CIE As Level Business | 3.3 The Market Mix - Marketing

Marketing mix

The four key decisions of *product, price, promotion* and *place* that must be taken to enable the effective marketing of a product.

Product

Goods and services that are the end result of the production process and are sold on the market to satisfy customer needs.

Unique selling point (USP)

The attribute of a product that makes it different from competitors products.

Product differentiation

The unique qualities of a product that lead to a difference between the product and competitors' products.

Intangible attributes

The subjective opinions of customers about a product which cannot be measured or compared easily.

Tangible attributes

The measurable features of a product, which can be easily compared with other products.

Brand

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

New product development (NPD)

The design, creation and marketing of new goods and services.

What are the *advantages* of *new product development*?

1. *Increased sales + revenue*

—> New products attract new and existing customers.

—> ✅: Can *boost sales* + *expand market share*.

2. *Competitive advantage*

—> Innovative products differentiate the business.

—> ✅: Helps firm *stand out from competitors*.

3. *Meet changing customer needs*

—> Consumer preferences change over time.

—> ✅: Maintains *customer satisfaction*.

What are the *disadvantages* of *new product development*?

1. *High costs*

—> Research, design, testing, and marketing are expensive.

—> ✅: Increases *financial risk*.

2. *Risk of failure*

—> Many new products do not succeed.

—> ✅: Can lead to *losses + wasted resources*.

3. *Time-consuming*

—> Development + testing tasks time.

—> ✅: Delays *market entry* and revenue generation.

Product positioning

Consumers' view of a product or service as compared to its competitors.

Product portfolio analysis (PPA)

Analysing the existing products of a business to help allocate resources effectively between them.

Product life cycle

The patterns of sales for a product from launch to withdrawal from the market.

What are the stages of the product life cycle?

1. Development

2. Introduction

3. Growth

4. Maturity

5. Decline

Extension strategy

A way of keeping a product at the maturity stage of the life cycle and extending the life cycle.

What are the *product-related extension strategies*?

- Product improvements

- Line extensions

- Repositioning

What are the *promotion-related extension strategies*?

- Changes to advertising

- Price promotions

- Sales promotions

Boston matrix

A method of analysing the product portfolio of a business in terms of market share and market growth.

What are the 4 categories of the Boston Matrix?

1. *STAR* — high market share + high market growth

2. *CASH COW* — high market share + low market growth

3. *QUESTION MARK* — low market share + high market growth

4. *DOGS* — low market share + low market growth

What are the limitations of the Boston Matrix?

1. *Over-simplification*

—> Only uses *market growth + market share* to assess products.

—> ❌: Ignores other important factors like competition, costs, and brand strength —> may lead to *poor decisions*.

2. *Difficult to measure accurately*

—> Market share + market growth can be hard to calculate precisely.

—> ❌: Data may be *inaccurate / unreliable*.

3. *Assumes high market share = high profit*

—> This is not always true (e.g. high costs may reduce profit).

—> ❌: Can lead to *misleading conclusions*.

What are *hold strategies for STARS*?

- Allocate more resources to *support further growth*.

- *Build market share* through continuous investment in product development, marketing and innovation to maintain a strong market position.

- Capture additional market segments by *expanding the product's reach* into new geographical markets.

What are *harvest strategies for CASH COWS*?

- *Maintain market dominance* by protecting existing market share through branding, quality and customer loyalty.

- *Optimise profitability by streamlining operations*, reducing costs, and maximising efficiencies to maximise profits.

- *Extract* cash flows to invest in other products or new ventures.

What are *build strategies for QUESTION MARKS*?

- Conduct market research and analysis to determine the *potential for growth and profitability*.

- Invest selectively and *allocate resources strategically to question marks with the highest potential* and withdraw resources from those with low potential.

- Invest in marketing, research and development to increase market share and convert them into stars.

What are *divestment for DOGS*?

- *Sell off the product* or business unit if it no longer fits with the company's overall strategy or long-term objectives.

- Harvest or maintain if the product can still *generate some cash flows*.

- If the product has no future prospects *plan for an orderly exit* from the market.

Pricing strategies

Methods used to establish the best price for a product or service. It helps a business to choose the best prices to maximise profits.

Mark-up pricing

Adding a fixed mark-up for profit to the unit cost of *buying in* a product.

