UNIT 3 BUSINESS

UNIT 3

Chapter 17: The Nature of Marketing – Study Notes

Section A: Important Concepts

1. Market

• A market is where buyers and sellers meet to exchange goods and services.

• It can also refer to the group of consumers interested in a product, capable of purchasing it, and legally allowed to buy it.

2. Market Size

• Total sales of all producers in a market.

• Importance of Market Size:

  • Helps assess whether entering the market is viable.

  • Allows businesses to calculate their market share.

  • Identifies market growth or decline.

3. Market Growth

• Definition: Percentage change in market size over time.

• Factors influencing market growth:

  • General economic growth.

  • Changes in consumer incomes.

  • Development of new products/markets.

  • Market saturation (e.g., SIM card market has limited growth).

4. Market Share

• Formula: Market Share=(Firm’s Sales in Time PeriodTotal Market Sales in Time Period)×100\text{Market Share} = \left( \frac{\text{Firm's Sales in Time Period}}{\text{Total Market Sales in Time Period}} \right) \times 100Market Share=(Total Market Sales in Time PeriodFirm’s Sales in Time Period​)×100

• Benefits of high market share:

  • Higher sales and potential profits.

  • Increased retailer interest in stocking the product.

  • "Brand Leader" status enhances marketing potential.

• A firm’s market share can fall even if its sales rise, if total market sales increase at a faster rate.

5. Market Location

• Local Markets: Businesses sell in specific areas.

• Regional Markets: Expansion into a larger geographic region.

• National Markets: Selling products throughout the country.

• International Markets:

  • Offers highest sales potential.

  • Requires adjustments for different consumer preferences, laws, and cultures.

6. Marketing Objectives

• Goals that the marketing department aims to achieve within a timeframe.

• Common marketing objectives:

  • Increase market share.

  • Improve brand recognition.

  • Target new customers.

  • Enter new markets.

7. Marketing Budget

• The estimated financial resources allocated for marketing activities.

• Includes advertising, promotional campaigns, salaries, office expenses, and other costs.

• Essential for business growth and planning.

8. Marketing Mix (The 4Ps)

• Product: What is being sold.

• Price: How much it costs.

• Promotion: How consumers are made aware of the product.

• Place: Where the product is sold.

9. Marketing Strategy

• A company’s approach to attracting customers and increasing sales.

• Focuses on value proposition, target demographics, branding, and the 4Ps.

10. Industrial vs Consumer Markets

• Consumer Marketing: Selling to individuals for personal use.

• Industrial Marketing: Selling to businesses, focusing on customer needs and long-term relationships.

11. Local, National, and International Markets

• Local: Targets regional audiences (e.g., restaurants, small retailers).

• National: Supply and demand within a single country, regulated by national laws.

• International: Markets beyond the company’s home country, requiring adaptations for cultural and legal differences.

Section B: Role of Marketing

1. Link Between Marketing and Corporate Objectives

• Corporate Strategy: Long-term goals and overall direction.

• Marketing Strategy: Focuses on increasing sales and maintaining a competitive edge.

2. Coordination of Marketing with Other Departments

Marketing and Finance

• Finance department uses sales forecasts for cash flow and budget planning.

• Provides funds for marketing expenses like advertising and promotions.

Marketing and Human Resources

• HR recruits and selects marketing team members.

• Responsible for training, appraising, and motivating marketing staff.

Section C: Demand and Supply

1. Factors Influencing Demand

• Definition: The quantity of a product consumers are willing and able to buy at a given price.

• Key Factors:

  • Consumer income levels.

  • Prices of substitutes and complementary goods.

  • Population size and structure.

  • Trends, fashion, and advertising.

2. Factors Influencing Supply

• Definition: The quantity of a product businesses are willing to supply at a given price.

• Key Factors:

  • Production costs (raw materials, labor).

  • Government taxes and subsidies.

  • Weather conditions and natural disasters.

  • Technological advancements.

3. Interaction Between Demand, Supply, and Price

• Law of Supply and Demand: Prices fluctuate based on supply and demand balance.

  • Surplus (High Supply, Low Demand): Prices decrease.

  • Shortage (High Demand, Low Supply): Prices increase.

