketing strategies: They are long-term actions that aim to achieve the marketing
objective.
6. Control tools: They allow managers to assess whether marketing strategies have been
successful.

4.2.2 The four Ps of the marketing mix

The marketing mix contains the four decisions that must be taken if a company is going to
achieve its marketing objective. These are the elements that will enable the company to deliver a
product to the market, or rather to get the product sold. These four decisions relate to:
1. Product
2. Price
3. Promotion
4. Place
Product decisions: products can be broken down into two overlapping categories: goods and
services. Goods are tangible products, such as clothing or cars. Product decisions involve all
physical aspects of the good, ranging from the design and features of the good itself, down to its
packaging. Additional choices such as color ranges, sizes and optional extras will also be
considered. Services are intangible products, such as search engines or entertainment. Service
decisions will focus on the total customer experience. A cinema, for example, will examine the
cleanliness of the theatre and the comfort of the seating.

Pricing decisions: Pricing strategies are more complex than simply working out the maximum
price consumers are willing to pay. There are a number of internal and external factors that need to
be considered. External factors include the number of competitors, relative market shares
and stage of the product life cycle. Internal considerations will be production costs and
marketing objectives.

Promotion decisions: Promotion breaks down into two areas: above-the-line promotion and
below-the-line promotion. Advertising via media such as television or newspapers is
classified as above the line. Tactics such as personal selling and sales promotions are
classified as below the line. The choice of promotion will depend on factors such as which media
the target market uses, promotional objectives and the marketing budget.

Place decisions: Place decisions concern the distribution of the product: where it is sold and
the route it takes from the producer to consumers. Intermediaries such as retailers and
wholesalers can widen distribution, but also demand a slice of the profits.

Factors that influence the design of a marketing mix:

Internal factors External factors

Marketing budget Level of competition

Current brand image Stage of the product life cycle

Marketing objectives Results of STEEPLE analysis

Skills of current staff

Unique selling point (USP)

4.2.3 The effectiveness of a marketing mix in achieving marketing objectives

Adjusting the marketing mix to achieve the marketing objective:
For-profit organizations’ marketing objectives:

Marketing mix
element Example of adaptation

Product Research to confirm that the product satisfies customers. Improve the
 Marketing mix
element Example of adaptation

product quality if necessary.

Price Reduce prices; possibly use a price penetration strategy.

Promotion Increase promotional activity. Possibly use below-the-line promotion, such

as personal selling and sales promotions. Above-the-line promotions may
also be increased if the budget is available.

Place Use multiple distribution channels to reach a wide target market.

Marketing mix Example of adaptation

element

Product Use market research to ensure the product meets customers' requirements.

Price Use price discrimination to offer loyal customers discounts.

Promotion Offer an after-sales service and loyalty schemes.

Place Use direct distribution to help ensure customers have a positive experience.
If intermediaries are used, ensure they are regularly inspected for levels of
customer service.

Not-for-profit organizations’ marketing objectives:

Marketing mix
element Example of adaptation

Product n/a

Price Set up easy-to-use regular payment plans so customers can make donations
via direct debit.

Promotion Online below-the-line promotion, such as the use of social media and
memes, can quickly create a social buzz. Guerilla marketing may also be
effective.

Place Direct marketing (direct distribution) can help to target consumers

efficiently.
4.2.4 Market segmentation
Geographic segmentation involves dividing consumers according to their location.
Demographic segmentation involves dividing consumers according to characteristics such as
age, gender and occupation.
Psychographic segmentation divides the population according to lifestyle and personal interests.

4.2.5 Selecting a target market

Target market is the specific group of customers at which a firm aims its product(s).

Factors affecting which segments to target

The first question managers ask themselves when deciding on a market segment is: 'Will we be
able to gain a profitable market share?' The answer to this will depend on a number of factors,
which include:
• The level of competition
• The marketing budgets
• The marketing objective
• The current brand images

4.2.6 Niche markets and mass markets

A niche market is a small specific subsection of a larger market, focused on providing a
particular product or service or satisfying the needs and wants of a small market segment.