Cost-plus pricing

Setting a price by *calculating a total unit cost* for the product then adding a fixed product mark-up.

What are the *advantages* of *cost-plus pricing*?

1. *Simple to calculate*

—> Price is set by adding a fixed margin to cost.

—> ✅: Easy to use, saving *time + effort*.

2. *Ensures costs are covered*

—> All production costs are included in the price.

—> ✅: Reduces risk of *making a loss*.

3. *Stable pricing*

—> Prices don't fluctuate frequently.

—> ✅: Provides *certainty for both business + customers*.

What are the *disadvantages* of *cost-plus pricing*?

1. *Ignores demand*

—> Does not consider how much customers are willing to pay.

—> ❌: May results in *low sales* if price is too high.

2. *Ignores competition*

—> Prices are not based on competitors' prices.

—> ❌: The business may become *uncompetitive*.

3. *Inaccurate cost estimates*

—> If costs are miscalculated, prices will be incorrect.

—> ❌: Can lead to *losses / overpricing*.

4. *May discourage efficiency*

—> Businesses can simply increase prices if costs rise.

—> ❌: Reduces incentive to *control costs*.

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.

What are the *advantages* of *contribution-cost pricing*?

1. *Helps cover fixed costs*

—> Even if price is low, each sale contributes to something.

—> ✅: Reduces *overall losses* in the short term.

2. *Useful for filling spare capacity*

—> Firms can accept lower prices when they have unused capacity.

—> ✅: Increases *output + total revenue*.

3. *Improves competitiveness*

—> Lower prices can attract more customers.

—> ✅: Helps *increase sales volume*.

4. *Supports short-term decisions*

—> Useful in situations like special orders or entering new markets.

—> ✅: Helps businesses *stay operational* during *low demand*.

What are the *disadvantages* of *contribution-cost pricing*?

1. *Does not fully cover total costs*

—> Prices may not include fixed costs.

—> ❌: Can lead to *losses if used long-term*.

2. *May trigger price wars*

—> Competitors may also lower prices.

—> ❌: Leads to *reduce industry profits*.

3. *Can damage brand image*

—> Very low prices may signal low quality.

—> ❌: Reduces *perceived value*.

4. *Customers expect low prices*

—> Once prices are reduced, it's hard to increase them.

—> ❌: Affects *future profitability*.

Loss leader

When a product sold is at a price below its market cost to stimulate other sales of more profitable goods or services.

What are the *advantages* of *loss-leader pricing*?

1. *Attracts customers*

—> Low prices draw customers into the store.

—> ✅: Increases *sales of other higher-margin products*.

2. *Clears excess or perishable stock*

—> Useful for products with limited shelf life.

—> ✅: Reduces *waste + stock losses*.

3. *Increases market share*

—> Low pricing draws customers from rivals.

—> ✅: Strengthens *market position*.

What are the *disadvantages* of *loss-leader pricing*?

1. *Loss on the product*

—> The business makes little or not profit (or a loss) on the time.

—> ❌: Reduces *overall profit margin*.

2. *Customers may only buy the discounted item*

—> Not all customers purchase additional products.

—> ❌: The business may *fail to recover the loss*.

3. *Can damage brand image*

—> Frequent heavy discounts may suggest low quality.

—> ❌: Reduces *perceived value*.

Competitive pricing

Making pricing decisions based on the price set by competitors.

What are the *advantages* of *competitive pricing*?

1. *Attracts customers*

—> Prices are set similar to or lower than competitors.

—> ✅: Increases *sales volume*.

2. *Maintains competitiveness*

—> Helps the business stay aligned with market prices.

—> ✅: Reduces risk of *losing customers to rivals*.

3. *Simple to implement*

—> Businesses just monitor competitors' prices.

—> ✅: *Saves time* + reduces need for *complex pricing strategies*.

What are the *disadvantages* of *competitive pricing*?

1. *Lower profit margins*

—> Businesses may match or undercut competitors' prices.

—> ❌: Can reduce *profit per unit*.

2. *Price wars*

—> Firms continuously lower prices to stay competitive.

—> ❌: Leads to *falling profits across the industry*.

3. *Ignores costs*

—> Prices are based on competitors rather than the firm's own costs.

—> ❌: The business may sell at *little or no profit*.

Price discrimination

Charging different groups of consumers different prices for the same good or service.