  • Equilibrium Price: Where demand and supply meet.

Section D: Market Orientation vs Product Orientation

1. Product Orientation

• Focuses on product development first, then finds a market.

• Risk: Consumers may not want the product.

• Examples: Agriculture, raw materials, new technologies.

2. Market Orientation

• Focuses on identifying consumer needs before developing products.

• Advantages:

  • Continual market analysis ensures customer satisfaction.

  • Businesses modify pricing and marketing strategies based on consumer trends.

3. Asset-Led Marketing

• Uses a company’s strengths (brand, technology, people) to develop products.

• A mix of product and market orientation.

Section E: Mass vs Niche Marketing

1. Mass Marketing

• Targets the entire market with one product.

• Advantages:

  • High sales volume.

  • Benefits from economies of scale.

  • Less risk compared to niche markets.

• Disadvantages:

  • High competition.

  • Expensive advertising.

  • Standardized products may not meet specific consumer needs.

2. Niche Marketing

• Focuses on a specific, small market segment.

• Examples: Luxury cars, designer clothing, specialty products.

• Advantages:

  • Higher prices and profit margins.

  • Stronger customer loyalty.

• Disadvantages:

  • Small sales volume.

  • High risk if consumer preferences change.

Section F: Market Segmentation

1. Methods of Segmentation

• By Age: Different age groups have different needs.

• By Region: Demand varies based on geography.

• By Gender: Some products are gender-specific.

• By Product Use: Categorized by intended function (e.g., baby soap vs health soap).

• By Income (Socio-Economic Group): Targeted based on purchasing power.

• By Lifestyle: Segments based on hobbies, health consciousness, environmental concerns, etc.

2. Advantages of Market Segmentation

• Helps businesses target customers more effectively.

• Identifies gaps in the market for new opportunities.

• Allows for differentiated pricing strategies.

• More efficient allocation of marketing resources.

• Helps small businesses compete by focusing on a niche.

3. Disadvantages of Market Segmentation

• Requires extensive market research.

• Higher advertising costs for different segments.

• Risk of over-specialization if consumer trends change.

Section G: Customer Relationship Management (CRM)

1. Definition and Objectives

• CRM focuses on maintaining long-term customer relationships.

• Objectives:

  • Customer Acquisition: Gaining new customers.

  • Customer Retention: Keeping existing customers loyal.

  • Customer Extension: Encouraging repeat purchases and upselling.

2. Benefits of CRM

• Reliable customer data and reporting.

• Automated marketing messages.

• Improved customer service and satisfaction.

• Increased efficiency and collaboration.

Chapter 18: Market Research – Study Notes

Section A: Purpose of Market Research

1. Identifying Market Size and Market Growth

• Market size measures how much is sold and how fast the market is changing.

• It can be measured by unit sales or total revenue within a given time period.

• Market growth is the percentage change in market size over a given period.

• Understanding market size helps businesses conduct segmentation analysis, penetration analysis, and market attractiveness assessment.

2. Identifying Consumer Profile and Expectations

• Market research helps identify:

  • Customer needs (what they want).

  • Customer demographics (age, income, lifestyle).

• Businesses should use:

  • Market research reports, focus groups, and surveys to collect accurate data.

• Relying on instincts instead of research leads to customer loss and inefficiency.

3. Analyzing Competition

• Competitive analysis helps businesses identify:

  • Unique advantages over competitors.

  • Barriers to market entry.

• Many businesses operate on outdated assumptions about competitors, leading to poor decision-making.

4. Analyzing Environmental Factors

• Marketing Environmental Analysis: Examines internal and external factors affecting business success.

• External forces include:

  • Microeconomic factors: Competitor behavior, market trends.

  • Macroeconomic factors: Economic conditions, government policies.

• Businesses must adapt their marketing strategies to changes in these environments.

Section B: Primary and Secondary Research

1. Differences Between Primary and Secondary Research

2. Usefulness of Secondary Research

✅ Cheaper compared to primary research.
✅ Helps businesses understand the market landscape before conducting primary research.
✅ Quick access to existing data.

3. Usefulness of Primary Research

✅ Up-to-date data (more relevant than secondary research).
✅ Specific to business needs (collected for a particular purpose).
✅ Confidential (competitors do not have access to it).

