Studied by 2 peopleWhat are the Four P’s?
PRODUCT - firm must identify customer’s needs and fulfil needs by coming up with product.
PRICE - price must be one customer thinks is good for value.
PROMOTION - product must be promoted so customers are aware that is exists.
PLACE - can refer to channel of distribution used to get product from the company to the customer. E.g. whether it is sold through retailers or sold to customers.
What factors can affect the marketing mix?
CHANGES IN TECHNOLOGY - improvements in e-commerce means more companies are selling their products online rather than in store. Changes in digital communication have also affected how companies promote their products online.
CUSTOMERS NEEDS AND WANTS CHANGING - business needs to adapt the marketing mix to then meet these changing needs.
COMPETITION IN THE MARKET AND BUSINESS’S COMPETITORS - e.g. if competitors are offering same products at lower price, the business may have to lower prices to stay competitive. Business may also have to adapt new products to attract the attention of the market.
How different parts of the marketing mix affect each other?
CHANNEL OF DISTRIBUTION that product is sold through - can affect pricing and promotion because items sold online will be cheaper than in store because business may have lower fixed costs. Retailers will use displays whereas products online may use online advertising.
QUALITY AND PRICE WILL AFFECT PROMOTION - is low quality and cheap, price may be emphasised in promotional material. If product is high quality and expensive, promotional material may emphasise quality.
Define segmentation and give examples of how a market can be segmented
SEGMENTATION is people within a market are divided into groups.
Market can be segmented by its demographics - these are characteristics :
Age
Income
Gender
Other ways :
Location
Lifestyle
Why might businesses map the market?
MARKET MAPS ARE (OFTEN) IN FORM OF A DIAGRAM AND INCLUDE 2 VARIABLES.
helps business to understand its location.
find out competitors selling similar products and gaps in market.
allow business to see how customers perceive key features of its competitors’ products.
see if part of map with no product.
once a gap has been spotted, business will need to carry out research to confirm whether or not there is demand for type of product.
if they identify that there is demand, the business can focus on creating products with the features needed to fill the gap.
How can market data inform business decisions?
Knowing market share of different businesses, the cost and suppliers of competitor products may help with business decision if it should lower prices.
segmentation - helps business to decide on best marketing approach for its target market.
can show if new product will be in competition with existing products on market.
business can investigate how demand for a product is changing over time.
business may want to study the effect of changes it makes to its products, such as changing the packaging or adding features.
Why market research is important and how market research helps businesses
Market research helps businesses to understand its customers and competitors and can be used to identify the business’s customers to satisfy their needs.
Make informed decisions - it provides the business data that can be used to support decisions. They need to consider products, where to sell them, promotion and price.
Increased sales - knowing demand can help business to increase sales by adjusting their pricing.
Stay competitive - gathering info on products/prices of competitors can help show how they are different. This can help the business improve its strategies to be more competitive.
Reduce risks - if business sell products that customers don’t want or tries to sell products at a price that’s too high or in the wrong location, it could lose money. Market research can help the business to make decisions that can prevent this.
Define Primary research and give examples
PR involves getting info from customers or potential customers. This involves asking customer questions or watching how people behave. PR provides data that is up-to-date, relevant and specific to needs of business. It is expensive and time-consuming.
QUESTIONNAIRES - documents with questions that are given to people. They are cheap and can be used to sample a large geographic area but not many people might respond.
SURVEYS - are used to collect info from people, over the phone or using questionnaires. Phone surveys have higher rate of response but can be expensive.
INTERVIEWS - involve asking people questions face-to-face. They have good rate of response but can be expensive.
FOCUS GROUPS - small group of people discuss their attitudes towards a product. They are faster than surveying several people individually but quieter individuals may not get opinion across.
OBSERVATION - involves observing what people do or say instead of asking. They are cheap and give accurate information but allow customers to give opinions.
TRIALLING - is where a business launches a product to a small selection of people to begin with and records how it sells. They can then make changes to improve sales before launching it to a larger market. It lets businesses test in a real market to see how their product will be received. However, competitors will be able to get an idea of what business is doing.
Define Secondary research and give examples
Secondary research gives businesses access to wide range of data. Useful for looking at the whole market and analysing past trends to predict future. Involves looking at things like market research reports, government publications, articles in newspapers, magazines and the internet. It is cheaper than primary research and is instantly available but may not always be relevant to the business’s needs.
GOVERNMENT PUBLICATIONS
ARTICLES IN NEWSPAPERS
MAGAZINES
INTERNET
SOCIAL MEDIA can also be used to see what is POPULAR or TRENDING
What is the difference between QUANTITATIVE and QUALITATIVE date?
QUANTITATIVE - anything you can measure or reduce to a number (QUANtitaive - QUANtity) e.g. ‘how many…'?’
