UNIT 3

MARKETING
What is a Market?
A market is a place where parties can gather to facilitate the exchange of goods and services. The
parties involved are usually buyers and sellers. The market may be physical like a retail outlet,
where people meet face-to-face, or virtual like an online market, where there is no direct physical
contact between buyers and sellers.

Demand: The quantity of a product that consumers are willing and able to buy at a given price
in a time period

Demand varies with price – for all normal goods the quantity bought rises with a price fall and the
quantity bought falls with a price increase. This is shown by a demand curve

The level of demand for a product can vary due to a change in any of these determinants of
demand:

• Changes in consumers ’incomes

• Changes in the prices of substitute goods and complementary goods
• Changes in population size and structure
• Fashion and taste changes
• Government policies
• Advertising
Supply: The quantity of a product that firms are prepared to supply at a given price in a time
period.

Why supply increases when price increases?

• Most firms want to make a profit

• If the price of a product increases, more profit will be made on each item sold, assuming
costs don’t change
• Other firms may be encouraged to start making and selling the product, as they see the
opportunity to make a profit

This direct relationship between the quantity supplied and price can be shown on a SUPPLY
CURVE

Factors that have an influence on supply are:

1. Cost of production
2. Changes in production technology
3. Legislation and government policies
4. Weather
Equilibrium price: Market price that equates supply and demand for a product. The market is
in balance as the consumers ’willingness to pay a certain price is determined at an agreeable
level of supply for the producer.

Marketing: The management task that links the business to the customer by identifying and
meeting the needs of customers profitably – it does this by getting the right product at the right
price to the right place at the right time

Marketing involves the following functions:

• Product design
• Pricing
• Advertising
• Distribution
• Customer service
• Packaging

Marketing strategy: Long-term plan established for achieving marketing objectives.

Marketing objectives: Goals set for the marketing department to help the business achieve its
overall objectives.

Examples of marketing objectives include an increase in:

• Market share – perhaps to gain market leadership
• Total sales (value or volume – or both)
• Average number of items purchased per customer visit
• Frequency that a loyal customer shop
• Percentage of customers who are returning customers
• Number of new customers
• Customer satisfaction
• Brand identity
Coordination of marketing with other
departments

Marketing → Finance
• The finance department will use the sales forecasts of the
marketing department to help construct cash-flow forecasts and
operational budgets.

• The finance department will have to ensure that the necessary

capital is available to pay for the agreed marketing budget, for example for promotion
expenditure

Marketing → Human Resources

• The sales forecasts will be used by human resources
to help devise a workforce plan for all of the
departments likely to be affected by a new marketing
strategy, for example additional staff may be needed
in sales and production.

• Human resources will also have to ensure that the recruitment and selection of appropriately
qualified and experienced staff are undertaken to make sure there are sufficient workers to
produce and sell the increase in sales planned for by the marketing department

Marketing → operations
• Market research data will play a key role in new product development – as explained above.

• The sales forecasts will be used by the operations department to plan for the capacity
needed, the purchase of the machines that will be used and the stocks of raw materials
required for the new output level.
Market Orientation: An outward-looking approach to business that prioritises identifying the
needs and desires of consumers and creating products and services that satisfy them. Companies
that have a market orientation consider the opinions and needs of their target market as a critical
component of their research and development (R&D) for new products.

Advantages of Market Orientation

• Improvements in customer service and product support. This helps ensure customer
satisfaction remains high with the company as a whole and promotes brand loyalty and
positive word-of-mouth advertising.

• Reveal customer desires. Cost-effective or practical marketing strategies to implement. The

business then must determine how to meet customer expectations in the best way possible.

• Long-term development strategies. Options that are not cost effective today may become
quite possible down the line due to changes in technology, science, regulation or other
market conditions.

Product orientation: An inward-looking approach that focuses on making products that can
be made – or have been made for a long time – and then trying to sell them

Advantages of Product Orientation

• Fewer resources. The company focuses its resources to focus more
on internal research and development.
• Cheaper costs. Companies can save on some costs, such as market
research. They don’t spend a lot of time and resources, figuring out
what customers want.

• Unique product. Product-oriented businesses continue to innovate to produce the best

products. Indeed, even if the product is unique, it may not generate a unique selling
proposition because competitors offer similar products.
Asset led marketing is a marketing strategy that is highly suitable for larger, more successful
businesses that have established themselves in specific markets. In asset led marketing, a
company takes a look at its current position in the market and its current assets.

• What is it about the company that is

currently doing very well?

• What could be going better?

• What are the company’s best products and

services and the ones that aren’t working?

Somewhere, the hope is that you will have a strong asset. In asset led marketing, you then take
that asset and you run with it, using it in order to propel the rest of your business.

Drawbacks of Asset-led Marketing

• Missed Opportunities
• Lack of Flexibility
• Limited Customer Research
• Brand Loyalty Issues

Societal marketing: This approach considers not only the demands of consumers but also the
effects on all members of the public (society) involved in some way when firms meet these
demands.

The societal-marketing concept has the following implications:

• It is an attempt to balance three concerns: company profits, customer wants and society’s
interests.

• There may be a difference between short-term consumer wants (low prices) and long-
term consumer and social welfare (protecting the environment or paying workers
reasonable wages). Societal marketing considers long-term welfare.

• Businesses should still aim to identify consumer needs and wants and to satisfy these
more efficiently than competitors do – but in a way that enhances consumers’ and
society’s welfare.

• Using this concept could give a business a significant competitive advantage. Many
consumers prefer to purchase products from businesses that are seen to be socially
responsible.
Niche marketing: Identifying and exploiting a small segment of a larger market by developing
products to suit it

Advantages of niche marketing

• Better customer loyalty
• Focusing on the resources
• Less competition
• High-profit margins

Disadvantages of niche marketing

• Smaller market
• A higher Return on Investment isn’t guaranteed
• Low economies of scale.

• Higher average production cost

Mass marketing: Selling the same products to the whole market with no attempt to target
groups within it

Advantages of Mass marketing

• More potential customers.

• Higher economies of scale.

• High sales.

• Less prone to changing tastes

• Save on marketing costs.

Disadvantages of Mass marketing

• The company does not adapt products according to consumer requirements.
• Companies usually rely on low prices to attract as many customers as possible.
• Low switching costs for the consumers
• Highly competitive pressure.
 • High entry barriers
Positioning The Product
Firms need to identify the segments that would be most suitable for their product Ideally a firm
will want to enter a growing market, since this means more is being sold to consumers

A firm will also have to consider the competition:

• What are their strengths?
• What are their weaknesses?
• How are they different?

Market share is the percent of total sales in an industry generated by a particular company.
Market share is calculated by taking the company's sales over the period and dividing it by the
total sales of the industry over the same period the formula of market growth is

Market growth is defined as the rise in the demand for a product or a service in the market.
Usually, the market growth happens when a company is in its expansion phase. Companies try to
increase the value of the product and promote features and sometimes offer attractive pricing to
get more sales.
Market segment: A sub-group of a whole market in which consumers have similar
characteristics.

Consumer profile: A quantified picture of consumers of a firm’s products, showing proportions

of age groups, income levels, location, gender, and social class

1. Geographic segmentation: Marketing strategy used to target products or services at

people who live in, or shop at, a particular location. It works on the principle that people in
that location have similar needs, wants, and cultural considerations
• Location

• Climate

• Language

• Population

• Urban, suburban and rural

E.g., “oatcakes” are popular in Stoke-on-Trent, whilst “battered Mars Bars” are popular in the
South Birmingham area
2. Demographic segmentation refers to the categorization of the target market based on
specific variables like age, education, and gender. It is a type of market segmentation that
helps businesses to understand their consumers better and meet their needs, effectively.

3. Psychographic segmentation breaks down your customer groups into segments that
influence buying behaviors, such as: beliefs, values, lifestyle, social status, opinions and
activities.
4. Behavioral segmentation refers to a process in marketing that divides customers into
segments depending on their behavior patterns when interacting with a particular business or
website.
This considers consumer behavior patterns, including:
• What people buy
• How often people buy
• How loyal customers are to certain brand

The introduction and use of loyalty cards have made this much easier for firms track consumer
behavior.

Competitive advantage refers to factors that allow a company to produce goods or services
better or more cheaply than its rivals. These factors allow the productive entity to generate more
sales or superior margins compared to its market rivals.

A unique selling point (USP), also called a unique selling proposition, is the essence of what
makes your product or service better than competitors. In online marketing, communicating your
USP clearly and quickly is one of the keys to getting potential customers to convert on your site.
Customer relationship management (CRM): using marketing activities to establish
successful customer relationships so that existing customer loyalty can be maintained
Developing effective long-term relationships can be achieved by:

• targeted marketing – giving each customer the products and services they have
indicated – from past purchases – they most need

• customer service and support – essential to building customer loyalty, call centers
have been criticized for letting existing customers down and many businesses are now
focusing on improving these

• providing as much information to customers as possible – about product

materials/quality/features and service levels

• using social media – some CRM systems integrate social media sites like Twitter, LinkedIn
and Facebook to track and communicate with customers
 Glossary
1. Marketing Objectives: the goals set for the marketing department to help the business achieve its
overall objectives.

Example: increase company sales by 25% by 2016.

2. Marketing Strategy: long-term plan established for achieving marketing objectives.

Example: using CRM or developing the products by creating a new USP.

3. Market Orientation: an outward-looking approach basing product decision on consumer demand, as

established by market research.

Example: Facebook and Coca-Cola.

4. Product Orientation: an inward-looking approach that focuses on making products that can be made
or have been made for a long time – and then trying to sell them.

Example: Apple products.

5. Asset-led Marketing: an approach to marketing that bases strategy on the firm’s existing strengths and
assets instead of purely on what the customer wants.

Example: Cadbury used its reputation for chocolate brand reputation to extend into related products such
as desserts.

6. Societal Marketing: this approach considers not only the demands of consumers but also the effects
on all members of the public (society) involved in some way when firms meet these demands.

Example: The Body Shop which is known to be original, natural and ethical beauty brand.

7. Demand: the quantity of a product that consumers are willing and able to buy at a given price in a time
period.

Example: demand for sweaters in winter.

8. Supply: the quantity of a product that firms are prepared to supply at a given price in a time period.

Example: production of more warm clothes in winter.

9. Equilibrium Price: the market price that equates supply and demand for a product.

10. Market Size: the total level of sales of all producers within a market. Companies are interested in
knowing the market size before.

Example: launching a new product or service in an area.

11. Market Growth: the percentage change in the total size of a market (volume or value) over a period
of time.

Example: a new technology might only be marketable to a small set of consumers, but as the price of the
technology decreases and its usefulness in everyday life increases, more consumers could increase demand.

12. Market Share: the percentage of sales in the total market sold by one business. Example: a business
has 25% market share in an industry. This is calculated by the following formula:

Firm’s sales in time period x 100

total market sales in time period

13. Direct Competitor: businesses that provide the same of very similar goods or services.

Example: Samsung and Apple.

14. USP (Unique Selling Proposition): the special feature of a product that differentiates it from
competitor’s products.

Example: Apple’s IOS software.

15. Product Differentiation: making a product distinctive so that it stands out from competitor’s
products in consumer’s perception.