Section C: Sampling

• Sampling allows researchers to collect primary data from a small group of people instead of surveying an entire population.

• Target Population: People most likely

Section C: Sampling (Continued)

1. Importance of Sampling

• Why use sampling?

  • Collecting data from an entire population is expensive and impractical.

  • Sampling allows businesses to get representative insights with lower cost and effort.

• Who is sampled?

  • The sample should reflect the target market, meaning the potential customers for the business’s product.

• Challenges of Sampling:

  • Poorly selected samples can lead to biased results.

  • A larger sample size increases accuracy but also costs more.

2. Types of Sampling Methods

A. Probability Sampling (Random Selection – More Reliable)

1. Random Sampling

   • Every member of the target population has an equal chance of being selected.

   • Ensures fairness but can be time-consuming.

   • Works best with large populations.

2. Stratified Sampling

   • Population is divided into groups (strata) based on characteristics (e.g., age, income).

   • A random sample is taken from each group to ensure representation.

   • Example: A clothing brand surveys people from different income groups to ensure fair data collection.

3. Quota Sampling

   • Similar to stratified sampling, but researchers choose individuals from each group.

   • Example: A researcher conducting a study on car buyers selects 30% male respondents and 70% female respondents to reflect market trends.

   • More practical than stratified sampling but can lead to bias.

B. Non-Probability Sampling (Not Random – Less Reliable)

• Used when time or budget is limited.

• Convenience Sampling: Selecting respondents who are easy to reach (e.g., surveying people at a shopping mall).

• Judgmental Sampling: The researcher selects people based on their own judgment of who will provide the best information.

Section D: Market Research Data

1. How Accurate is Primary Research?

The reliability of primary data depends on several factors:

A. Sampling Bias

• Occurs when the sample does not truly represent the entire population.

• Smaller samples are more prone to errors.

• A larger, well-selected sample increases accuracy.

B. Questionnaire Bias

• Poorly designed questions can lead respondents toward certain answers.

• Issues with questionnaires:

  • Too technical (confusing for respondents).

  • Too personal (making people uncomfortable).

  • Leading questions (pushing respondents to a certain answer).

C. Who Conducts the Research?

• Skilled researchers increase data accuracy by properly engaging respondents.

• If businesses lack expertise, they may hire market research agencies for professional data collection (though costly).

D. Biased Data in Secondary Research

• Secondary data may be outdated or misleading if:

  • It was collected for a different purpose.

  • It comes from biased sources (e.g., promotional articles).

  • Key details are left out intentionally.

2. Interpretation of Market Research Results

• Raw data from surveys, interviews, and focus groups must be analyzed and presented clearly for decision-making.

• Data visualization tools (graphs, charts, and reports) make findings easier to understand.

• Common issues in interpreting data:

  • Misreading trends due to small sample sizes.

  • Failing to consider external market changes.

  • Making assumptions without statistical evidence.

3. Limitations of Market Research Data

Despite investing time and money, market research does not always guarantee success.

Key limitations:
❌ Sampling bias – Results may not represent the entire market.
❌ Market conditions change rapidly – Consumer preferences shift faster than research can predict.
❌ Misinterpretation of data – Poor analysis can lead to wrong business decisions.
❌ Expensive – Conducting extensive research can be costly, especially for startups.

4. Cost-Effectiveness of Market Research

• Even secondary research takes time and money.

• Businesses must decide whether the benefits outweigh the costs.

• Effective market research should:
  ✅ Reduce business risks by identifying trends.
  ✅ Support product development by understanding customer needs.
  ✅ Improve marketing strategies by targeting the right audience.

• Companies must carefully allocate their research budget to ensure maximum value from the insights gained.

Final Takeaways from Chapter 18

✅ Market research helps businesses understand their market, customers, and competitors.
✅ Primary research is collected first-hand, while secondary research relies on existing data.
✅ Sampling is necessary to make research cost-effective and practical.
✅ Biases in research (sampling, questionnaire, or interpretation) can lead to incorrect conclusions.
✅ Market conditions change rapidly, so research must be updated regularly.
✅ Despite limitations, market research is essential for making informed business decisions.