What are the *advantages* of *price discrimination*?

1. *Increases revenue and profit*

—> Higher prices charged to customers willing to pay more.

—> ✅: Maximises *revenue from each market segment*.

2. *Better use of spare capacity*

—> Lower prices attract additional customers (e.g. students, off-peak users).

—> ✅: Increases *total sales w/o raising costs significantly*.

3. *Expands market coverage*

—> Different price levels make products accessible to more groups.

—> ✅: Increases *market share*.

What are the *disadvantages* of *price discrimination*?

1. *Customer resentment*

—> Customers may feel it is unfair if they pay different prices.

—> ✅: Damages *brand image + trust*.

2. *Difficult to segment markets*

—> Businesses must prevent resale between groups.

—> ✅: Increases *administration + monitoring costs*.

3. *Legal + ethical issues*

—> In some cases, it may be seen as discriminatory or unfair.

—> ✅: Could lead to *regulation* / *negative publicity*.

Dynamic pricing

When businesses change product prices, usually when selling online depending on the level of demand or the availability of supply.

What are the *advantages* of *dynamic pricing*?

1. *Maximises revenue*

—> Higher prices can be charged when demand is high.

—> ✅: Increases *total revenue + profit*.

2. *Better use of capacity*

—> Lower prices during off-peak times attract customers.

—> ✅: Reduces *unused capacity* (e.g. seats, rooms stock).

3. *Responds to market conditions quickly*

—> Prices can be adjusted in real time.

—> ✅: Helps the business stay *competitive*.

What are the *disadvantages* of *dynamic pricing*?

1. *Customer dissatisfaction*

—> Customers may feel prices are unfair or unpredictable.

—> ❌: Damages brand *trust + loyalty*.

2. *Complex to implement*

—> Requires technology, data analysis, and monitoring.

—> ❌: Increases *costs + management complexity*.

3. *Risk of negative publicity*

—> Sudden price increases (e.g. surge pricing) may attract criticism.

—> ❌: Harms *brand image*.

Penetration pricing

Setting a relatively low price to achieve a high volume of sales, to gain a large market share.

What are the *advantages* of *penetration pricing*?

1. *Rapid market entry*

—> Low initial price attracts many customers quickly.

—> ✅: Helps the business *gain market share fast*.

2. *Discourages competitors*

—> Low prices make it less attractive for new firms to enter the market.

—> ✅: Reduces *competition short-term*.

3. *High sales volume*

—> Lower prices increase demand.

—> ✅: *Higher output + economies of scale*.

What are the *disadvantages* of *penetration pricing*?

1. *Low profit margins (short term)*

—> Prices are set very low initially.

—> ❌: Reduces *profit per unit* + may lead to losses.

2. *Difficult to raise prices later*

—> Customers become used to low prices.

—> ❌: May cause *loss of customers*.

3. *May attract price-sensitive customers only*

—> Customers may buy only because it is cheap.

—> ❌: Low *brand loyalty* — may switch if prices rise / competitors undercut.

4. *Risk of price wars*

—> Competitors may also lower prices to compete.

—> ❌: Leads to *falling profits across the market*.

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.

What are the *advantages* of *market skimming*?

1. *High initial profits*

—> Early adopters are willing to pay premium prices.

—> ✅: Generates *high profit margins*.

2. *Helps recover development costs quickly*

—> High prices help cover R&D and marketing expenses.

—> ✅: Reduces *financial risk*.

3. *Creates a premium brand image*

—> High prices help cover signals high quality or exclusivity.

—> ✅: Enhances *brand perception*.

What are the *disadvantages* of *market skimming*?

1. *Limited initial sales volume*

—> High prices reduce the number of customers.

—> ❌: Slower *market penetration*.

2. *Attracts competitors*

—> High profits may encourage new entrants.

—> ❌: Increases *competition*.

3. *Risk of overpricing*

—> If customers do not perceive enough value.

—> ❌: Leads to *low demand or failure*.

Psychological pricing

Setting a price at a level which matches consumers' views of a product's perceived value.

What are the *advantages* of *psychological pricing*?

1. *Increases sales*

—> Prices like 9.99 appear cheaper than 10.

—> ✅: Encourages *more purchases*, boosting revenue.

2. *Influences customer perception*

—> Pricing can signal value (cheap or premium).