Example: Samsung’s latest iris scanner.

16. Niche Marketing: identifying and exploiting a small segment of a larger market by developing
products to suit it.

Example: sports channels like STAR Sports and Fox Sports target a niche of sports enthusiasts.

17. Mass Marketing: selling the same products to the whole market with no attempt to target groups
within it.
Example: soaps or soft drinks.

18. Market Segment: a sub-group of a whole market in which consumers have similar characteristics.
Example: males or females and adults or children.

19. Market Segmentation: identifying different segments within a market and targeting different
products or services to them.

Example: toys for children and premium cars for high income adults.

20. Consumer Profile: a quantified picture of consumers of a firm’s products, showing proportions of age
groups, income levels, location, gender and social class.

Example: it may be done in many industries to be profitable.

 Multiple Choice Questions

1 Marketing is best defined as the:

a) process of advertising products and services to a target market
b) process of researching the market and setting objectives
c) management process of controlling the 4Ps

d) management process responsible for identifying, anticipating and satisfying customer needs
profitable

2 It is often stated that the decline of the British motorcycle industry was largely a consequence
of British firms adopting a product-oriented approach. This approach is characterized by:
a) an inward-looking focus on making products that can be made and then trying to sell them

b) an outward-looking approach basing product decisions on what the market demands

c) consideration not only of the demands of consumers, but also of the effects of products on all
members of society
d) an outward-looking approach basing product decisions on competitor strategies

3 Which one of the following statements correctly describes the normal relationship between
quantity demanded and price?
a) There is an inverse relationship between price and quantity demanded.

b) There is a direct relationship between price and quantity demanded.

c) An increase in price leads to a rightward shift in the demand curve.

d) A decrease in price leads to a rightward shift in the demand curve

4 Market share is defined as:

a) the proportion of the total market that a particular firm’s sales have achieved
b) the percentage change in sales over time in a particular market
c) the percentage change in sales of a particular firm over time
d the breaking down of a large market into subgroups, that are likely to respond to products in
different ways

5 Market growth is defined as:

a) the percentage increase in sales of a particular firm over time

b) the change in the number of firms competing in a market
c) the percentage change in sales in the total market

d) the rate of change of market share

6 When calculating the market share of a supermarket, it would be best to use sales data based
on:
a) sales volume
b) unit sales
c) sales value
d) none of the above
Questions 15–16 relate to the following extract: The USA accounts for 50% of the global sports-footwear
market. Nike has the lion’s share, taking 47% of the $53.7 billion US sports-shoe market in 2013.

7 In 2013, Nike’s sales of sports footwear in the USA were:

a) $26.85 billion
b) $320 million
c) $25.24 billion
d) £2.54 billion

8 The 2013 global market for sports footwear was worth approximately:
a) $50 billion
b) $13.35 billion
c) $107.4 billion
d) $26.85 billion
 Sample Answers

Define the term 'demand'. (2 marks)

Demand refers to the quantity of the product that the customers are willing to buy
at a suitable timeand price.

Briefly explain two factors that could influence the demand for restaurant meals.
(3 marks)

One factor that could influence the demand in restaurant meals is the price.
Costumers may not be willing to buy an overpriced meal. Secondly, the trends
heavily influence the demand. The restaurant may introduce new offers and dealsas
time changes to meet the current demand.

Explain why the distinction between market orientation and product orientation
could be important for a business operating in a very competitive market. (5
marks)

Market oriented or ‘market-led ’businesses refer to an approach that bases

product designs on consumer demand. Whereas product-oriented approach
looks at available products or new products in order to sell them.
In a market-oriented approach, the customer is the priority. Businesses constantly
compete with each other. In market orientation, the constant feedback from
customers that is attained from market research allows the product and how it is
marketed to adapt to the changing demandsbefore other competitors.
For example, one aspect of competition is the price. Consumers tend to buy
products which are cheaper compared to another brand. So, for instance, two
business that produce the same product-in this case clothing- the customer will buy
the product from the brand that offers the cheaper product.
In conclusion, as product orientation is only fixated on products and
neglects consumer demand, it cannot help a business survive in a
competitive market.

Discuss the advantages and disadvantages of niche marketing for a small

manufacturer of fashionclothing (12 marks)
Niche marketing is identifying and utilizing a small segment of a larger market
by developingproducts to suit it.
The merits of niche marketing include the fact that small firms such as this fashion
clothing business can survive and flourish in markets that are overshadowed by
larger firms. Secondly, if the market is currently unexploited by competitors, then filling
a niche means the chance to sellat high prices and high-profit margins. So, a small
manufacturer of fashion clothing can sell clothing items at a higher price as there is
no competition. However, that is until the competitors counter by entering as well.
Consumers often pay more for an elite product.
Whereas the demerits of niche marketing are that small market niches do not
allow economiesof scale to be achieved. Therefore, as a small manufacturer, the
business will may have an increased production cost with a decrease in product.
Consequently, mass-market businesses are likely to have considerably lower
average costs of production. Besides, niche marketing strategy consists of more
risks as compared to mass-market strategies. As niche markets contain relatively
small numbers of consumers, any variation in consumer buying habits couldlead
to a rapid deterioration in sales. Hence, small firms such as this clothing business
that operates in only one niche market with one product will face challenges.
In conclusion, a small manufacturer of fashion clothing would face more
disadvantages thanadvantages if they opt for a niche marketing strategy.

Q. Define the term Product orientation [2]

Product orientation is an inward approach that focuses on the available or new
products with aim of selling them.
Q. Explain two advantages of customer (market) orientation to a business [3]
Market orientation is an outward-looking approach basing product decisions on
consumer demand, as established by market research. Market orientation values
customer feedback which helps in market research. This allows market-oriented
businesses to fulfil customer demand and compete with other businesses and
survive for longer. Secondly, the chances of a product failing are reduced.

Q. Define the term market segmentation [2]

Market segmentation means dividing a market in further smaller markets. It divides
customers into groups that share similar characteristics and interests.

Q. Explain two reasons why a business might segment the market for its Products
[3]

Market segmentation refers to identifying different segments within a market and

targeting different products or services to them. Market segmentation makes it
easier to categorize customer needs and make products that cater to consumer
needs. This is a more targeted approach and is efficient.
 Chapter 16

1. Define the term ‘market segmentation’[2]

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2. Explain two benefits to a business of market segmentation.[3]

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3. Define the term ‘customer (market) orientation’.[2]
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4. Explain two limitations of niche marketing.[3]

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5. Define the term ‘market segmentation’.[2]

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6. Briefly explain two reasons why a business might segment its market[3]
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7. Define the term ‘product orientation’.[2]

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8. Briefly explain two advantages of customer (market) orientation to a business.[3]

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9. Explain why the distinction between market orientation and product orientation could be important
for a business operating in a very competitive market[5]
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10. Analyse why a business might invest in market research[8]

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11. Discuss whether an airline business might increase its profits by more effective market
segmentation.[12]
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12. Analyse the possible benefits to a business of increasing its market share[8]
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13. Discuss whether branding should be the most important marketing activity for a new restaurant
business.[12]
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14. Analyse why a train company might use a strategy of price discrimination.[8]
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15. Discuss the importance of market share to a business operating in a competitive market.[12]
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MARKET RESEARCH
What is marketing?
1. Role of marketing and its relationship with other business activities
• the link between marketing objectives and corporate objectives
• marketing objectives

2. Supply and demand

• factors influencing the supply and demand for the products/ services of a
business
• interactions between price, supply and demand

3. Features of markets: location, size, share, competitors, growth

• how markets may differ: such as consumer/producer markets; national,
regional and international markets
• difference between product and customer (market) orientation
• problems associated with measuring market share and market growth
• implications of changes in market share and growth

4. Industrial and consumer markets

• classification of products
• how marketing might differ for different types of goods and service

5. Niche versus mass marketing

• reasons for and benefits/limitations of mass marketing and niche marketing
• benefits and limitations of market segmentation

6. Market segmentation
• methods of market segmentation including geographic, demographic and
psychographic
Market research: this is the process of collecting, recording and analyzing data about
customers, competitors and the market.
Market research helps in
• You Identify the Problem Areas as Well As Strong Areas.
• You Understand Your Customers' Needs.
• You Conduct Your Marketing Based on Informed Decisions.
• You Keep an Eye on Your Competitors.
• You Expand and Innovate.
• You Set Business Goals.

There are two types of market Research

• Primary research: the collection of first-hand data that is directly related to a firm’s
needs.

• Secondary research: collection of data from secondhand sources.

Primary research is research you conduct yourself (or hire someone to do for you.) It
involves going directly to a source – usually customers and prospective customers in your target
market – to ask questions and gather information. Examples of primary research are:

• Interviews (telephone or face-to-face)

• Surveys (online or mail)
• Questionnaires (online or mail)
• Focus groups
• Visits to competitors' locations

Primary research usually costs more and often takes longer to

conduct than secondary research, but it gives conclusive
results.
Advantages of primary data

• up-to-date and therefore more useful than most secondary data

• relevant – collected for a specific purpose – directly addresses the questions the
business wants answers to
• confidential – no other business has access to this data

Disadvantages of primary data

• costly – market research agencies can charge thousands of dollars for detailed customer
surveys and other market research reports
• time-consuming – secondary data could be obtained from the internet much more
quickly
• doubts over accuracy and validity – largely because of the need to use sampling and the
risk that the samples used may not be fully representative of the population

Quantative Data Qulatative Data

Based on numbers Based on opnion and experinces
Larger sampel size Samaller sampel size
Statistical data Interviews and observation
Objective Subjective
Closed ended questions Open ended questions
To validate hypothesis To generate hypothesis or develp ideas
There are 5 types of Probability sampling

Simple Random Sampling: Here every member of the population has an equal chance of
being chosen

Systematic Random Sampling: With this method every member of the population is
surveyed, e.g., every 10th

Stratified Random Sampling This involves dividing the sample into market segments,
based on existing knowledge

Cluster Sampling: This method splits the whole market into small areas, and sampling is
carried out in those areas believed to be typical

Quota Sampling: A certain number of people with given characteristics will be interviewed

Non-Probability Sample

there are two types of non-probability sampling

Convenience Sampling: Interviews anyone available

Judgement Sampling: This allows the interviewer to select people who they judge to be
representative of the market

Secondary - desk research: research is a type of research that has already been compiled,
gathered, organized, and published by others. It includes reports and studies by government
agencies, trade associations or other businesses in your industry. For small businesses with
limited budgets, most research is typically secondary, because it can be obtained faster and
more affordably than primary research.
There are two sources of secondary data
External
• pamphlets,
• newsletters,
• trade publications,
• magazines,
• newspapers.

Internal
• Sales Data.
• Financial Data:
• Transport Data:
• Storage Data:
• Trade associations

Advantage of secondary data.

• Ease of access. The secondary data sources are very easy to access.
• Low cost or free.
• Timesaving.
• Allow you to generate new insights from previous analysis.
• Anyone can collect the data.
• A huge amount of secondary data with a wide variety of sources.

Disadvantages of secondary data

• Not specific to your needs
• You haven’t got control over data quality
• Data can be biased in favor of the person who gathered it
• Data might be out of date
• You are not the owner of the data anyone can access it
 Glossary
1. Market Research: this is the process of collecting, recording and analyzing data about
customers, competitors and the market. Example: collecting data using questionnaires.