Chapter 19: The Marketing Mix – Product and Price

Section A: The Four Elements of the Marketing Mix (4Ps)

The Marketing Mix refers to four key components that define a business’s marketing strategy:

1. Product – What is being sold? This includes physical goods, services, or digital products.

2. Price – How much is charged? Pricing affects brand perception and profitability.

3. Place – Where and how is the product sold? Includes distribution channels and online vs. physical stores.

4. Promotion – How do customers find out about the product? Covers advertising, PR, and sales promotions.

Section B: Product

1. Difference Between Goods and Services

• Goods → Tangible items (e.g., clothing, electronics).

• Services → Intangible experiences (e.g., consulting, spa treatments).

2. Tangible and Intangible Product Attributes

• Tangible Attributes → Physical characteristics (size, material, color).

• Intangible Attributes → Perceived characteristics (brand image, quality, aesthetics).

Example:
A laptop has tangible attributes (size, weight) and intangible attributes (brand reputation, user experience).

3. Importance of New Product Development

New products help businesses:
✅ Adapt to changing consumer preferences.
✅ Stay competitive in the market.
✅ Use new technology for innovation.
✅ Diversify risk by introducing multiple products.
✅ Strengthen brand image and reputation.
✅ Utilize excess production capacity efficiently.

4. Product Differentiation and USP (Unique Selling Proposition)

• Product Differentiation → Making a product stand out from competitors.

• USP (Unique Selling Proposition) → The main feature that makes a product unique.

✅ Allows higher pricing due to exclusive design.
✅ Leads to higher sales and customer loyalty.

Section C: Product Portfolio Analysis

1. Product Life Cycle

2. Strategies to Extend Product Life Cycle

✅ Launch new versions or improved models.
✅ Sell in new markets (e.g., international expansion).
✅ Use stronger promotional campaigns.
✅ Offer discounts, special offers, or additional services (e.g., warranties).

3. Link Between Product Life Cycle and Cash Flows

• Development Phase: Negative cash flow due to high R&D costs.

• Introduction Phase: High marketing costs may still result in negative cash flow.

• Growth Phase: Cash flow turns positive as sales increase.

• Maturity Phase: Highest cash flow, lower marketing expenses.

• Decline Phase: Falling sales reduce cash flow, may lead to product discontinuation.

4. Boston Matrix (BCG Matrix)

A tool used to analyze a company’s product portfolio based on market growth and market share.

Section D: Price

1. Factors to Consider Before Setting a Price

✅ Costs of Production – Price must cover costs to ensure profitability.
✅ Market Competition – Pricing must align with competitors.
✅ Business and Marketing Objectives – High pricing for premium branding, low pricing for market penetration.
✅ Price Elasticity of Demand (PED) – If demand is highly elastic, price changes will significantly affect sales.
✅ New vs. Existing Product – Innovative products can be priced higher.

2. Pricing Strategies

A. Price Skimming

✔ High price for new innovative products.
✔ Lowers over time as demand increases.
✔ Recovers R&D costs quickly.
❌ May alienate price-sensitive customers.

B. Penetration Pricing

✔ Low initial price to attract customers and gain market share.
✔ Increases gradually as customer base grows.
❌ Lower revenue initially, slower profit recovery.

C. Competitive Pricing

✔ Price set at or slightly below competitors.
✔ Helps maintain market share.
❌ Requires extensive market research to track competitors’ prices.

D. Cost-Plus Pricing

✔ Adds markup percentage to cost.
✔ Ensures consistent profits.
❌ Ignores consumer demand and competitor pricing.

Example Calculation:

• Production cost for 1,000 cricket bats = $5,000

• Desired profit margin = 50%

• Price per bat = $5,000 / 1,000 x 1.50 = $7.50

E. Dynamic Pricing

✔ Price adjusts based on demand fluctuations.
✔ Used in airlines, hotels, and ride-sharing services.
❌ Customers may find pricing unfair if they pay different amounts.

F. Psychological Pricing

✔ Uses price perception tactics (e.g., setting prices at $9.99 instead of $10).
✔ High prices for premium brands improve perceived quality.

G. Promotional Pricing (Loss Leader)

✔ Short-term price cuts to attract customers.
✔ Clears old stock and revives interest in a brand.
❌ Reduces profitability temporarily.