—> ✅: Helps shape *brand image and positioning*.

3. *Simple + low cost to implement*

—> Only requires adjusting pricing format.

—> ✅: No significant *extra cost*.

What are the *disadvantages* of *psychological pricing*?

1. *Limited effectiveness*

—> Not all customers are influenced by pricing tricks.

—> ❌: Impact on sales may be *small / inconsistent*.

2. *May reduce brand image*

—> Frequent use of ".99" pricing may seem cheap.

—> ❌: Damages *premium brand perception*.

3. *Short-term impact*

—> Customers may become used to it over time.

—> ❌: Effectiveness may *decrease*.

Promotion

The use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorship and public relations to inform consumers and persuade them to buy.

Advertising promotion

Paid for communication to inform and persuade consumers, using media such as TV, newspapers and cinema.

What are the *advantages* of *advertising promotion*?

1. *Increases awareness*

—> Reaches a large audience quickly.

—> ✅: *Higher potential sales*.

2. *Boost sales + revenue*

—> Persuasive messages encourage purchases.

—> ✅: Leads to *increased demand*.

3. *Builds brand image*

—> Consistent advertising creates a strong identity.

—> ✅: Improves *brand recognition + loyalty*.

What are the *disadvantages* of *advertising promotion*?

1. *High cost*

—> TV, online campaigns, and design can be expensive.

—> ❌: Reduces *profit margins*, especially for small firms.

2. *Not always effective*

—> Customers may ignore / skip ads.

—> ❌: Leads to *wasted expenditure*.

3. *Difficult to measure impact*

—> Hard to link sales directly to advertising.

—> ❌: Makes evaluation *uncertain*.

Sales promotion

Incentives such as *special offers* or *discounts* directed at consumers or retailers to achieve *short-term sales increases* and *repeat purchases* by consumers.

What are the *advantages* of *sales promotion*?

1. *Boosts sales quickly*

—> Incentives encourage immediate purchases.

—> ✅: Increases *short-term sales + cash flow*.

2. *Clears excess / perishable stock*

—> Discounts help sell unsold goods.

—> ✅: Reduces *waste + storage costs*.

3. *Attracts new customers*

—> Promotions make products more appealing.

—> ✅: Expands *customer base*.

What are the *disadvantages* of *sales promotion*?

1. *Reduces profit margins*

—> Discounts lower revenue per unit.

—> ❌: Decreases *profitability*.

2. *Short-term impact only*

—> Sales often fall back after promotion ends.

—> ❌: Does not build *long-term demand*.

3. *May damage brand image*

—> Frequent discounts may make the product seem cheap.

—> ❌: Reduces *perceived value*.

Direct promotion

Communicating *directly with customers* through email, text message, social media or post to trigger sales.

What are the *advantages* of *direct promotion*?

1. *Targeted marketing*

—> Messages are sent to specific customers or segments.

—> ✅: Increases *effectiveness + response rates*.

2. *Personalisation*

—> Can be tailored using customer data (e.g. name, preferences).

—> ✅: Improves *customer engagement + loyalty*.

3. *Measurable results*

—> Businesses can track responses (clicks, purchases).

—> ✅: Helps evaluate *marketing effectiveness*.

What are the *disadvantages* of *direct promotion*?

1. *Privacy concerns*

—> Customers may dislike the use of personal data.

—> ❌: Damages *trust + brand image*

2. *Can be seen as intrusive*

—> Unwanted emails or messages may annoy customers.

—> ❌: Leads to *negative perception*.

3. *Requires accurate data*

—> Outdated or incorrect data reduces effectiveness.

—> ❌: Leads to *wasted effort + poor results*.

Digital promotion

The use of *online + electronic technologies* to promote a business's products / services to consumers.

What are the *advantages* of *digital promotion*?

1. *Wide reach*

—> Can access national + global audiences.

—> ✅: Increases *brand awareness + potential sales*.

2. *Targeted advertising*

—> Platforms allow segmentation by age, interests, behaviour.

—> ✅: Improves *effectiveness + conversion rates*.

3. *Cost-effective*

—> Often cheaper than TV or print advertising.

—> ✅: Suitable for businesses with *limited budgets*.

What are the *disadvantages* of *digital promotion*?

1. *High competition*

—> Many businesses advertise online.