Mass-market products are undifferentiated. The same marketing mix is used to target all
consumers. Target markets are likely to be large and may even include an entire population. If
companies are successful, mass-market products can lead to incredibly high quantities of sales.

Advantages of niche marketing Advantages of mass marketing

There is a low level of competition, There is a large target market, leading to high
leading to high potential profit margins. sales figures.

The small target market may lead to low Producing a product on a large scale can lead to
levels of competition. large economies of scale, which lower the average
cost of production.

It is attractive for new companies that do As only a single marketing mix is needed to target
not have the resources to compete in a global audience, the marketing costs per unit are
mass markets. relatively low.
4.2.7 Product positioning maps
Companies rarely compete against all other brands within a market. Instead, they differentiate
themselves, positioning their brand to meet the needs of their selected target market.

Strategic groups are companies that are very similar and target the same consumers.

Product positioning maps can also be used to identify potential new opportunities. If a
company believes the needs of a particular market segment are not being fulfilled, it may attempt
to reposition itself to meet their needs.
4.2.8 Product differentiation and unique selling points
A unique selling point (USP) is a feature of a product that makes the product stand out from its
competition.

4.4 Market research

4.4.1 Why and how organizations carry out market research
Market research, or marketing research, allows companies to gain up-to-date and relevant
information on their customers, competitors and other external stakeholders who may affect
them. According to UK-based market research expert Ray Poynter:
The four main uses of market research, by commercial organizations, in descending order of
importance (in terms of spend) are:
Monitoring performance, for example ad tracking, brand awareness, viewing figures, usage,
customer satisfaction, mystery and shopping.
Finding things out, for example the size of a market, current usage patterns, and market
opportunities.
To test ideas and products, for example ad testing, pack testing, and pricing research.
To help create new products, ideas, campaigns etc.

Market orientated companies are likely to base their strategies on the results of their market
research. Areas of focus for market research include:
 Product-based research: New products and prototypes may be tested on potential
customers. This will allow companies to gain an understanding of customers' reactions before
a new product is released onto the market.
 Price-based research: In highly competitive markets, new companies may be forced to use a
price follower pricing strategy. If this is the case, companies must regularly research the
market to find out the pricing strategies of competitors.
 Promotion-based research: It is important for companies to understand which media their
target market accesses. If a company selects the wrong media and customers do not see or
react to the message then money has been wasted. It may be possible to purchase customer
profiles using secondary market research, which can help with media selection.
 Place-based research: Selecting the right channel of distribution can be the difference
between success and failure.
How organizations carry out market research:

4.4.2 Methods of primary market research

Primary research is the creation of new information. Companies carry out primary market
research when they need specific up-to-date information.
Firms will need to approach individuals in enough numbers to give a reasonable sample size. The
more people approached or who give responses, the more reliable the results will be. The company
will need to be selective about who it includes in its sample choice. Their sample will need to be
representative of the population they intend to sell to.

The methods they will use will depend on research objectives. Budgetary and time constraints will
also be considered. The main methods of primary market research are:
• Surveys
• Interviews
• Focus groups
• Observations

Surveys attempt to gain data from large numbers of respondents in a relatively short time frame.
They are well suited for gathering quantitative rather than qualitative data. Surveys come in many
forms; these include:
Online surveys, such as Google Forms, sent out by email, or website evaluations.
Surveys by phone, asking customers to rate the service they receive from a telephone call center.
Face-to-face questionnaires, which may take place on high streets or shopping malls.
 Benefits Limitations

• Fast to design and implement. • Respondents may not take the

• Large amounts of quantitative data research seriously, lowering the
can be gathered. validity of the data.
• They are cost-effective, especially • Limited use for qualitative research.
online. • The possibility of researcher bias.
• The anonymity of some of the types of • It is difficult to plan for all the
surveys brings about more truthful various answers that participants
answers. might give. The questionnaire must
• With the development of survey give respondents plenty of
software, statistical techniques can be opportunity to share their views, but
used to analyze data and come to a are necessarily rigid.
conclusion. It can also determine
validity, reliability, and statistical
significance of the responses.