QUALITATIVE - all about peoples feelings and opinions. Allows people to voice their opinions and will give the business a great depth of info. e.g. ‘how do you feel about…?’
Explain a product life cycle
RESEARCH AND DEVELOPMENT - scientific research is often vital. Large businesses have teams of “applied” scientists who try to use recent scientific discoveries to develop new/improved products. R&D can lead to innovation where people invent new products.
INTRODUCTION - product is launched and put on sale. Advertising and sales promotions. Place is important.
GROWTH - demand for product increases until established.
MATURITY - demand reaches peak and promotion is not as important. Adverts will continue but less is needed. Product will become more available. No more room to expand.
DECLINE - demand falls and other products take over.
What are extension strategies? Give examples
What businesses can do to keep their products selling in the decline phase of the life cycle. Extension strategies can be expensive because the business has to spend more money on product.
ADDING MORE/DIFF FEATURES - can make it more useful or more appealing.
USING NEW PACKAGING - new design may make it eye-catching so people are likely to see it. Can attract new market.
TARGETTING NEW MARKET - can find new market for products. They can then target their promotional material at the new markets to extend life.
CHANGING ADVERTISEMENT - new advertising campaign to make it more appealing to original/new market.
LOWERING PRICE - reduce product price/special offers/competitions.
What is a product portfolio?
PP is a list of all the products a business sells
What is the Boston Matrix?
BM is a way for a firm to analyse its product portfolio. The market share of each product is considered, as well as how fast the market product is in is growing.
QUESTION MARKS - all new products. Have small market share but high market growth. They are not profitable yet and need heavy marketing to give them chance of success.
STARS - have high market share and high market growth - future cash cows.
CASH COWS - bring in lots of money. High market share but low market growth - they are in maturity phase. Costs are low because they have already been promoted.
DOGS - low market share and low market growth. A lost cause. Not a lot of profit.
Business can use money from cash cows to invest into question marks.
How can businesses broaden their portfolios?
Adding products to existing range by developing new products based on their current ones.
Increasing range of products by developing products that are different from current ones.
What is DIVERSIFICATION?
is designing and producing more products. It reduces risk that a decline in sales of one product will harm the business, meaning less threat to profit.
What is the difference between market-driven and product-driven?
MARKET-DRIVEN - firms using market research to find out what target market wants, then makes it meaning the product is useful.
PRODUCT-DRIVEN - firms will design or invent a product and then sell it meaning they often make something nobody wants.
What is differentiation and how can differentiation attract customers?
Differentiation is making products/services distinctive in market. One way to differentiate is to make a unique selling point. You can promote product in a way that makes it seem different. Price can also be changed. Product design is also important for product differentiation.
Design mix contains:
Function - must be fit for purpose
Cost - good design will lead to low manufacturing costs mean high profit
Aesthetics - look attractive and distinctive
What are the benefits of developing new products?
increase overall sales for business and may extend life cycle of existing products.
may appeal to new market segment.
can charge higher prices for new products before competitors bring out similar products.
can be good for firm’s reputation if being first to launch exciting products.
What are the risks of developing new products?
can be costly and time-consuming.
business risk running out of money if investing too much into research and development.
can end up wasting resources by developing something customers don’t want.
businesses might not be able to produce the new production on a large scale at a low enough cost.
businesses risk ruining their reputation if the new product is of poor quality.
Internal factors that affect pricing decisions
TECHNOLOGY - e.g. expensive machinery is needed to make product, this can increase the price but in long term, machinery may reduce costs since processes are more efficient.
METHOD OF PRODUCTION - flow production may require machinery but will likely benefit from economies of scale.
PRODUCT LIFE CYCLE - when product is in introduction or growth phase, firm may charge low or high price to encourage people to buy it. When it is in maturity phase, firm may need to bring its price in line with competitors prices.
External factors that affect pricing decisions
COMPETITION - if product is in competitive market, firm needs to look at what competitors are charging for similar products. If price is too high, customers will just choose a competitor’s product. If too low, customers will query whether quality is good.
MARKET SEGMENTS - if product is aimed at segment with high income, price will be higher than similar product aimed at lower income segment.
COST OF RAW MATERIALS - will affect cost of each unit. High quality raw materials will lead to high unit costs and so high prices will be needed to cover costs.
What are the pricing strategies businesses could use?
PRICE PENETRATION - where a firm charges low price when product is new to get lots of people to try it. Good way to establish market share and will increase the price when there are loyal customers.
LOSS LEADER PRICING - when product is set below cost. Firm doesn’t make profit but customers likely to buy other products as well.
PROMOTIONAL PRICING - products put on offer for limited period of time to help increase demand so good to increase market share or sales revenue.
PRICE SKIMMING - where firms charge high as they know the demand will be high and then lowers the price.
COMPETITIVE PRICING - where firm has to charge similar prices to other firms.