Section E: Pricing Strategy Evaluations

1. Competitive Pricing Analysis

• Evaluates how customers respond to price changes.

• Helps businesses set optimal prices without losing sales.

• Requires historical data and customer feedback.

Example Pricing Strategy Applications

Final Takeaways from Chapter 19

✅ The 4Ps (Product, Price, Place, Promotion) define marketing strategies.
✅ Product attributes can be tangible (physical) or intangible (perceived value).
✅ The Product Life Cycle affects marketing, pricing, and profitability.
✅ Boston Matrix helps manage product portfolios effectively.
✅ Pricing strategies vary based on market competition, demand, and business goals.
✅ Businesses must balance costs, profits, and customer expectations when setting prices.

Chapter 20: The Marketing Mix – Promotion and Place

Section A: Promotion Methods

1. What is Promotion?

Promotion refers to the communication process used to inform, persuade, and remind customers about a product. It is an essential part of the marketing mix and helps in:
✅ Creating brand awareness
✅ Attracting new customers
✅ Retaining existing customers
✅ Increasing sales

The combination of different promotional tools is called the Promotion Mix, and the budget allocated for promotion is the Promotion Budget.

2. Objectives of Promotion

✔ Increase sales by raising awareness.
✔ Encourage repeat purchases from existing customers.
✔ Attract new customers.
✔ Create a strong brand image.
✔ Correct misleading information about a product.

3. Advertising

Advertising is a form of "above the line" promotion, using mass media to reach a large audience.

Types of Advertising

1. Informative Advertising → Provides factual information (e.g., features, price, availability).

2. Persuasive Advertising → Encourages customers to buy the product by influencing emotions.

Advertising Media & Their Pros/Cons

✅ Choosing an Advertising Method depends on cost, audience size, target profile, message, and legal constraints.

4. Sales Promotion Methods ("Below the Line" Promotions)

Sales promotion refers to short-term incentives designed to increase sales quickly.

✔ Publicity (Product placements in movies, signage, endorsements).
✔ Public Relations (Sponsorships, donations, press releases).
✔ Loyalty Programs (Discounts, special offers for repeat customers).
✔ BOGOF (Buy One Get One Free).
✔ Competitions & Games (Encourages repeat purchases).
✔ Money-Off Coupons (Discount offers).
✔ Point of Sale Display (Attractive displays near checkout counters).

✅ Choosing a Sales Promotion Method depends on cost, audience profile, and marketing objectives.

5. Direct Promotion Methods

Direct promotion allows businesses to personally communicate with customers.

✔ Direct Mail → Personalized promotional messages via emails or letters.
✔ Telemarketing → Selling over the phone.
✔ Personal Selling → Face-to-face discussions (common for high-value products like cars).
✔ After-Sales Care → Customer support, warranties, and product maintenance services.

6. Evaluating Promotion Campaigns

✅ Sales performance before and after the promotion.
✅ Consumer awareness surveys to measure recall.
✅ Response rates to ads (e.g., clicks on digital ads).

Section B: Digital Promotion

Digital promotion is rapidly replacing traditional marketing due to cost-effectiveness and high engagement.

1. Methods of Digital Promotion

✔ Email Marketing → Promotional emails to target customers.
✔ Online Advertisements → Banners, pop-ups, video ads.
✔ Smartphone Marketing → SMS, push notifications.
✔ Search Engine Optimization (SEO) → Optimizing websites to appear higher in search results.
✔ Viral Marketing → Encouraging customers to share promotional content.

2. Benefits of Digital Promotion

✅ Global Reach → Businesses can market products worldwide.
✅ Cost-Effective → Cheaper than traditional advertising.
✅ Easy to Track → Analytics tools measure engagement and conversions.
✅ Personalization → Ads can be customized for specific customer groups.
✅ Increases Brand Loyalty → Social media builds relationships with customers.

3. Limitations of Digital Promotion

❌ Requires Technical Skills → Businesses need SEO and digital marketing expertise.
❌ High Competition → Many businesses use digital marketing, making visibility difficult.
❌ Negative Publicity → Bad reviews or complaints spread quickly online.
❌ Time-Consuming → Requires constant updates and interaction with customers.