Personal interviews are a lengthier surveying method and allow researchers to gain large amounts
of qualitative data. These could be conducted face-to-face, over the telephone or even via Skype.
Interviews allow researchers to ask follow-up questions so clarification of a key idea or opinion
can be sought. It is normal for interviews to be recorded so that they can be replayed and
transcribed at a later date. Interviews may take a large amount of time to complete, so as a result,
interviewees may need to be offered a financial incentive to take part.

Benefits Limitations

• Large amounts of qualitative data can be • Takes a huge amount of time

gathered. to arrange and analyses.
• Additional detailed information can be • Respondents may need to be
 Benefits Limitations

gathered using snowball sampling (see later paid to take part.

section). • The possibility of researcher
• Useful for gathering expert opinion. bias.
• They are expensive.

A focus group is an interview conducted with a group of individuals, usually with similar
characteristics.

Benefits Limitations

• Large amounts of qualitative data can be • Takes a significant amount of

gathered. time to arrange and analyze.
• Conversation can flow freely, rather than • Respondents may need to be
being responses to fixed questions. More paid to take part.
information might be gleaned this way. • Limited use for qualitative
• Individuals have the opportunity to ask research.
questions. • The possibility of researcher
• Researchers can seek clarification. bias.
• Potential changes to the marketing mix can
be pre-tested on members of the target
market.

Observations do not suffer from the shortcomings of focus groups and interviews. Respondents
often do not even know they are taking part in research, meaning their natural reactions can be
studied.

Benefits Limitations

• Observations are usually covert, • Customers may not like being spied upon,
so people can be observed which would damage their brand loyalty.
without bias. • Sometimes the results are difficult to
• Websites can automatically explain, for example, why customers don't
record users’ movements like the product or promotional activity.
without any additional costs.

4.4.3 Methods of secondary market research

• Market analysis reports.
• Academic journals.
• Government publications.
• Media articles.

If companies want in-depth market research information of a particular market, they have a
choice. They can either commission a market research agency to carry out a new study, or they can
purchase a market analysis report that has already been published.

Benefits Limitations

• Detailed information about • The cost may be too much for smaller
every aspect of a market. companies.
• May be invaluable for • Could be somewhat dated, unless recently
gaining an overview of a new published.
market. • As competitors have the option to purchase
the same report, little competitive advantage
can be gained.

Scholarly journals contain the very latest research and academic theory which has been
published by academics from the world’s leading universities.

Benefits Limitations

• Contain the very latest • Could be of limited use for many day-to-
contemporary academic ideas. day business decisions.
• Information is highly likely to be • A subscription fee is payable for most
reliable. Business Management titles.
• Potentially useful when planning
corporate strategy.

Governments from all over the world regularly publish data covering topics such as population
statistics and economics forecasts. This data can normally be seen as reliable and up-to-date. In
some cases, such as census data, government reports are the only way to access this information.
In addition, this data will typically contain important information about the economic
environment, such as economic growth, the unemployment rate, inflation, sectoral information, or
income data. Governments normally release their data for free and update it regularly.

Benefits Limitations

• Normally reliable data. • The quality of the data may depend upon the
• The only way to access wealth of the country producing it. Very poor
some economic and countries will have limited resources to dedicate
demographic data. to data collection.
• Most data are available
free of charge.

The websites and apps of newspapers and news channels are updated practically every minute.
Perhaps only social media contains more up-to-the-minute information. Reliable titles such as The
New York Times or The Guardian provide access to their content for free. Many sites also offer
alert services, whereby breaking news about a selected company or topic can be emailed directly
to a user. In addition to this, their large archives are well indexed, making searching for old stories
easy.

Benefits Limitations

• Up-to-the-minute • Many newspapers and most magazines require a

information available. subscription to access their content.
• Media sites have • Many newspapers have a political bias, which
searchable databases. may affect the way they report a story
• Some sites are free to
access.