2. Primary Research: the collection of first-hand data that is directly related to a firm’s needs.
Example: using focus groups to collect relevant data.

3. Secondary Research: collection of data from second-hand sources. Example: using

government statistics or using the internet to collect information.

4. Qualitative Research: research into the in-depth motivations behind consumer buying
behavior opinions. Example: subjective opinions about a product.

5. Quantitative Research: research that leads to numerical results that can be statistically
analyzed. Example: quantifying results from a closed ended questionnaire.

6. Focus Groups: a group of people who are asked about the attitude towards a product,
service, advertisement or new style of packaging. Example: asking a group of women about a
particular beauty product.

7. Sample: the group of people taking part in a market research survey selected to be
representative of the overall target market. Example: sample of 100 people.

8. Random Sampling: every member of the target population has an equal chance of being
selected. Example: the names of 25 employees being chosen out of a hat from a company of
250 employees. In this case, the population is all 250 employees, and the sample is
random because each employee has an equal chance of being chosen.

9. Systematic Sampling: every nth item in the target population is selected. Example: A sample
of 50 patients required from the register of 1000 patients available in the records section of a
teaching hospital. The sample fraction here will be 50/ 1000 = 1/ 20, thus k = 20. The first
member in the register is selected randomly between 1 and 20. The first and every 20th
member is subsequently selected as sample members.

10. Stratified Sampling: this draws a sample from a specified sub-group or segment of the
population and uses random sampling to select an appropriate number from each stratum.
Example: stratifying a population sample, in terms of gender (male or female).

11. Quota Sampling: when the population has been stratified and the interviewer selects an
appropriate number of respondents from each stratum. Example: if the basis of the quota is
college level and the research needs equal representation, with a sample size of 100, we would
select 25 first – year students, another 25 second – year students, 25 third – year and 25 fourth
– year students.

12. Cluster Sampling: using one or a number of specific groups to draw samples from and not
selecting from the whole population, example: using on town or region. Example:
neighborhoods, school districts, and classrooms.

13. Open Questions: those that invite a wide-ranging or imaginative response – the results will
be difficult to collate and present numerically. Example: How would you describe this product?

14. Closed Questions: questions to which a limited number of pre-set answers is offered.
Example: Do you like this product? Yes/ No.
 Multiple choice question

1. Which one of the following forms of data collection is an example of a business conducting

primary research?

a) collating information from the population census and the Family Expenditure Survey

b) using sales data from within the business’s own records

c) observation of customers

d) using a market intelligence report

2. Qualitative research is best defined as:

a) primary research

b) secondary research

c) research that leads to numerical results which can be analyzed further

d) research into the underlying motivation behind consumer buying behavior

3. A firm that wishes to conduct qualitative research should use which one of the following

research methods?

a) analyzing internal company records

b) focus groups

c) postal questionnaires

d) none of the above

4. Which one of the following is not generally considered to be an advantage of primary research

relative to secondary research?

a) it is typically more up to date

b) it is collected for the business’s specific need

c) it is cheaper to undertake than secondary research

d) no other business has access to these data

5. A bank conducting primary research into consumer opinions about different types of banking

charges decide to send a researcher into a shopping mall. She is instructed to conduct a

questionnaire survey with whoever happens to be passing. This is an example of what type of

sampling method?

a) simple random

b) quota

c) convenience

d) systematic

6. Which one of the following is an advantage of probability sampling relative to non-probability

sampling?

a) Confidence levels can be calculated.

b) It is typically cheaper.

c) The results are 100% reliable.

d) It avoids questionnaire bias.

7. What is the approximate median income (assume 50-week year)?

a) $15,500

b) $30,000

c) $18,500

d) $20,000 to less than $30,000

 Chapter 17
1. Define the term ‘market research’[2].

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2. Explain two advantages to a business of using primary (field) market research data[3]
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3. Distinguish between random sampling and quota sampling[2]

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4. Briefly explain two advantages of using ‘focus groups’ as a method of market research[3]
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5.Analyse why primary market research could be more useful to a business than secondary
market research[8]
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5. Discuss the advantages and disadvantages to a business of using focus groups to collect[12]

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MARKETING MIX
Product & Price
Marketing mix: Four key decisions that must be taken in the effective marketing of a
product. Also called the ‘4Ps’.
1. Product should satisfy a need/want. This might be an existing product, an adaptation of an
existing product or a newly developed one.
2. Price is important too. If set too low, then consumers might lose confidence in the product’s
quality; if too high, then many will be unable or unwilling to afford it.
3. Promotion must be effective – telling consumers about the product’s availability and
convincing them, if possible, that your brand is the one to choose.
4. Place refers to how the product is distributed to the consumer. If it is not available at the
right time in the right place, then even the best product in the world will not be bought in the
quantities expected

Product includes consumer and industrial goods and services. Goods have a physical
existence, such as washing machines and chocolate bars.

Services have no physical existence, but satisfy consumer needs in other ways − hairdressing,
car repairs, child-minding and banking are examples of services
The most successful new products are those that are differentiated from competitors ’products
and of er something ‘special’. Product differentiation can be an effective way of distancing a
business from its rivals – the best form of product differentiation is one that creates a Unique
Selling Point (USP). For example: Domino’s Pizza deliveries: ‘It arrives in 30 minutes or it’s
free’.

The benefits of having a USP include:

• Effective promotion that focuses on the differentiation feature of the product or service.

• Opportunities to charge higher prices due to exclusive design/service.

• Free publicity from business media reporting on the USP.

• Higher sales than undifferentiated products.

• Customers more willing to be identified with the brand because ‘it’s different’
Intangible attributes of a product: Subjective opinions of customers about a product that
cannot be measured or compared easily.

Tangible attributes of a product: Measurable features of a product that can be easily

compared with other products.

Brand: An identifying symbol, name, image or trademark that distinguishes a product from its
competitors.

A combination of the tangible attributes, intangible attribute, effective market research and a
well-balanced 4P’s supported by the 4C’s will elevate a normal product into becoming a widely
recognized brand.

Product life cycle: The pattern of sales recorded by a product from launch to withdrawal
from the market and is one of the main forms of product portfolio analysis.

Extension strategies
These strategies aim to lengthen the life of an existing product before the market demands a
completely new product. Examples of extension strategies include selling in new markets
(export markets for example) or repackaging and relaunching the product.
Product Life Cycle and Cashflow
• Cash flow is negative during the development of the product as costs are high, but nothing
has yet been produced or sold

• At introduction, the development costs might have ended but heavy promotional expenses
are likely to be incurred – and these could continue into the growth phase.

• The maturity phase is likely to see the most positive cash flows, because sales are high,
promotion costs might be limited, and spare factory capacity should be low

• As the product passes into decline, so price reductions and falling sales are likely to combine
to reduce cash flows. Clearly, if a business had too many of its products either at the decline
or the introduction phase, then the consequences for cash flow could be serious.
Product portfolio analysis: analyzing the range of existing products of a business to help
allocate resources effectively between them

A product portfolio is the collection of every product and service that a business sell. A detailed
analysis of this portfolio can provide insights into the sources of company sales and profits, and
growth prospects. The portfolio may be viewed as a group of product lines, as well as a group of
individual products.

Price is the amount paid by customers for a product. Determining an appropriate price for a
good or service is a vital component of the marketing mix. Price can have a great impact on the
consumer demand for the product
The is relationship between price changes and the size of the resulting change in demand is
known as price elasticity of demand.
Price is the amount paid by customers for a product. Determining an appropriate price for a
good or service is a vital component of the marketing mix

Setting the right price for the product depends on:

• Costs of production

• Competitive conditions in the market

• Competitors’ prices

• Business and marketing objectives

• Price elasticity of demand

• Whether it is a new or an existing product

The pricing level set for a product will also:
• Determine the degree of value added by the business to bought-in components

• Influence the revenue and profit made by a business due to the impact on demand

• Reflect on the marketing objectives of the business and help establish the psychological
image and identity of a product

Pricing methods
There are several different pricing methods that can be used.
1. Penetration Pricing
2. Price Skimming
3. Cost-plus / Mark-up Pricing
4. Competition-based Pricing
5. Demand-based / Dynamic Pricing
6. Discounts / Sales
7. Psychological Pricing
8. Price Discrimination

1. Penetration pricing: Setting a relatively low price often supported by strong promotion
in order to achieve a high volume of sales. Firms tend to adopt penetration pricing
because they are attempting to use mass marketing and gain a large market share. If the
product gains a large market share, then the price could slowly be increased.

2. Price / Market skimming: Setting a high price for a new product when a firm has a unique
or highly differentiated product with low price elasticity of demand. The aims of this
pricing strategy are to maximize short-run profits before competitors enter the market
with a similar product and to project an exclusive image for the product. If rivals do launch
similar products, it may be necessary for the price of the original product to be reduced
over a period of time.
3. Cost-plus / Mark-up pricing: Adding a fixed mark-up for profit to the unit price of a
product. This is method is often used by retailers, who take the price that they pay the
producer or wholesaler for the product in question, and then just add a percentage mark-
up. The size of the mark-up usually depends upon a combination of the strength of
demand for the product,
Total cost of brought-in materials = $40
50% mark-up on cost = $20
Selling price = $60

4. Competition-based pricing: A firm will base its price upon the price set by its
competitors. As the name suggests, competitor-based pricing is a pricing strategy in
which a company sets the price for its products after observing the competition.
However, this strategy does not cover initial costs and only takes into account the selling
price of the rivals’ products.

5. Dynamic pricing, also referred to as , demand pricing, or time-based pricing is a pricing

strategy in which businesses set flexible prices for products or services based on current
market demands. Dynamic pricing is a common practice in several industries such as
retail, hospitality, tourism, entertainment, electricity, and public transport. Each industry
takes a slightly different approach to dynamic pricing based on its individual needs and
the demand for the product.

6. Discount pricing is one type of pricing strategy where you mark down the prices of your
merchandise. The goal of a discount pricing strategy is to increase customer traffic, clear
old inventory from your business, and increase sales.

7. Psychological pricing is the business practices of setting prices lower than a whole
number. The idea behind psychological pricing is that customers will read the slightly
lowered price and treat it lower than the price actually is. An example of psychological
pricing is an item that is priced $3.99 but conveyed by the consumer as 3 dollars and not
4 dollars, treating $3.99 as a lower price than $4.00.
 8. Price discrimination is a selling strategy that charges customers different prices for the
same product or service based on what the seller thinks they can get the customer to
agree to. In pure price discrimination, the seller charges each customer the maximum
price they will pay. In more common forms of price discrimination, the seller places
customers in groups based on certain attributes and charges each group a different
price.

Boston Matrix analysis:

This method of analyzing the market standing of a firm’s products and the product portfolio of
a business was developed by the Boston Consulting Group. It highlights the position of the
products of a business when measured by market share and market growth.