COST-PLUS PRICING - when not in competitive pricing with other producers. Firm works out total cost of making product and adds a certain amount depending on how much profit they want to make while still having reasonable demand which can be done by using a mark-up (add percentage to cost) or using profit margin.
Why do businesses promote?
to inform customers about product and USP.
to persuade customers to buy product.
to create or change the image of product.
to create or increase sales.
Why is good branding important?
Products with strong brand image are easily recognised and liked by customers. A strong brand image is usually built up over number of years.
What are the methods of advertising?
NEWSPAPERS - local can reach market segment in specific area and national can reach wide audience but number of people reading newspapers are declining.
MAGAZINES - are aimed at specific market segments like people with same hobbies. Businesses can use adverts in magazines to target these segments but adverts can be pricey but better quality.
POSTERS AND BILLBOARDS - placed near target audience and stay for a long time and seen by many people but don’t look at them for long.
LEAFLETS, FLYERS AND BUSINESS CARDS - are cheap to produce and distribute. They can be targeted at certain areas and people can keep them but people see them as junk.
TELEVISION - seen by wide audience and include sound and images. Long messages can be delivered but are very expensive.
INTERNET ADVERTS - can be seen any time by large, targeted audience and can include sounds and moving images but there are lots of adverts online.
RADIO - can be heard by wide range of people and include sound. Adverts on local stations are good for companies that want to target a market segment in particular location.
What is sponsorship and why do businesses do it?
Sponsorship can create high profile for your business or brand name, it’s also a good way to target a market segment that is characterised by lifestyle.
What is public relations?
PR involves communicating with media and can be a cheap and easy way to get firm noticed by wide audience. Once firm has spoken to media, it has little control over what the public get to see/hear.
How do firms use new technology for promotion?
SOCIAL MEDIA - quick, easy and cheap way for firms to promote. Firms use pages to advertise products, offer sales promotions, share stories about products and built up excitement for launches. Able to make lots of account for different parts of business and can add any info they like. However negative comments can be made by customers.
TARGETED ADVERTISING - individual’s internet search history can be used to create targeted advertising. Web pages have spaces for adverts, but adverts found in these spaces will depend on what individual has searched for in the past. So the adverts will be more likely to be something that the individual is interested in and be more effective.
E-NEWSLETERS - business’s mailing list. This means that they will get e-newsletters from business about promotion and offers.
What are the methods of sales promotion?
competitions
free samples
special offers, e.g. 2 for 1
coupons
point of sale displays, e.g. branded display case at front of shop
free gifts
loss leaders, e.g. reducing price of one product
What is a promotional mix and what does it include?
Firm use combo of different promotional methods to promote product
FINANCE AVAILABLE - large firms can usually afford to spend more than small ones.
NATURE OF THE PRODUCT OR SERVICE - some products need lots of description to say what they are.
WHAT COMPETITORS ARE DOING - a firm might want to use social media if all of its competitors are.
NATURE OF MARKET - if market is growing, firm may be willing to spend more on promotion as they are predicting a large increase in sales, which will cover costs.
TARGET MARKET - promotions might need to be in place where they’ll be seen by the right people, and need to be presented in a way that they’ll appeal to the right people.
Common channels of distribution
SELLING TO WHOLESALERS - wholesalers buy products in bulk and store them in warehouse. Manufacturers sell products to wholesaler, then consumer or retailer buy product from wholesaler. Selling to wholesaler means the manufacturer gets bulk orders and doesn’t have to store lots of stock.
SELLING DIRECTLY TO RETAILERS - retailers sell products to consumer. Selling directly to retailers means that the manufacturer can provide the retailer with product knowledge so retailer can provide better customer service. Retailer can help promote products.
SELLING DIRECTLY TO CUSTOMERS - e-tailers sell products via internet - they use e-commerce. They can sell to a global so they have more potential customers than if they used stores.
Why is e commerce important?
the internet can be accessed all over the world and a business may want to target foreign countries with online promotions.
What are internal and external sources of finance?
Internal comes from within business and is quick and easy to access. External comes from outside of business and needs to be paid back.
Internal - personal savings, retained profit, selling fixed assets
External - bank loans, overdrafts and mortgages, loans, new partners, trade credit, government grants, hire purchases, crowd funding, share capital, venture capital and stock market flotation
Short term sources of finance
Trade credit
Overdrafts
Selling fixed assets is medium-term
Long-term sources of finance
Government grants
loans
hire purchases
personal savings
share capital
retained profit
venture capital
stock market flotation
crowd funding
Factors affecting choice of finance
size and type of company
amount of money needed
length and time the finance is needed for
cost of the finance
What is break even and how do you work it out?
Break even is the level of sales a firm needs in order to just cover its costs
break even = fixed costs / sales price-variable costs
Note
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