Advantages Disadvantages

Primary • Direct information about • Expensive

research customers' tastes
• Enough time needs to be
• Can discover reasons for dedicated
purchases being made
• Training is required for staff
• The information that is
gathered by the business • The sample might be
would be unique, thus the unrepresentative
business can gain an
advantage over other
businesses.

Secondary • Inexpensive • Must rely on methods of

research others
• Consists of wider
macroeconomic information • Does not inform about
customer preferences
• Can access market reports
• Might not exist for certain
fields, industries, or problems
• Gathered with perhaps
different objectives in mind,
and this depends on who
gathered the information and
what its purpose was.
4.4.4 Ethical considerations of market research
Leading questions:
The most important part in this area is that there should be no 'attempt to influence the
respondent’s opinion or attitude through direct or indirect attempts, including the framing
or order of questions.' It can be very easy to affect how people respond to a survey, by asking
leading questions, as the video below points out.

Voluntary involvement:
Respondents should know that they are taking part in research, and have the right to opt out if they
want. When you phone a company's call center, there is often a recorded message that says
something like, 'calls may be recorded for monitoring and training purposes.'

Vulnerable groups:
Researchers should be careful when conducting research with vulnerable groups, such as children
or those who are mentally ill. In the case of children, it is likely that researchers will need to gain a
parent's permission before undertaking the research.

Purpose of use:
Information obtained should only be used for its stated purpose. For example, if a person answers
some questions about their health, this information should not be sold to medical insurance
companies.

Reporting the results:

The results of market research must be reported accurately.

4.4.5 Qualitative and quantitative research

Qualitative research:
In qualitative research, the key question asked is 'Why?' Researchers ask questions like 'Why
would someone select a particular brand over its rivals?' or 'Why do they like or dislike a new
advertising campaign?'
Quantitative research:
Quantitative research focuses on collecting large amounts of data. Surveys and observations allow
for easy collection of quantitative data. It is normal for surveys to ask closed or multiple choice
questions so that their results can easily be analyzed. Secondary research methods such as
government population statistics, or market analysis reports are also excellent sources of
quantitative data.

4.4.6 Methods of sampling

A sample is a sub-group within a population that can be used to conduct research on, rather than
researching the entire population.
Firms have to decide who they will select to be part of their research. There are various sampling
methods they could use; these include:
• Convenience sampling: The sample is just made up of whatever people are willing to
partake in the research.
 • Random sampling: In random sampling everyone in the population has the same chance
of being selected to take part in the research.
• Cluster sampling: In cluster sampling, researchers break up their population into different
geographic clusters. Once this have been done, they will visit each location and attempt to
talk to people within that area.
• Snowballing sampling: A researcher will set up an interview with their first respondent.
At the end of the interview, they will ask the interviewee to recommend another person
they should speak to, in order to gain further insight.
• Stratified sampling: Both use strata (the plural of stratum), based on previous knowledge
about the population, to break their population up into smaller groups.
• Quota sampling: If he was using quota sampling, he would simply talk to the first five
people he saw.

Sampling
Method School Example Benefits Limitations

Convenience Stand in the dining room and Very fast, little Low chance of
survey the first 100 people planning needed. representing the entire
you see. school. Data is likely to
be skewed depending
upon who is
interviewed.

Random The names of all students in Still relatively There is no guarantee

the school are put into a simple to select the sample will be
random name generator. The the sample. representative.
first 100 names are
interviewed.

Cluster Students visit a small number Data can be Skewed data still
of classrooms and interview gathered quickly. possible as there is no
everyone in those rooms. Classes can be guarantee that the make-
selected to up of each class
represent a range represents the school.
of year groups.

Snowballing One person is interviewed; at Useful if people Friendship groups are

the end of the interview they with specific likely to lead to skewed
are asked to recommend a knowledge are results.
friend to be interviewed next. the target It will take a long time
population. to arrange all of the
interviews.

Quota Students are divided up into The views of all Characteristics of the
different year groups. sub-groups are population must be
 Sampling
Method School Example Benefits Limitations

Convenience sampling is gathered. This known, so strata can be

then used to select should improve developed.
respondents from within each research The use of convenience
year group. accuracy. sampling will lower
generalizability.