The Boston Matrix allows an analysis, not only of the existing product portfolio, but also of what future
marketing strategies the business could take next. The size of each circle on the matrix represents the
total revenue earned by each product. The four sectors created by the matrix can be analyzed in the
following way:

Low market growth, high market share: product A:

cash cow This is a well-established product in a mature market. Typically, this type of product isprofitable
and creates a high positive cash flow. Sales are high relative to the market and promotional costs are likely
to be low, as a result of high consumer awareness. The cash from this product can be ‘milked’ and injected
into some of the other products in the portfolio. Hence, this product is often referred to as a cash cow.
The business will want to maintain cash cows for as long as possible.
High market growth, high market share: product B: star

This is clearly a successful product as it is performing well in an expanding market. It is often referred to
as a star. The business will be keen to maintain the market position of this product in what may be a fast-
changing market. Therefore, promotion costs will be high to help differentiate the product and reinforce
its brand image. Despite these costs, a star is likely to generate high amounts of income.

High market growth, low market share: product C: question mark

The question mark consumes resources but generates little return. If it is a newly launched product it is
going to need heavy promotion costs to help become established. This finance could come from the cash
cow. The future of the product may be uncertain, so quick decisions may need to be taken if sales do not
improve. These could include revising the design, relaunching with a new brand image or even withdrawal
from the market. It should, however, have potential as it is selling in a market sector that is growing fast.

Low market growth, low market share: product D: dog

The dog seems to offer little to the business in terms of either existing sales and cash flow or future
prospects, because the market is not growing. It may need to be replaced shortly with a new product
development. The business could decide to withdraw from this market sector altogether and position
itself into faster-growing sectors.

Impact of Boston Matrix analysis on marketing decisions:

This analytical tool has relevance when:

• analyzing the performance and current position of existing product portfolios

• planning action to be taken with existing products

• planning the introduction of new products.

By identifying the position of all products of the business, a full analysis of the portfolio is possible. This
should help focus on which products need marketing support or which need corrective action. This action
could include the following marketing decisions:

Building – supporting question mark products with additional advertising or further distribution outlets.
The finance for this could be obtained from the established cash cow products.
Holding – continuing support for star products so that they maintain their good market position. Work
may be needed to freshen the product in the eyes of the consumers so that high sales growth can be
sustained.
Milking – taking the positive cash flow from established products and investing it in other products in the
portfolio.

Divesting – identifying the worst-performing dogs and stopping the production and supply of these
products. This strategic decision should not be taken lightly as it will involve other issues, such as the
impact on the workforce and whether the spare capacity freed up by stopping production can be used
profitably on another product.

These strategies can only be undertaken if the business has a balanced portfolio of products. If there are
too many dogs or question marks, then the overall shortage of cash may not allow the firm to take
appropriate action.

Limitations of using the Boston Matrix for marketing decisions

No technique can guarantee business success. This will depend on the accuracy of the marketing
managers’ analysis and their skills in making marketing decisions. The Boston Matrix helps to establish the
current situation of the firm’s products, but it is of little use in predicting future success or failure.

On its own, the Boston Matrix cannot tell a manager what will happen next with any product. Detailed
and continuous market research will help. However, decision-makers must always be conscious of the
potentially dramatic effects of competitors’ decisions, technological changes and the fluctuating economic
environment.

The Boston Matrix is only a planning tool and it has been criticized for simplifying the complex set of
factors that determine product success.

The Boston Matrix assumes that higher rates of profit are directly related to high market shares. This is
not necessarily the case when sales are being gained by reducing prices and profit margins
 Glossary

1. Marketing Mix: the four key decisions that must be taken in the effective marketing of a product.

Example: it includes product (cellphones, soaps etc.), price (skimming/ penetration), place (malls, outlets),
and promotion (brochures, advertisements).

2. Customer Relationship Management (CRM): using marketing activities to establish successful

customer relationships sot that existing customer loyalty can be maintained.

Example: making an app for customers to track their orders or change them.

3. Brand: an identifying symbol, name, image or trademark that distinguishes a product from its
competitors.

Example: Nestle, Gucci

4. Intangible attributes of a product: subjective opinions of customers about a product that cannot
be measured of compared easily.

Example: design

5. Tangible attributes of a product: measurable features of a product that can be easily compared
with other products.

Example: size, speed

6. Product: the end result of the production process sold on the market to satisfy a customer need.

Example: Milk, cosmetics

7. Product Positioning: the consumer perception of a product or service as compared to its

competitors.

Example: Subway’s slogan is “eat fresh” which, in the competitive fast food market, is simple two-word
slogan stands out by clearly differentiating their offering on the healthiness and the freshness of their
menu offering.
8. Product Portfolio Analysis: analyzing the range of existing products of a business to help allocate
resources effectively between them.

Example: comparing market growth of each product with its market share to analyze which product is
more profitable.

9. Product Life Cycle: the pattern of sales recorded by a product from launch to withdrawal from the
market and is one of the main forms of portfolio analysis.

Example: some of the stages include, survival, maturity and decline.

10. Consumer Durable: manufactured product that can be reused and is expected to have a
reasonably long-life.

Example: a car or washing machine.

11. Extension Strategies: these are marketing plans to extend the maturity stage of the product before
a brand new one is needed.

Example: changing color or features of a product.

12. Price Elasticity of Demand: measures the responsiveness of demand following a change in price.

Example: In the case of relatively inelastic demand for gasoline. As the price of gasoline increases, the
quantity demanded doesn't decrease all that much. This is because there are very few good substitutes
for gasoline and consumers are still willing to buy it even at relatively high prices.

13. Mark-Up Pricing: adding a fixed mark-up for profit to the unit price of a product.

Example: For example, if a product is worth $100, the selling price with a 25% markup would be $125.
Gross Profit Margin = Sales Price – Unit Cost = $125 – $100 = $25. Markup Percentage = Gross Profit
Margin/Unit Cost = $25/$100 = 25%. Sales Price = Cost X Markup Percentage + Cost = $100 X 25% + $100
= $125

14. Target Pricing: setting a price that will give a required rate of return at a certain level of output/
sales.

Example: if a stock is trading at $60, and the company has a bad quarter and analysts reduce the price
target from $70 to $50, it is going to generate selling activity and reduce the share price closer to the
$50 target.
15. Full-Cost Pricing: setting a price by calculating a unit cost for the product (allocated fixed and
variable costs) and then adding a fixed profit margin.

16. Contribution-Cost Pricing: setting prices based on the variable costs of making a product in order
to make a contribution towards fixed costs and profit.

17. Competition-Based Pricing: a firm will base its prices upon the price set by its competitors.

Example: if a competitor sets its price $5 per unit, the reaction of a firm would be similar to charging that
price.

18. Dynamic Pricing: offering goods at a price that changes according to the level of demand and the
customer’s ability to pay.

Example: the San Francisco Bay Bridge charges a higher toll during rush hour and on the weekend, when
drivers are more likely to be travelling

19. Penetration Pricing: setting a relatively low price often supported by strong promotion in order to
achieve a high volume of sales.

Example: discount stores such as Walmart charges lower price to gain maximum revenue.

20. Market Skimming: setting a high price for a new product when a firm has a unique or highly
differentiated product with low elasticity of demand.

Example: cellphone brand such as Apple charges higher for its products because of the unique nature.
 Multiple Choice Questions

1 Which one of the following is not one of the traditional 4Ps?

a) people

b) product
c) place
d) promotion

2The 4Cs is one view of the key elements of successful marketing. Which one of the following
is not one of the 4Cs?
a) customer solution

b) cost to the customer

c) communication with the customer
d) customer loyalty

3 Which one of the following is not generally considered to be a benefit of branding?

a) It reduces price elasticity of demand.

b) It provides product differentiation.
c) It reduces costs.
d) It can provide a firm’s product with a strong identity

4.A business charges different prices to different customers for the same product. This is an
example of:
a skimming pricing
b penetration pricing
c price discrimination
d competitive pricing
5. The product life cycle is illustrated below

If a product is at point x, what stage of its life cycle has it reached?

a) decline
b) growth
c) introduction
d) maturity

6. A firm has fixed costs of $20,000 per year and unit variable costs of $6. Production is
currently 4,000 units per year. Assuming that the firm uses full-cost pricing and adds a profit
mark-up of 200%, what is the selling price?
a) $33

b) $22
c) $18
d) $15
7 Price elasticity of demand measures:
a) the responsiveness of price to change in quantity demanded

b) the responsiveness of quantity demanded to a change in price

c) the price of a product as a proportion of consumer income
d) the relationship between the demand for two separate products
 Sample answers

Q. Discuss ways in which poor customer relations could be improved in a large

retail business.

Maintaining good customer relations for any business in a large retail business or a
small-scale farmer's market is very vital in making the business flourish and increase
its sales hence the market share. The first key factor in improving customer
relations in a large business is engagement with the customers. this includes the
overall buying experience, after-sales services as well as any customer services
when asked for To improve poor relations; a retail business needs to improve all of
these services to attract customer loyalty The retail business needs to check up on
customers regularly to ask their feedback and offer any help regarding the product
or services purchased. This builds up customer confidence in the business

Secondly, to improve poor customer relations, the business needs to adopt a more
customer-led approach. To market their products, the business needs to consider
the 4cs more closely than the 4PS. They need to consider what the customer needs
what is the cost to the customer how to communicate with the customer and lastly
how convenient is the retail store or its products are to the customer. However, for
this, the business needs to change its overall. Marketing objectives changing its
overall business objectives from being product-oriented to being more prod
market/customer-oriented

Lastly, since poor relations are already established, the business can make use of
above-the-line advertising to overcome any prejudice or wrong perception about
the business. However, the above-the-line promotion will involve targeting mass
markets and a huge sum of money will have to be paid Targeting the mainaudience
which will be a waste of money as it is not necessary that the business
has poor relations with all of its customers. considering that below - the -line
promotion can also be used to target few worthy customers. IR campaigns can be
made used to improve the business’s reputation.

2016 – JUN – P12 – Q.6

Q. The 4C's marketing model is more useful for a retail business than the 4P’s
marketing model. Do you agree with this statement? [20 marks]

The 4Ps given an equal overview with the 4Cs as they both equate to certain
elements within each other for the business to set pricing strategies etc. For a
producer, the first step to consider are the4Ps, known as the marketing mix
consisting of product, price, place, and promotion. Product refers to a tangible or
intangible good or service provided price is how much the product is sold for, place
refers to how convenient the product is for the buyer and promotion is howthe
product is promoted and made known to the customer. However, many people
argue its importance of other 4Ps which include 'people' and ' process as well in the
case of intangible goods or services. The significance of each P might differ in each
company's case.

The 4Ps despite being more considered by most companies also have some
significance in conflict with the 4cs which are: customer solution, the cost to the
customer, communication with consumer, and convenience to the consumer. This
is a more customer led approach rather than the company focusing on its own
strengths and welfare. All of the 4cs, however, equate to something in the 4ps they
go hand-in-hand for e.g.: product and customer solution equate/hence the 4ps are
manipulated keeping in mind the possible outcomes of the 4PS so both are useful
accordingly .
2016 – NOV – P11 – Q.7a

Q. Analyze the benefits to a business of product portfolio analysis. [8 marks]

A product portfolio refers to the list of products offered by a company over a

certain period of time. Product portfolio analysis is the analysis. Of the different
phases, each product is in at a given time in the product portfolio. Analyzing
provides many benefits to the company upon the improvement of its sales and
generation of revenue It provides a regular check on the performance of a form's
marketing strategy and helps plan marketing mix decisions. accordingly, identify
any cash How problems and recognize the need for a balanced product portfolio.