—> ❌: Makes it harder to *stand out*.

2. *Ad fatigue / being ignored*

—> Customers may scroll past or block ads.

—> ❌: Reduces *effectiveness*.

3. *Requires skills + expertise*

—> Managing campaigns + data needs knowledge.

—> ❌: Increases *training / hiring costs*.

Examples of *digital promotion* (name 2)

1. *Social media marketing* —> platforms like IG, FB, TikTok, or X.

2. *Email marketing* —> Sending promotional emails to target customers.

3. *Search engine marketing (SEM)* —> Paid adverts that appear in search engine results (e.g. Google Ads).

4. *Influencer marketing* —> Paying social media personalities to promote a brand.

5. *Website banners + pop-ups* —> Digital adverts placed on websites.

6. *Video marketing* —> Promotional content shared on platforms like YouTube or embedded in websites.

7. *Content marketing* —> Creating blogs, articles or videos to provide value + attract customers.

Channel of distribution

The chain of intermediaries that a product passes through from producer to final consumer.

Direct selling: *Producer —> Consumer*

- Commonly used for *online products* / other direct sales channels.

✅ *No intermediaries* —> low cost —> can offer lower price / keep higher profit.

❌ Producer must handle almost *everything* (delivery, returns, customer service) —> *expensive + time consuming*

Single-intermediary: *Producer —> Retailer —> Consumer*

Producer —> Retailer —> Consumer

- Used for products with *high demand* / *high cost of distribution*.

- Also common where customers need *advice* in selecting the product.

✅ Retail staff can give *advice + after-sales* help, which suits complex goods like laptops.

❌ Inventory sits *idle* in the retailer's warehouse or shop, *tying up cash* until each item is sold.

Single-intermediary: *Producer —> Wholesaler —> Consumer*

- Used when there are *no physical retail stores*, or for products where the wholesaler can *sell directly to bulk- buying consumers* (e.g. institutions or large events).

✅ Can reduce distribution costs by *cutting out the retailer*, allowing slightly *lower prices* for *large-scale buyers*.

❌ It is not suitable for *every consumers* who want to buy in small quantities.

Two intermediary-channel: *Producer —> Wholesaler —> Retailer —> Consumer*

- Used by *smaller retail businesses* that lack space / sufficient cash flow to hold large amounts of inventory.

✅ Small shops can buy *little* and *often* from the wholesaler, so they do not need big, costly *storage space*.

❌ Two extra *markups* push the *selling price* up for customers.

Online marketing (e-commerce)

Selling and marketing activities that use the internet, email and mobile communications to encourage direct sales via electronic commerce.

Digital distribution

The delivery or distribution of digital media content such as audio, video, TV programmes, films, software and video games.

What are the *advantages* of *digital distribution*?

1. *Wider market reach*

—> Customers can buy from anywhere (national/global).

—> ✅: Increases *potential sales + market share*.

2. *Lower operating costs*

—> Less need for physical stores + staff.

—> ✅: Reduces *fixed costs* + improves *profitability*

3. Convenience for customers*

—> 24/7 access to products.

—> ✅: Improves *customer satisfaction + sales*.

What are the *disadvantages* of *digital distribution*?

1. *High competition*

—> Many businesses operate online.

—> ❌: Makes it harder to *stand out*.

2. *Lack of physical experience*

—> Customers cannot see or try products before buying.

—> ❌: May reduce *confidence + sales*

Physical distribution

The activities that combine to achieve the efficient movement of finished products from the end of the production operation to the consumer.

What are the *advantages* of *physical distribution*?

1. *Customers can see or see + try products*

—> Buyers can inspect quality before purchase.

—> ✅: Increases *confidence + likelihood of purchase*.

2. *Immediate availability*

—> Customers can take the product instantly.

—> ✅: Improves *customer satisfaction.

3. *Personal service*

—> Staff can give advice + recommendations.

—> ✅: Enhances *customer experience + loyalty*.

What are the *disadvantages* of *physical distribution*?

1. *High operating costs*

—> Rent, staff wages, utilities, and maintenance.

—> ❌: Increases *fixed costs*.

2. *Limited market reach*

—> Only customers in that location can access the store.

—> ❌: Restricts *sales potential*.

3. *Less convenience*

—> Customers must travel and shop during opening hours.

—> ❌: Reduces *customer convenience*.