Stratified Students are divided up into This is the most Characteristics of the
different year groups. accurate of all population must be
Random sampling is then sampling known, so strata can be
used to select respondents methods. developed.
from within each year group. More time-consuming
than quota sampling.

4.4.7 Results from data collection

Method Example Possible Uses

Bar graph To compare.

Histogram To display frequency.

Line graph To show changes over time.

 Method Example Possible Uses

Pictogram To display frequency.

Pie chart To show percentages.

Scatter plot To show correlation.

Table To display all data collected.

4.5 The four P's (product, price, promotion, place)

4.5.1 The product life cycle

The product life cycle is a model designed to help product managers make strategic decisions
concerning a product’s marketing mix. As successful products move through the stages, different
elements of the marketing mix will grow in importance. The product life cycle is split into five
sections:
• Research and development
• Introduction
• Growth
 • Maturity
• Decline

A fad is a product that is sold in high volumes for a short period of time and then quickly loses
popularity.
4.5.2 Product: extension strategies

 Finding a new target market.

 Product update.

4.5.3 Product: the Boston Consulting Group (BCG) matrix

 Cash cows (high market share, low market growth).

 Dogs (low market share, low market growth).
 Stars (high market share, high market growth).
 Problem child (low market share, high market growth)
Product strategies:
 Milk your cows: reinvest the surpluses from cash cows into other products.
 Help your stars shine: stars offer the best chance of future profitability. Therefore, they
should be the primary recipients of investment.
 Support your problem child: if problem child products are to have any chance of success,
they will require considerable investment. However, this should not come at the expense of
stars. Therefore, cash-strapped firms may decide to cut their losses and let these products fail.
 Keep your dog as a pet: as long as they remain profitable, dogs should be maintained in the
product portfolio, as the surpluses can be invested in the company's stars and problem
children. However, if dogs begin to experience a negative cash flow, they should be allowed
to die.

4.5.4 Product: branding and packaging

A brand is a name, symbol or design that is used to identify a product or company.

The importance of branding:

 Awareness: A strong brand will be instantly recognizable by consumers.
 Development: A strong brand will allow a company to launch secondary products with
relative ease.
 Loyalty: Brand-loyal customers require very little persuasion to try or to purchase new
products.
 Value: Brand-loyal customers are more likely to make repeat purchases and are less sensitive
to price changes.

The limitations of branding:

Developing a brand takes time and money. If companies attempt to use their brands to move into
unrelated markets, consumers may not value the link.

4.5.5 Price
Pricing for a new product

Pricing
strategy Definition Benefits Limitations

Skimming Launching a product with It promotes a high- Many customers may be

an initial high price to quality image. put off by high prices.
give an image of Revenue is maximized
exclusivity and prestige. from the 'Innovator'
market segment.

Penetration Launching a product with Market share and Low profit margins are
an initial low price to customer loyalty may likely during the
encourage consumers to be quickly established. initial low price.
try it and hopefully Customers may not
develop brand loyalty. accept the price rise.
Pricing for all the products:

Pricing strategy Definition Benefits Limitations

Cost-plus Calculating the total cost It is simple, and It is inward facing,

(mark-up) of a product, then adding a easy to ensure all and takes no account
percentage for the profit costs are covered. of the market.
margin.

Price leader Adopting a price that is It gives an image of It is only suitable for
slightly above rivals to high quality. Higher market leaders.
give an image of prestige. profit margins can Price-sensitive
be enjoyed. customers will be
lost.

Price follower Setting a price that is It is market oriented It takes no account of

(competitive similar to that of rivals. and should ensure cost, and profit
pricing) potential customers margins may
are not lost because therefore be low.
of a high price.

Psychological Setting a price in a way It is simple to It is easy to copy.

that seems attractive to implement. Therefore, any
consumers. advantage may
quickly be eroded by
rivals who follow the
same strategy.