Analysis decides to help the firm allocate resources for each product accordingly
for example a product in its introduction stage shall be allocated more funds for
promotion etc. although resources are limited due to fewer sales at the start.
Product variations might be required at the maturity stage to increase existing sales
which is provided by PPA Furthermore, PPA identifies gaps within the company's
cash How and solve them accordingly diversifying their product range and implying
effective extension strategies to existing products. The analysis is a useful tool in
evaluating how your investment portfolio is performing in terms of rate of return
and risk. Hence it plays a huge role in the product's life

2016 – JUN – P11 – Q.7a

Q. Analyze how a business might use price elasticity of demand for pricing
decision. [8 marks]

Price elasticity of demand is a measure to show the responsiveness of the quantity

demanded of a good or service to a change in its price when nothing elsechanges.
It can help understand a marketing Director what effect a change price will have
over a change in demand for egg for an inelastic demand, a priceincrease will result
in an increase in profits: price elasticity of demand helps to increase the price of
the product based on its predicted demand by. the PED equation.
By having enough knowledge of PED, the marketing Director can use the policy of
price- discrimination for different PEDS in a different segment the company targets.
PED will help the Director make more accurate sales forecasts with a predicted
price increase or demand increase by using the PED formula hence product
production and resource allocation become easier. The above reasons show why a
marketing director must possess enough knowledge understanding of price
elasticity of demand as he is the making all major marketing strategies.
 Chapter 18

1. Define the term ‘price discrimination’.[2]

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2. Explain why cost-based pricing an effective pricing strategy for might be a small business[3]
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3. Explain two disadvantages to a business of using price discrimination.[2]
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4. Define the term ‘price elasticity of demand’.[3]

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5.Define the term ‘competitive pricing strategy’.[2]

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5. Define the term ‘price skimming’[2]

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6. Briefly explain two reasons why price elasticity of demand might be useful to a business when
making pricing decisions[3]
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7. Discuss the extent to which a new entrant in the computer manufacturing market will need to rely
on penetration pricing to gain market share[12]
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8. Discuss factors that could determine the success of a business that has decided to set up an online
shop to sell beauty products[8]
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9. Analyze why a business might use a price skimming strategy[8]
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10. Discuss factors that could determine the success of a business that has decided to set up an online
shop to sell beauty products[8]
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11. Discuss whether having a large product portfolio is an advantage for a car manufacturer.[12]
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12. Discuss factors that could determine the success of a business that has decided to set up an online
shop to sell beauty products[8]
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 MARKETING MIX
Promotion & Place
Promotion: Use of advertising, sales promotion, personal selling, direct mail, trade fairs,
sponsorship and public relations to inform consumers and persuade them to buy
Promotion is about communicating with actual or potential customers. Effective promotion not
only increases awareness of products but can create images and product ‘personalities ’that
consumers can identify with.
Advertising is only one form of promotion and other techniques include direct selling and sales
promotion offers

Promotion objectives
Promotion campaigns can be planned to achieve several objectives. These are all about
communicating with the target consumers. These aims can either be focused on the short term
such as an increase in sales next month – or on the longer term – such as to change the image
of the business.

Promotional objectives aim to:

• Increase sales by raising consumer awareness of a product

• Remind consumers of an existing product and its distinctive qualities

• Increase purchases by existing consumers or to attract new consumers to the brand

• Demonstrate the superior qualities of a product compared with those of competitors

• Create or reinforce the brand image or ‘personality’ of the product

• Correct misleading reports about the product or the business

• Develop the public image of the business – rather than just the product

• Encourage retailers to stock and actively promote products to the final consumer
It is most unlikely that just one method of promotion will be sufficient to achieve promotional
objectives. There are several elements of the promotion which combine to form the
“Promotion mix” (the combination of promotional techniques that a firm uses to sell a product)

There are two types of promotion:

1. Above the line promotion

2. Below the line promotion

Above-the-line promotion (ATL): A form of promotion that is undertaken by a business by

paying for communication with consumers. The features of ATL promotion are:

• Expensive to undertake

• Can reach large audience in one go

• Difficult to target individual customers

Advertising: Means of communication with the users of a product or service.

Advertisements are messages paid for by those who send them and are intended to inform
or influence people who receive them. This involves the use of a media to send a message.
There are a number of different media, including:

• Newspapers - less expensive, reaches mass audience and adverts can be kept

• Cinema - only reaches cinema audiences

• Billboards (Posters) - reach a large audience but provide little information and likely not to be
noticed

• Radio - can target specific groups who listen to

particular stations

• Television

• Magazine

• Taxi Advertising

• Roundabout Advertising

• Parking Ticket Advertising Internet Marketing

Advertising decisions – which media to use?
Factors to consider are:

➢ Cost

➢ Size of audience

➢ The profile of the target audience in terms of age, income levels, interests and so on

➢ Message to be communicated

➢ Other aspects of the marketing mix

➢ Legal and other constraints

Below-the-line promotion (BTL): Promotion that is not a directly paid-for means of

communication but based on short-term incentives to purchase. BTL promotion methods are
used to establish direct connection with the individual customer as the business has complete
control over who is specifically targeted.
Sales promotion: Incentives such as special offers or special deals directed at consumers or
retailers to achieve short-term sales increases and repeat purchases by consumers. Sales
promotion is generally aiming to achieve short-term increases in sales, but advertising often
aims to achieve returns in the long run through building customer awareness of and confidence
in the product.

There is a huge range of incentives and activities that come under the umbrella term ‘sales
promotion’. They include:

• Price deals – a temporary reduction in price, such as ‘10% reduction for one week only’

• Loyalty reward programs – consumers collect points, air miles or credits for purchases

• Money-off coupons – redeemed when the consumer buys the product

• Point-of-Sale displays in shops – e.g., a ‘dump bin’ is a free-standing bin centrally placed full
of products ‘dumped’ inside to attract attention

• BOGOF – ‘buy one, get one free’

• Games and competitions – e.g., on cereal packets

Advantages of direct marketing
• Targeting: You can send specific messages to particular groups of customers and
potential customers based on demographics and buying behavior. The more targeted
your campaigns, the more successful they are likely to be.
• Personalization: Reach your audience with a personal touch. Direct mail or email can be
addressed to a specific person, and even include details like past orders. A phone call
can engage a customer in conversation to start building a relationship with your
business.
• Affordable: Tactics like email marketing or leafleting can be very cost effective. Most
direct marketing will be more cost effective for SMEs than mass media advertising
campaigns.
• Measurable: If your marketing messages ask the recipient to take a particular action or
use a specific voucher code, you can easily track the success of campaigns. This can help
you plan future campaigns.
• Informative: You can deliver detailed information on your products, services and prices
unlike other forms of advertising.

Disadvantages of Direct Marketing

• Intrusive: Some people dislike marketing mail and consider it to be 'junk mail'. Many people
find direct marketing annoying and intrusive. This is especially true of telemarketing

• Environment: Using leafleting or paper-heavy direct mail campaigns can be bad for the
environment. To avoid this, and any negative impact on your brand image, use recycled
materials or try email campaigns.

• Low response rates: Direct marketing response rates tend to be around 1-3%. When you
reach a consumer who isn't interested in your products of services, it wastes money, and
they are likely to find it irritating. Use more targeted lists as opposed to sending out mass
messages to minimize this.

• Competition: It can be hard to make your messages stand out when the recipient receives
high number of marketing emails or direct mail.

• Cost: Tactics like telemarketing and direct mail may have high financial and resource costs.

• Legal issues: There are laws relating to privacy and data protection in direct marketing. You
must ensure that your mailing list only contains individuals who have consented to receive
marketing messages from you.
Sponsorship: Payment by a company to the organizers of an event or team/individuals so
that the company name becomes associated with the event/team/individual

Public relations: Deliberate use of free publicity provided by newspapers, TV and other
media to communicate with and achieve understanding by the public.

Brand is the name, logo, symbol given by a firm to a product or a range of products.
The aims of branding products include:

• Aiding consumer recognition

• Making the product distinctive from competitors

• Giving the product an identity or personality that consumers can relate to

Benefits of Branding
• Increase the chances of brand recall by consumers, e.g., when shopping in a supermarket
and there are several product options available.
• Clearly differentiate the product from others.
• Allow for the establishment of a ‘family’ of closely associated products with the same brand
name.

Marketing or promotion budget: Financial amount made available by a business for

spending on marketing/ promotion during a certain time period.

Spending huge amounts on promotion will never guarantee the success of a product – the
promotion has to match the marketing objectives and integrate well with the rest of the
marketing mix.
Place decisions are concerned with how products should pass from manufacturer to the final
customer. Several different ‘channels of distribution ’are available for firms to use.

Channel of distribution: Chain of intermediaries a product passes through from producer

to final consumer.

Importance of channel of distribution

• Consumers may need easy access to a firm’s products to allow them to try them

• Manufacturers need outlets for their products that give as wide market coverage as
possible, but with the desired image of the product appropriately promoted.

• Being available in multiple locations will help improve brand image.

Criteria for choosing distribution channels

• Costs
Comparison of costs for each method including delivery costs of direct selling, compared
with the cost of selling to retailers at a lower price

• The Degree of Control

Amount of control over 4P’s involving intermediaries can affect the image product

• Access To the Consumer

A small target market may mean that the use of retailers is not viable E.g., Specialist sports
equipment
.
Packaging is the quality, design and color of materials used in packaging of products can have
a very supportive role to play in the promotion of a product. Packaging can perform the
following functions:

• Protect and contain the product

• Give information, depending on the product, to consumers about contents, ingredients,

cooking instructions, assembly instructions and so on

• Support the image of the product created by other aspects of promotion

• Aid the recognition of the product by the consumer

Methods of digital promotion

These methods use the latest technology to get their messages to customers.

Social media marketing:

social media is not just a marketing channel but also a way for people to keep in touch with friends and
family, read the latest news or follow topics they are interested in. There are many social mediaplatforms
businesses can choose to use. Most businesses use more than one. Promotion managers needto consider
Facebook, Twitter, Instagram and other platforms, and decide which are most relevant tothe target group
of consumers they are trying to communicate with. Twitter and Facebook advertisements, hashtag
campaigns and influencer marketing are among the most popular methods of social media marketing.

Email marketing
Email marketing connects with customers within their own mailboxes. It is a well-established method of
increasing brand loyalty and selling more products to existing customers.

There are many different ways businesses can reach out to customers through email marketing,
including:

• newsletter campaigns

• purchase confirmation emails

• thank you emails

• email notifications about new products.

Online advertising:

Displaying pop-up banners or advertisements on other websites aiming at the same niche is the most
common form of online advertising. Businesses can use online platforms such as Google AdSense that
allows adverts to be automatically delivered to other content sites.

Smartphone marketing

This is becoming one of the most important methods of digital promotion, especially to younger
consumers. It is claimed that 94% of all emails are opened and – once open – the sender has the reader’s
attention. As well as sending text messages to subscribers, businesses can further appeal to potential
consumers by providing them with free apps for all phone types. Apps can send real-time push messages
to consumers’ phones when new products are available on the company website. Messaging platforms
such as Messenger and Telegram also allow marketing teams to create marketing bots which are used to
gain new customers.