Section C: The Role of Packaging in Promotion

1. What is Packaging?

Packaging refers to the physical container or wrapping of a product. It serves both functional and promotional purposes.

2. Functions of Packaging

✔ Protects the product from damage.
✔ Makes the product transportable and easy to store.
✔ Provides essential information (e.g., ingredients, usage instructions).
✔ Enhances product appeal through attractive designs.
✔ Reinforces the brand image and makes the product stand out.

3. Drawbacks of Packaging

❌ Can be costly if too elaborate.
❌ May contribute to environmental waste if not eco-friendly.
❌ Might mislead customers if packaging exaggerates product quality.

Section D: The Role of Branding in Promotion

1. What is Branding?

Branding is the unique identity of a product that differentiates it from competitors.

✔ Brand Name → The recognizable name of the product (e.g., Nike, Apple).
✔ Brand Image → The perception customers have about a brand (e.g., luxury, affordability).
✔ Brand Loyalty → The tendency of customers to keep buying a specific brand.

2. Importance of Branding

✅ Increases Recognition → A strong brand is easier to remember.
✅ Builds Customer Trust → Customers prefer known brands over unknown ones.
✅ Improves Advertising Effectiveness → Customers engage better with familiar brands.
✅ Allows Premium Pricing → Well-established brands can charge higher prices.
✅ Encourages Repeat Purchases → Brand loyalty leads to long-term profits.

Section E: Place (Distribution Channels)

1. What is Place (Distribution)?

The "Place" element of the marketing mix refers to how products are made available to customers.
✔ Ensuring products are in the right place, at the right time.
✔ Using the best distribution channels to reach customers efficiently.

2. Distribution Channels

A Distribution Channel is the chain of businesses a product passes through before reaching the consumer.

Types of Distribution Channels

3. Factors Influencing Distribution Decisions

✔ Nature of the Product → Expensive or technical products may need direct selling.
✔ Target Market Location → International businesses need strong distribution networks.
✔ Cost of Distribution → More intermediaries increase costs.
✔ Competitor Strategies → Businesses may use similar distribution channels to remain competitive.

Section F: Online Marketing (E-Commerce)

1. What is E-Commerce?

E-Commerce is buying and selling goods/services online. It has transformed marketing strategies globally.

2. Opportunities for Businesses

✅ Wider Customer Base → Businesses can sell globally.
✅ Lower Operational Costs → No need for physical stores.
✅ Data Collection → Businesses can track customer behavior for better targeting.
✅ 24/7 Availability → Online stores never close.

3. Threats for Businesses

❌ High Competition → Many online sellers.
❌ Security Issues → Risk of fraud and cyberattacks.
❌ Lack of Customer Interaction → No face-to-face communication.

4. Opportunities for Consumers

✔ Convenience → Shop from home anytime.
✔ More Choices → Access to a variety of products globally.
✔ Easy Payment Options → Secure online payments.

5. Threats for Consumers

❌ Scams and Fraud → Risk of identity theft.
❌ Can’t Physically Examine Products → Can’t check quality before purchase.
❌ Delivery Delays → Shipping issues may arise.

Section G: Internet Marketing

Internet marketing uses digital platforms to promote and sell products.

1. Key Functions of Internet Marketing

✔ Selling directly to consumers via company websites.
✔ Online Advertising (e.g., Google Ads, social media).
✔ Building customer relationships through email marketing.
✔ Market Research → Collecting data through website visits and online surveys.

2. Benefits of Online Marketing

✅ Cheaper than traditional marketing.
✅ Global reach with small investment.
✅ Customers leave valuable data for future marketing.
✅ Lower fixed costs than physical stores.

3. Challenges of Online Marketing

❌ Need for technical expertise (SEO, analytics).
❌ Increased competition from global sellers.
❌ Risk of negative reviews and bad publicity.

Final Summary

✔ Promotion is crucial for raising awareness and driving sales.
✔ Digital promotion is growing rapidly due to its cost-effectiveness and reach.
✔ Branding and Packaging help differentiate products and attract customers.
✔ Distribution Channels determine how products reach consumers efficiently.
✔ E-Commerce and Internet Marketing have transformed global sales strategies.