Predatory Temporarily setting an Once competition is It is illegal in many

extremely low price to eliminated, higher countries.
undercut rivals, forcing prices and higher
them to leave the market. market share can
lead to increased
profits.

Price Charging different groups Profits are It is not possible in

discrimination of consumers different maximised from all markets. Some
(dynamic prices for the same good each consumer customers may feel
pricing) or service. segment. cheated.

Loss leader Stores significantly reduce It can lead to a large It is only possible for
the price of a single item boost in sales multi-product
below cost price to attract revenue. retailers.
customers, expecting
customers to buy other
 Pricing strategy Definition Benefits Limitations

products while they are

shopping.

4.5.6 Promotion: Above-the-line

Above-the-line promotion is the use of paid-for media such as TV, radio and the internet.

Method Benefits Limitations Examples

Television The use of sound and video This is by far the most Mass-market products
can enhance impact. There expensive medium. produced by
is potential for a global Services such as companies with large
audience. Netflix have led to a marketing budgets.
falling audience for
advertisers.

Online It is highly targeted. Some technical Potentially any

Clicking on an knowledge is needed. businesses. 'Pay-per-
advertisement can take a Some customer groups click' services make
customer directly to the do not use the internet online advertising
seller's webpage. regularly. affordable for most
 Method Benefits Limitations Examples

businesses.

Newspapers Large amounts of A lack of sound and Products that segment

information, such as movement can reduce by socio-economic
addresses and prices, can impact. Newspaper class. Advertisements
be communicated. readership is in a that need to
Customers can refer to the global decline. communicate a
advertisement multiple significant amount of
times. Some segmentation information.
by socio-economic group is
available.

Magazines Readership is highly Lack of movement Segmented and niche-

segmented. A single and sound can reduce marketed products.
magazine could be read by impact.
multiple people within the
same target market.

Radio This is the only medium There is a low impact Local companies with
that reaches consumers because of a lack of small marketing
while they are engaged in visual images. budgets.
activities such as driving or Customers may not
housework. Local radio pay attention to
stations allow for commercials as they
geographic segmentation. are concentrating on
other things.

Outdoor Reach can range from a Non-digital billboards Potentially any

national campaign down to lack moving images, consumer product can
a single billboard. Well- so may lack impact. be advertised with
placed advertisements can outdoor promotions.
be seen by thousands of
people.

4.5.7 Promotion: Below-the-line

This refers to any promotion that is not carried out in the mass media. Generally, below-the-line
promotion has fewer costs, so may be more attractive to smaller businesses. The main areas of
below-the-line promotion are:
• Direct marketing
• Sales promotion
• Loyalty cards
• After-sales service
 • Public relations
• Merchandising
• Direct mailing
• Packaging
• Exhibitions and trade fairs

Method Benefits Limitations Examples

Direct Written text allows It can annoy potential Local fast-food

marketing large amounts of customers. Many takeaways. Political
information to be people will not even campaigns. Websites
communicated. see the messages that track their users'
because they have purchases.
'spam' filters.

Sales promotion This has a high impact The message may be Fast-moving
as the customer is lost if rivals have consumer goods.
targeted at the point of similar offers. Price Companies that wish
sale. reductions lead to to sell old stock.
lower profit margins.

Loyalty cards Repeat purchases are Price reductions and Consumer retailers in
encouraged. Data on free products lead to mature markets.
customer spending lower profit margins.
habits can be gathered.

After-sales Customer satisfaction Additional employees Technical products

service can be increased, which will be needed to such as cars and
could lead to greater provide the after-sales computer systems.
loyalty. service.

Public relations This improves brand Employee training is Large companies that
 Method Benefits Limitations Examples

reputation through required for crisis produce unethical

positive actions. management skills and goods such as petrol
keeping positive and tobacco.
community relations.

Merchandising Products gain a wider It is costly to produce Universities.

brand awareness when and may not guarantee Companies looking
merchandise is used. additional sales. to gain recognition
for their name.

Direct mailing This is useful for It can annoy people. Estate agents, local
targeting local potential cleaners, plumbers or
customers. builders.