Search engine optimization (SEO)

Businesses that use e-commerce (sell online) locate their websites on search engines such as Google, Bing,
Yahoo and Baidu (China). They need to use SEO to make sure that their content appears amongthe
first results of a search. Without SEO, it is very difficult indeed for a business trading online to remain
competitive. Several SEO methods can be used to ensure a high ranking on a search engine results page,
such as optimizing the content for specific keywords. Search engine algorithms are constantly changing,
and businesses need to update their SEO methods accordingly.

Viral marketing:

Viral marketing makes use of all types of digital marketing. The essence of viral marketing is to create a
post, video, meme or similar short form of content that spreads across the web like a virus. To make a
successful viral marketing campaign, businesses promote the same content across multiple channels such
as Twitter, YouTube, blog posts and newsletters over a short period of time. Marketing managers try to
identify individuals with high social networking potential, called influencers. The managers create viral
messages that appeal to the influencers. These have a high chance of being passed on to many people
who may be impressed that the influencer has contacted them about the product.
Benefits of digital promotion

• Worldwide coverage – a website allows businesses to find new markets and trade globally, increasing
potential market size.

• Relatively low cost – a well-planned and well-targeted digital marketing campaign can reach the right
customers at a much lower cost than traditional forms of advertising.

• Easy to track and measure results – web analytics and other techniques of measuring response rates
make it easy to establish how effective a promotion campaign has been. Detailed information about how
customers use a website or respond to advertising is available, which helps to improve the effectiveness
of future campaigns.

• Personalization – this is a very important benefit of digital promotion. Each customer can be made to
feel that only they are being sent a special offer. The business’s customer database needs to be linked to
the website, then whenever someone visits the site, the business can greet them with targeted offers.

• Social media communication builds customer loyalty – involvement with social media and quick
responses to customers’ messages can build customer loyalty and create a reputation for being easy to
converse with.

• Content marketing – digital marketing allows a business to create engaging campaigns using content
marketing. This means producing varied content such as images, videos and articles, which can help a
business gain social currency, especially if it goes viral.

• Website convenience increases sales – the conversion rate of visits to websites (when customers buy
something) is higher than with other forms of selling. It is more convenient too, unlike other forms of
media which require people to get up and make a phone call or go to a shop.

Limitations of digital promotion:

• Time-consuming – unless a digital promotion agency is used (which can be high cost), tasks such as
optimizing online advertising campaigns and creating marketing content can be time-consuming. The
success of promotions needs to be judged against the cost of preparing them.

• Skills and training – employees must have up-to-date knowledge and expertise to carry out digital
marketing with success. Tools, platforms and trends change rapidly. Employees may need training to keep
their skills at the right level.

• Global competition – reaching a worldwide audience is easy but this means competitors can do so too!
Standing out clearly against a large number of competitors can be difficult and costly. Search engine
optimization is one way of trying to do this.

• Complaints and feedback – unhappy customers can quickly send out negative messages about a
business or its products. Any negative feedback or criticism of a brand can be visible to the target audience
through social media and review websites. It is essential for a business to respond quickly and effectively
to such criticism.
 Glossary
1. Promotion: the use of advertising, sales promotion, personal selling, direct mail, trade fairs,
sponsorship and public relations to inform consumers and persuade them.

2. Promotion Mix: the combination of promotional techniques that a firm uses to sell a product.

Example: a firm may use advertisements along with billboard ads to promote its products.

3. Above-the-line Promotion: a form of promotion that is undertaken by a business paying for

communication with consumers.

Example: firms have to pay a lot of amounts for TV advertisements.

4. Advertising: paid-for communication with consumers to inform and persuade.

Example: TV and cinema advertising.

5. Below-the-line Promotion: promotion that is not a directly paid-for means of communication, but
based on short-term incentives to purchase.

Example: through public relations.

6. Sales Promotion: incentives directed at consumers or retailers to achieve short-term sales increases
and repeat purchases by consumers.

Example: special offers, buy one get one free.

7. Personal Selling: a member of the sales staff communicates with one consumer with the aim of
selling the product and establishing a long-term relationship between company and consumer.

Example: department stores on the perfume and cosmetic counters.

8. Sponsorship: payment by a company to the organizers of an event or team/ individuals so that the
company name becomes associated with the event/ team/ individual.

Example: Nike, Adidas

9. Public Relations: the deliberate use of free publicity provided by newspapers, TV and other media to
communicate with and achieve understanding by the public. Example: print or TV campaigns.

10. Branding: the strategy of differentiating products from those of competitors by creating an
identifiable image and clear expectations about a product.

Example: apple used by Apple Computers.

11. Marketing or promotion budget: the financial amount made available by a business for spending
on marketing/ promotion during a certain time period.

12. Channel of Distribution: this refers to the chain of intermediaries a product passes through from
producer to final consumer.

Example: through intermediaries.

13. Internet (Online) Marketing: refers to advertising and marketing activities that use the Internet,
email, and mobile communications to encourage direct sales via electronic commerce.

Example: social media.

14. E-Commerce: the buying and selling of goods and services by businesses and consumers through an
electronic medium.

Example: creating an online website for selling products.

15. Viral Marketing: the use of social media sites or text messages to increase brand awareness or sell
products.

Example: use of text messages or word of mouth as a means of promotion.

16. Integrated Marketing Mix: the key marketing decisions complement each other and work
together to give customers a consistent message about the product.

Example: making changes in product, along with adjusting the appropriate price, distributing it to
appropriate outlets or creating own store and promoting it via above the line or below the line
promotion.
 Multiple Choice Questions

1 A manufacturer of tablet computers recently launched a promotional campaign costing

$3 million. Its marketing objective was to increase sales by at least 30% during the campaign.
Sales actually increased from $20 million to $29 million. It can be concluded that:

a) the marketing objective was not met

b) the marketing objective was met and that profits were increased
c) the marketing objective was met, but that profits decreased
d) the marketing objective was met, but that the impact on profits cannot be determined

2. Promotion may be defined as:

a) communication with actual or potential customers
b) the application of advertising to increase sales
c) the attempt to develop the public image of the business

d) the method of getting goods to market

3 Which one of the following is an example of above-the-line promotion?

a) sales promotion
b) direct mailing

c) advertising in a magazine
d) sponsorship

4 A firm decides to set its promotional budget using objective-based budgeting. What does
this mean?
a) It will be set as a percentage of sales revenue.
b) It will be set at a level required to achieve a sales target.
c) It will be set in relation to last year’s budget.
d) It will reflect what the business can afford.

5 A large firm selling industrial goods is least likely to use which one of the following forms of
promotion?
a) Trade faires
b) advertising in specialist magazines
c) personal selling
d) TV commercials

6 Which one of the following is not an example of a sales promotion?

a) money-off coupons
b) BOGOF

c) point-of-sale display
d) personal selling

7 Which one of the following factors will act as a constraint on the promotion decisions of a
business?
(i) the promotion decisions of competitors
(ii) the size of the firm
(iii) the law

(iv) other aspects of the marketing mix

a) (ii), (iii) and (iv)
b) (ii) and (iii)
c)(ii) and (iv)
d) all of them
 Sample Answers

2016 – JUN – P11 – Q.7b

Q. Discuss the best ways a car manufacturer could use the marketing mix to
increase its share of the market. (12 marks)

The marketing mix is the four key factors that need to be considered for the
effective marketing of a business’s products or services. however other 4Ps i.e.,
factors. might also be considerably different businesses. The four Ps of the
marketing mix are price, product, place, and promotion. For the effective marketing
of his cars, the car manufacturer needs to consider all of the above 's making up an
integrated marketing mix ...

Product forms the most integral part of the marketing mix. The product for thecar
manufacturers is his cars increase sales, the can manufacturer can improve his
existing car range or add a new range of cars to diversify his product portfolio. This
portfolio can further help in allocating resources to each car effectively for its
survival and growth in the car industry. with this if the manufacturer. wants to have
sales more than its competitors, it needs to develop a unique selling point for its
cars that differentiates its cars from the competitors which would incline customers
towards his company if the cars are developed keeping in mind what the customers
need.

By having a wide product portfolio, the manufacturer can manipulate can prices
differently for different consumers i. e. price discrimination by targeting different
segments of the market, this way, consumers from different financial backgrounds
will not be lost if car prices are either too high or too low. Secondly, to increase
market share, the manufacturers can reduce prices for most demanded cars which
will lead to an even higher demand for those cars hence increased market share.
demand-based pricing. However, the manufacturer. also,
opt for competition-based pricing if a USP differentiates its -product from that of
its competitors, sales will naturally be increased however this is not a more
consumer-led approach.
Thirdly, the manufacturer needs to consider the place, i. e. how convenient or easily
available to the customers are the cars. This needs to consider where the
manufacturers are located and how many outlets do they have for the cars to be
easily purchased by the consumer The easier the availability, the more customers
the business will attract. After the product development, its prices set and it is out
for public purchasing, it is vital that the consumers get to know about what the new
product is, what its features are, etc. For this, the manufacturer needs to promote
the product well. For more affordable cars, targeted at max markets, the
manufacturer can go for above the- line -promotion. However, for more exclusive
cars, some segments can be targeted individually by using below the line
promotion. For new products, the manufacturer can make use of informative
advertising whereas to increase sales for existing cars, the business can go for
persuasive advertising to develop the brand name. All of the above factors must be
considered all to get he, to form an integrated marketing mix to increase the market
share.
Q. Discuss ways in which poor customer relations could be improved in a large
retail business. (8 marks)

Maintaining good customer relations for any business in a large retail business or a
small-scale farmer's market is very vital in making the business flourish and increase
its sales hence the market share. The first key factor in improving customer
relations in a large business is engagement with the customers. this includes the
overall buying experience, after-sales services as well as any customer services
when asked for. To improve poor relations; a retail business needs to improve all
of these services to attract customer loyalty The retail business needs to check up
on customers regularly to ask their feedback and offer any help regarding the
product or services purchased. This builds up customer confidence in the business

Secondly, to improve poor customer relations, the business needs to adopt a more
customer-led approach. To market their products, the business needs to consider
the 4cs more closely than the 4PS. They need to consider what the customer needs
what is the cost to the customer how to communicate with the customer and lastly
how convenient is the retail store or its products are to the customer. However, for
this, the business needs to change its overall. Marketing objectives changing its
overall business objectives from being product-oriented to being more prod
market/customer-oriented

lastly, since poor relations are already established, the business can make use of
above-the-line advertising to overcome any prejudice or wrong perception about
the business. However, the above-the-line promotion will involve targeting mass
markets and a huge sum of money will have to be paid Targeting the mainaudience
which will be a waste of money as it is not necessary that the business has poor
relations with all of its customers. considering that below - the -line promotion can
also be used to target few worthy customers. IR campaigns can be made used to
improve the business’s reputation ..
Q. Discuss why a business could use different pricing strategies during the life of
a product or service. (12 marks)

A product when launched goes through a few stages until it is officially launched in
the market. Through these four stages, the pricing strategy needs to be changed
with every stage for the product's survival. The four stages that a product is likely
to pass through are introduction, growth, maturity, and decline. without effective
pricing strategies, sales revenue will decrease drastically resulting in a loss for the
business.

In the introduction phase, a business could either use a penetration or skimming

pulling strategy for a new product. A penetration pricing strategy could be used to
set a lower price than competitors using strong promotion to increase overall sales
revenue l targeting a mass market. When using a skimming strategy, the business
sets a high price for the product which is most likely to have a unique selling point.
However, this is targeted at only a specific market segment and only maximizes
short-term Sales revenue.

Whatever the strategies’ used in the introductory phase of the product is promoted
and received well, sales are most likely to grow, this is known as the growth phase,
however, it does not last quite long. If a penetration pricing scheme was adopted,
the business can now raise pricing demand is also increasing. If a slimming strategy
was used, sales could now start declining as the product then moves you. and the
next phase of its life due to being aimed at a Specific segment, hence prices could
now be decreased.

As the product's life cycle proceeds, it moves towards. the maturity phase as the
market is now saturated since all the buyers have already bought the product. At
this time competitive - based pricing strategy is adopted to counter the competitive
products. This could include both. overpricing as well as market pricing to attract
as many customers as possible and not bring overtaken by the competitors selling.
similar- quality substitutes. At this point, the main aim is to
increase market share and maintain the product's position in the market, hence for
a more customer-led approach, the business could make use of dynamicpricing
which sets prices based on the customer's affordability or price discrimination
which charges different. " Market segments differently. This attracts more
customers hence increased sales revenue ..
lastly, when the product approaches its decline stage, sales begin to declinehence
prices need to be cut down to sell off existing stock. However, if the PED A is low
enough prices could even be increased to maximize profits as the demand doesn’t
decrease much.

Q. Briefly explain two uses of the product life cycle to a business. (5 marks)

The product life cycle is the pattern of sales recorded by a product from launch to
withdrawal from a market. It helps with the decisions like when to launch a new
product or even when to withdraw it from the market if it's in the decline phase.
The product life cycle helps identify how cash flow might depend on the cycle for
egg- cash How is negative during the introductory phase of the product as sales are
less but promotional costs might be high. likewise, cash flow differs in all phases of
the product's life cycle.

Q. Discuss how and why promotional activity might change at different stages of
a product's life cycle. (12 marks)

A product life cycle is the pattern of sales recorded for a particular product from its
launch to withdrawal within the market. The different stages of a product are
introduced growth, saturation, and decline. During the introduction phase, there is
a high level of promotion to make it known to the public. This will include
informative advertising to make the qualities and features of the product beknown
to the possible target market. This might include above - the- line promotion if a
penetration scheme is used and below the line promotion if a skimming strategy
Going in the growth phase sales will now start declining. As a result, to attract
customer loyalty, brand image needs to be developed hence persuasive advertising
will be needed which does not contain details regarding the product.It only focuses
on making the brand be known to existing and potential customers, so they keep
buying the product, acting as a reminder hence increase purchases. This might also
be After growth comes maturity or the saturation phase where although the sales
cease to grow, but do not decrease. This means that the consumers have already
bought the product that they want hence the promotional needs to be modified
accordingly. persuasive advertising continuesto differentiate the product from
those of the competitors, this promotionalactivity is not as high as the introductory
phase but is significantly high to Inform customers

of any product improvements, newer prices, or any other fixes in the product. As a
product's life progresses, it reaches the decline stage where the product's demand
decreases due to maybe competitors getting stronger or technical improvements.
Sales decline hence promotional activity also becomes very limited, almost slows
down. The remaining promotion/advertising might now onlybe done to inform the
market of declining prices, discounts, or clearance sales to get done with the
remaining inventory of the product. As explained above, promotional activity
transitions from being very high to low within the productlife cycle.
 Chapter 19
13. Define the term ‘below-the line promotion’.[2]

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14. Briefly describe two methods of ‘above-the-line promotion’.[3]

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15. Define the term ‘marketing mix’.[2]
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16. Briefly explain two factors a manufacturing business might consider in deciding on an appropriate
channel of distribution[3]
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17. Explain how viral marketing could be an important part of marketing for a business[5]

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18. Analyze, using examples, why packaging could be important in the marketing mix[8]

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19. Discuss how a house construction business could improve its customer relations[12]

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20. Discuss factors that could determine the success of a business that has decided to set up an online
shop to sell beauty products[8]
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21. Discuss the best ways a car manufacturer could use the marketing mix to increase its share of the
market.[12]

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22. Discuss factors that could determine the success of a business that has decided to set up an online
shop to sell beauty products[8]
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Marketing Analysis
Marketing decisions about prices, products, promotions and distribution should be based on as much up
to-date and relevant information as possible. For example, how useful would it be for marketing managers
to know:

• How much will demand change if we raise prices by 10%?

• How much will sales increase if we raise promotion spending by $1m a year?

• How much will demand for our products be affected by changes in consumer incomes?

Marketing departments try hard to assess the impact on demand of these three variables: the price of
the product, promotional spending, and consumer income levels. A form of measurement has been
developed to help in this assessment. It is called elasticity of demand.

Price Elasticity of Demand:

Price Elasticity of Demand is a measure of the responsiveness of demand to a change in price.

The demand for a product may be price elastic or price inelastic. The potential range of elasticity and its
effects are given in the table below.

Factors that affect price elasticity of demand are

• availability of substitutes,
• if the good is a luxury or a necessity,
• the proportion of income spent on the good,
• how much time has elapsed since the time the price changed.
Impact of price elasticity of demand on business decisions
There are two main ways PED could impact on business decisions:

• Pricing decisions: If a bus service operator is considering changing its prices, then knowing the PED
on different routes will help. It could raise prices on routes with low PED (inelastic demand) and
reduce them on routes with high PED (elastic demand). These decisions will increase the total revenue
of the bus operator.
• Wage increase decisions: If the PED for the products of a business is low (inelastic), then a demand
for wage increases from employees is more likely to be accepted than if PED was high. This is because,
if the business increases wages, costs will rise but the marketing manager could increase product
prices with little impact on demand. If PED was high (elastic), then a wage increase could not easily
be passed on in the form of higher prices.

Uses and Limitations of Price Elasticity of Demand:

• + Making more accurate sales forecasts
• + Assisting in pricing decisions
• - PED assumes that nothing else has changed for example competition level or changes in industry
• - A PED calculation becomes outdated quickly and hence will have to be often recalculated due to
market changes
• - It is not always easy, or indeed possible, to calculate PED. The data needed for working it out might
come from past sales results and this means PED is based

Income Elasticity of Demand:

The elasticity of demand measures how factors such as price and income affect the demand for a product.
The income elasticity of demand measures how the change in a consumer’s income affects the demand
for a specific product. You can express the income elasticity of demand mathematically as follows.

Inferior good: is a type of good whose demand declines when income rises.
In other words, demand of inferior goods is inversely related to the income
of the consumer.
Impact of income elasticity on business decisions

There are two main ways income elasticity results could influence business decisions:

• During a period of economic growth and rising consumer incomes, businesses are
likely to focus on increasing output of income-elastic products such as luxury goods.
New product launches should before products that are likely to have a high-income
elasticity of demand.

• During an economic recession when incomes for most consumers fall, the reverse will be the case.
Businesses will focus on producing more basic versions of their products, which can be sold at a lower
price. Businesses that sell inferior goods may have to increase output to cope with the expected
increase in demand. New product launches should focus on affordable products rather than those
with an exclusive image and expensive features.

Promotional elasticity of demand

this measures the responsiveness of demand for a product following a change in the
amount spent on promoting it.

Cross elasticity of demand:

Measures the responsiveness of demand for a product following a change in the price of another
product

If the result of the above formula is negative, it means that the two goods are ‘complements’ to each
other – in other words, they are often bought together. If the result is positive, it means that the two
goods are substitutes and are competing for consumer spending.
Process of New Product Development:
In many fast-changing markets, there is a constant need to develop new products. If this is not successfully
undertaken, then a business will find itself trying to market products that are perceived as being out-of-
date, based on technology that has been overtaken by products marketed by other businesses. This is
particularly true for the consumer electronics market, cars and cameras. New product development is also
very important in the pharmaceutical industry, where the opportunities to make huge profits from new
medicines are considerable

There are seven stages in the process of a new product development These are;

• Generating New Ideas – Ideas may be generated from various sources such as employees, customer
surveys, adaption of competitors ideas, brainstorming in groups
• Idea Screening – This involves eliminating those ideas that does not seem to be commercially
feasible
• Concept development and Testing – this involves detailed consideration of the ideas shortlisting.
This process may involve consideration of matters such as;
a) Who are likely customers of the product
b) What features should be incorporated
c) What will it cost to produce
d) What will the customer be willing to pay

• Business Analysis – this involves consideration of the likely impact of the new product on company’s
costs, sales and profits. Company should consider whether they have sufficient finance to develop
the product
• Product Testing – this involves technical performance of the product and whether it is likely to meet
consumers’ expectations. This should involve developing prototypes for a product, testing it in
different conditions and making required changes
• Test Marketing – The product is launched in a small market before a full launch. This allows to
notice the response of the customers. Risks associated with a full scale launch are dramatically
reduced.
• Commercialization – this involves full scale launch of the product and corresponds the introduction
phase of the product life cycle
Research and development:
Effective R&D is essential in some industries if a business is to keep at the forefront of its market and is
to retain or recapture a competitive advantage. Examples of
firms that have improved their performance with R&D include
Apple, Samsung, Toyota and Honda

Governments of country are usually really interested that the

businesses operating in a country work on the R&D side. They
assist businesses by providing legal security by allowing them
to register patents so to avoid unauthorized copying.

Factors that influence the level of R&D expenditure by a business

• The nature of the industry: Rapidly changing technologies and consumer expectations in
pharmaceutical products, defense, computer and software products, and motor vehicles lead to the
need for substantial investment in R&D by leading businesses.

• Level of R&D spending by competitors: In many markets, it is essential to spend as much as, or more
than, competitors if market share and technical leadership are to be maintained.

• Business expectations: If business managers are optimistic about the future state of the economy,
economic growth and consumer demand, then they are more likely to agree to substantial budgets
for R&D.

• The risk profile or culture of the business: Management’s willingness to take risks, and to invest for
the long term, affects the R&D expenditure of a business. A short-term objective of maximizing profits
will discourage managers from investing in R&D.

• Government policy towards grants to businesses and universities for R&D: Government support
programs, and the range and scope of tax allowances for such expenditure, will influence decisions by
businesses.
Sales Forecasting:
If marketing managers were able to predict the future accurately, the risks of
business operations would be much reduced. If a precise forecast of monthly sales
over the next two years could be made (sales forecasting), the benefits to the whole
organization would be immense:

• The operations department would know how

many units to produce, how many materials
to order and would hold the correct level of
inventories.

• the marketing department would be aware

of how many products they would need to
sell and distribute.

• The human resources workforce plan would be more accurate, leading to the
appropriate number of employees with the right skills.