Packaging No additional The packaging has to Companies with

marketing efforts are attract enough attractive, luxury or
needed. attention. quirky logos that
would readily catch
the eye.

Exhibitions and There are many Many rivals will also Wedding fairs,
trade shows potential customers in be in attendance. caravan companies.
one place.

4.5.8 Promotion: The impact of technology and guerrilla marketing

Technology has increased the amount of information a company has about its customers. This
allows for powerful targeted messages to be sent to a company's target market. The main areas of
promotion that have been affected by technology include:
• Loyalty cards
• Online advertising
• Direct marketing
• Viral marketing
• Social media marketing
• Social networking

4.5.9 Place (distribution)

Essentially, producers have two options: sell directly to the consumer or use an intermediary to
help with the distribution process. There are three types of intermediary a firm may use:
• Wholesalers
• Retailers
• Agents and brokers
4.8 E-commerce

4.8.1 Features of e-commerce

key features of an e-commerce business, which are:
• Global markets
• Unrepresentative groups: Not all groups of society are online yet. Older generations are
generally underrepresented. Companies that target these groups need additional selling
techniques to maximize their sales revenue.
• Increasingly mobile
• The importance of peer reviews
• Market segmentation
• The role of security

4.8.2 The effect of e-commerce on the marketing mix

 Product adaptations: E-commerce has changed a number of products for ever. Many
companies that used to sell physical products have seen their markets shrink because of
online alternatives.
 Price adaptations: E-commerce has affected pricing strategies in two very different ways:
price comparison and price discrimination.
Price comparison: The internet has made it easier for consumers to compare prices. In
industries with many close substitutes, this has forced prices down.
Price discrimination: E-commerce companies collect huge amounts of information about
their customers. This comes from a variety of sources. The most obvious are your purchase
history and any information you completed on a customer profile. In addition, many online
retailers use cookies to find out about their customers. Companies can use this information to
charge a higher price for goods they think you are likely to buy.
 Promotion adaptations: Advertisers are also attracted to online media as it allows them to
carry out psychographic segmentation. By analyzing consumers' search history and social
media profiles, they can build up detailed target market profiles.
 Place adaptations: Traditional bricks-and-mortar shops are costly to run. Extensive planning
must be carried out to ensure that the location chosen for a physical shop will generate the
necessary footfall to justify the expense.

4.8.3 Types of e-commerce

All online businesses fall into one (or more) of the following three categories, which are:
• Business to consumer
• Business to business
• Consumer to consumer
An evaluation for the company

Benefits Costs

Global markets can lead to huge sales Billions of consumers are not yet online and
revenues. cannot be targeted by e-commerce companies.

Fixed costs are low. There is limited opportunity for growth in

countries where many people do not have debit
or credit cards.

Psychographic segmentation can lead to The fear of online fraud stops many people from
targeted marketing campaigns. buying online.

Price discrimination can lead to increasing Customers cannot see or touch items online,
spend per customer. which may reduce sales.

Websites and branding can be quickly and Customer returns processes can be expensive to
relatively inexpensively updated. operate.

Global usage of the internet is expanding, Large and ongoing investment in technological
which represents significant opportunities infrastructure is needed.
for future growth.

Staff with specialist computing skills must be

recruited.

High levels of competition can lead to low-

profit margins.

Without a physical store building, brand loyalty

can prove difficult.
 Benefits Costs

There is a link to unemployment, since many

shops will close.

An evaluation for the consumer:

Benefits Limitations

E-commerce stores are open 24 hours a The consumer has to wait for physical goods to be
day. delivered.

Shopping can be done from any location. Not all consumers have the necessary skills to use
Customers do not have to travel to buy modern technology such as computers, tablets and
the goods and services they need. smartphones to shop online.

Price comparison websites make it easier Some consumers are excluded because of a lack of
to find the best value retailer. banking or telecommunications (internet)
infrastructure.

Online reviews can be used to assess There is a risk of online fraud.

quality.

Some products are available for Some consumers may be put off as they do not
immediate download or streaming. want to share their private information online.