• Cash flow forecasting would be much more accurate

In reality, of course, the 100% accuracy in sales forecasting cannot be achieved, as

there can be various uncontrollable factors that can influence sales. Still, most firms
make sales forecast to assist in the planning process as much as possible.
Methods of Sales Forecasting :
Sales forecasting techniques can broadly be classified into two areas. First approach is to ask the opinions
of experts and customers (Qualitative) and the second approach is to analyze past Page 103 sales results
to try use these to predict the future (Quantitative). We will discuss both approaches one by one.

Qualitative Techniques –
a. Sales Force Composite – as the name suggests, this method involves asking the sales force
representatives about their opinion about the sales forecasts. They are usually in more contact
with customers and have more idea about level of sales expected. However, sales representatives
may not be aware of macroeconomic developments or competitors actions.
b. Delphi Method – This is a long range qualitative forecasting technique that obtains forecast
from a panel of experts. These are experts and specialists of their fields and give their forecasts
extremely independently. Their opinions are then used to predict future sales. c. Consumer
Surveys – These are a form of market research and this involves asking a sample of customers in
the form of questionnaires or interviews about their expected level of demand for the product.
d. Jury of Experts – This is when specialists within the business are used to make forecast for
the future sales. This is similar to Delphi technique but the difference is, Delphi technique use
experts which are not directly employed by the business

Quantitative Techniques –
a) Correlation – establishing casual relationships – This method involves establishing relation
between the sales and the factors on which the changes of sales mostly depends. Such as if sales are
mainly effected by the level of advertisement expenditures, then in order to make sales forecast, first
the business will estimate the future changes of advertisement expenditure and likewise it should be
related to changes in future sales i.e. if advertisement expenditure is expected to increase in next 6
months so will the sales increase in the next six months.

Similar relationships can be established between sales and.

• Prices
• Competitors promotional activity
• Changes in commission payment to sales staff
• Levels of disposable income
• The weather

However it should be remembered that, establishing correlation does not prove that there is a cause
and an effect. Sales could rise due to various other factors such as seasonal variations.
b) Time Series Analysis – This method of sales forecasting is entirely based on past sales data. Time
series analysis have two major forecasting techniques. These are;

i). Extrapolation – This is where past sales data is plotted on a time series graph and the actual line
can be extended or extrapolated into the future along the trend of the past results.

ii. Moving Averages – this method is more complex than simple graphical extrapolation. It allows the
identification of underlying factors that are expected to influence future sales. These are;

• The Trend: the underlying movement in the time series

• Seasonal Fluctuations: the regular and repeated variations that occur in sales data within a period
of 12 months
• Cyclical Fluctuations: these variations in sales occur over period of time of much more than a year
and are due to the business cycle
• Random Fluctuations: These can occur at any time and will cause unusual and unpredictable sales
figures – examples include exceptionally poor weather or negative public image due to a certain
scandal.

Benefits and Drawbacks of Moving Averages Sales Forecasting Technique:

+ It is useful for identifying and applying the seasonal variation to predictions

+ It can be reasonably accurate for short term forecasts in reasonably stable economies

- It is a fairly complex calculation

- Forecasts further into the future become less accurate as results are based entirely on past data
Marketing strategy
Marketing Plan: is a detailed, fully researched written report on marketing objectives and
the marketing strategies to be used to achieve them.

The key contents of a typical marketing plan are:

Purpose of the plan and Mission of Business The first part of the plan is to provide the reader
with necessary information to understand the purpose of it. Background information of the
business, including its mission statement – will be particularly important if the audience for the
plan is not familiar with the company.

situational analysis – where the business is now, which includes market research his situational
analysis could cover five main areas.
a) Current Product Analysis
b) Target market analysis
c) Competitor Analysis
d) Economic and Political Environment
e) A SWOT Analysis – to be studied later

marketing objectives – The next question a marketing plan should provide an answer to is:
Where do we want to be? All marketing strategies need clear marketing objectives to focus on.
These objectives should be SMART so that progress towards achieving them can be monitored at
regular intervals. Marketing objectives can be expressed in terms of:
a) sales level (units or monetary value) to be reached by a given date
b) market share target
c) rate of sales growth
d) profit margin targets for the new product

Marketing strategy – This section of the plan analyses how the business intends to achieve its
marketing objectives. Marketing strategies could include:

• mass or niche marketing

• selling to the existing markets and consumers
• selling to a new market segment
• developing new markets (e.g. in other countries).
marketing mix – Once the marketing strategy and objectives are set, the marketing mix of a
product or service is designed. This includes all the things studied in chapter number 18 and 19 –
Product, Price, Place and Promotion.
marketing budget –There needs to be a certain financial allocation for the plan which will help
the plan to be implemented. This budget can be set in various different ways which were studied
earlier in chapter 19.
executive summary and time frame for implementing the plan. This section gives a short overall
summary of the plan and the timescale over which it will be introduced

Marketing planning benefits

• The marketing plan is an essential part of the overall business plan of existing businesses or
proposed new start-ups. The plan should demonstrate that a market exists for the product;
that it would be profitable to exploit this market; and that the marketing-mix tactics are
appropriate for the market.

• Marketing planning reduces the risk of failure of strategies that are very different to those
the business has followed before. By following the stages of a plan, major potential risks are
much reduced because clear objectives are set, market research is undertaken, a coordinated
strategy is used, and promotion spending is kept within budget.

• Planning marketing activities helps to give clear direction to other departments within the
business: finance prepares the cash resources needed, operations ensure sufficient output is
produced and human resources recruits and trains the workforce needed.

Marketing planning limitations:

• Marketing plans take up much management time and a small business may not have the
skilled management expertise to produce an effective and professional plan.

• Any plan can be affected by events, and, in a fast-changing market, a complex and inflexible
plan could be a disadvantage. When facing changes, such as the entry of a new competitor,
only a flexible marketing plan is likely to be successful.

• A plan that is not based on adequate research of the market and customers’ preferences can
result inappropriate marketing strategies being adopted
Approaches to Marketing Strategy:

• Consistency- When your content quality, quantity or schedule isn’t consistent, it can confuse
your customers. Keeping with a regular strategy not only helps create a better customer
experience but it also helps build credibility, reputation, and brand trust

• Coordination-According to the marketing concept, an organization should try to provide

products that satisfy customers' needs through a coordinated set of activities that also allows
the organization to achieve its goals. Customer satisfaction is the marketing concept's major
objective.

• Focused- A focus strategy is a method of developing, marketing, and selling products to a

niche market, which could be a type of consumer, product line or geographical area. A focus
strategy would center on the expansion of marketing tactics for your company while aiming
to establish a new relationship with your target audience.

The Changing role of IT and AI in Marketing:

IT Applications in marketing Information technology in marketing helps gathering

information about consumer preferences and needs. It is also a tool for generating
needs for a product or service. At the present stage of development of the digital
society, marketing (including advertising) have become personalized The following
are widely used IT applications in marketing:

• Internet: websites are now business necessities for the marketing of products.
• Email: Most businesses have created opt-in email lists which give them a large base of
customers who are already interested in their products. E
• Mobile: mobile marketing reaches customers on mobile (cell) phones and other mobile
devices through text messaging and applications.
• In store: digital signage allows businesses to capture the attention of customers and market
specific products to them
• Social media: this is both a major opportunity and a great challenge for businesses when it
comes to product marketing.
AI Applications in marketing:
AI marketing uses artificial intelligence technologies to make automated decisions based on data
collection, data analysis, and additional observations of audience or economic trends that may
impact marketing efforts. AI is often used in marketing efforts where speed is essential. AI tools
use data and customer profiles to learn how to best communicate with customers, then serve
them tailored messages at the right time without intervention from marketing team members,
ensuring maximum efficiency. For many of today’s marketers, AI is used to augment marketing
teams or to perform more tactical tasks that require less human nuance. AI marketing use cases
include

• data analysis
• natural language processing
• media buying
• automated decision making
• content generation
• real-time personalization

Strategies for International Marketing:

A business will look for international marketing because.

• Saturated home markets – when the competition is severe, and market is not growing then
the business may consider moving to some other country

• Greater opportunity for selling goods in other countries without tariffs and quotas. The
national markets may be saturated. Moving internationally gives the chance of higher sales,
economies of scale and improved profitability.

• One global marketing strategy can be used to create a global brand identity. This saves on the
costs of ‘different products for different markets.

• By sourcing and importing materials and supplies from low-cost countries, with no tariffs or
quotas, businesses should be able to reduce prices and become more competitive.

• More opportunities to arrange mergers, takeovers and joint ventures with businesses in other
countries which could make marketing in other countries easier.
Challenges faced in international marketing:

• Political differences – changes of government can cause instability in some countries, and
this can increase the risk of doing business there.

• Economic and Social differences – differences in living standards, tax rates, interest rates
and various other changes main have to considered thoroughly by the business.

• Legal differences – different countries have different laws and regulations, and businesses
may have to have proper legal department to deal with this

• Cultural differences – This is a key factor to consider in international marketing, yet it is often
difficult to define and measure. Cultural differences are not written down as laws are, yet
they can exercise as powerful an impact on people’s behavior. Failure to recognize cultural
differences – including language differences can have severe consequences for the business

There are, then, two broad approaches to selling goods and services internationally. These are
known as pan-global marketing and global localization.
Pan-global marketing strategies:

A pan-global marketing strategy is one that adopts standard products, brand messages and
promotional campaigns across the whole world. More limited developments of this concept
include pan-European or pan-Asian strategies, where the geographical area for such common
approaches is more restricted. This strategy of not adopting different marketing strategies for
different countries can have a number of advantages and disadvantages for businesses.
Global Localization – this involves adopting the marketing mix, including differentiated products,
to meet national and regional tastes and cultures. This strategy will have following benefits and
limitations the world’s largest fast-food organization, with top brands such as KFC and Pizza Hut,
has adopted this approach to great success. It offers all its global franchisees and branches the
benefits and security of a giant multinational corporation. However, it differentiates most aspects
of its marketing mix between different countries and markets. For example:

Choosing the strategy to develop a global market

The choice of strategy will be influenced by the differences between the existing national market
and the target global markets. The greater these differences are, the greater the need for a
localized strategy and not a pan-global strategy. These are the main differences between
international markets

• Economic and social differences

• Legal differences
• Cultural differences
• Differences in business practices

Selecting the method of entry into international markets:

Exporting – A business can export in international market either directly or indirectly

Direct Exporting: involves selling goods without using any intermediaries such as agents. This will
have benefits and limitations. These are

+ Company will have complete control over international marketing

+ No commission is taken by intermediaries
- The business might not have knowledge of the foreign market
- The exporting business will have to handle the administrative issues such as transporting,
paperwork etc.
Indirect Exporting involves selling goods with the use of intermediaries such as agents. This will
have benefits and limitations. These are.
+ Agents will have knowledge of the new market
+ Transport and administrative procedures become responsibility of agents
- Intermediaries keeps their share of profits

- The intermediaries will have other firms’ products to sell as we

International Franchising – this means that foreign franchisees are used to operate a firm’s
activities abroad.

Joint Ventures – this is where the business enters into a joint venture with a business that is
already operating in the foreign market

Licensing – this is when a business allows another firm in another country to produce its goods
under license.
Direct investment in Subsidiary – this is when a business opens up their subsidiary company in
foreign market