higher business - marketing

Market Led 

Product Led 

The business develops products based on customer wants. 

The business produces products that it believes customers will want and tries to convince them to buy them. 

High levels of market research carried out to determine customer wants. 

Market research is not seen as important. There are however high levels of product research and development. 

Market-led businesses often exist in highly competitive markets. 

New technologies with little to no competition are often product led. 

The marketing mix will be responsive to changes in external factors and consumer behaviours. 

Often the product is unresponsive to changing external factors. 

Type of Research 

Advantages 

Disadvantages 

DESK RESEARCH INVOLVES: 

Researching and analysing information that has already been gathered. 

METHODS OF DESK RESEARCH INCLUDE: 

• Competitors website  

•  Online news articles 

•  Trade magazines 

•  Government publications 

•  Financial statements 

• Sales figures 

• Timely – desk information is quick to gather 

• Cost effective – desk information does not require trained and paid interviewers or research companies 

• Available – desk information already exists so is easy to look up 

• Not objective – desk information is collected and presented by some else, so could be biased 

• Not appropriate – desk information is not fit for the exact purpose and may have to be “shoehorned” to fit the business’ needs. 

• Not concise – the researcher may have to read through a lot of information to get what is needed 

FIELD RESEARCH INVOLVES: 

Gathering brand new information suitable for the business’s exact needs 

EXAMPLES: 

•  Postal survey 

•  Personal interview  

•  Telephone survey 

•  Online survey 

•  Hall tests 

• Electronic point of sale (EPOS) 

• Complete – field information should have no parts missing 

• Timely – in the respect that the information is up to date 

• Appropriate – field information is fit for the purpose its needed for 

• Accurate – information should be correct as it can be validated 

• Not cost effective - field information requires trained and paid interviewers or expensive research companies  

Stage 

Impact on sales 

Impact on profits 

Research and Development (R & D) 

The product is being researched and developed. Prototypes will be made and tested. Changes may have to be made after research feedback. 

There are no sales yet as the product is still being developed. 

The product will be making a loss due to the costs of development and zero income from sales. 

Introduction 

The product is launched. This usually coincides with introductory promotional activities to create “hype” for the product. 

Sales are slow to begin with as customers are unsure of the product. Customers may have to be persuaded to move from the competitor products. 

The product begins to cut into the losses from development, but high promotional costs still result in a loss being made overall. 

Growth 

The product has been on the market for some time, customers are fully aware of the product and are purchasing it. 

Sales start to rise rapidly. This can be the result of slightly reduced prices, lack of competition and/or consumer confidence in the product. 

Profits are starting to be made and losses from development and promotions during the initial stages are recouped. 

Maturity 

The product has been on the market for some time. Competition enters the market. 

Sales growth peaks and levels out. Many sales can still be made for a long time at this stage. 

Profits can still be healthy but start to fall. The competition will take sales away and the thus the profits will fall. 

Saturation 

The product suffers from too many competitors being in the market. 

Sales begin to fall as consumers flock to competitors’ products. 

Profits fall rapidly, especially if prices are slashed to encourage sales. 

Decline 

The product’s life is nearing the end. The product will soon stop being produced. 

Sales fall rapidly and eventually the product will be withdrawn from the market. 

Profits continue to fall. Eventually products may be sold at unit cost just to break even. 

Product Type 

Impact 

Stars:  

products that have a high market share in a high-growth market e.g. Apple’s iPad 

Stars need constant investment in marketing to keep ahead in a competitive market. 

Stars allow a business to be a market leader. 

Over time, stars will decline into either question marks or cash cows. 

Cash Cows:  

products that have a high market share of a low growth market e.g. Microsoft Office 

Cash cows should require little marketing expense due to lack of competition. 

Funds gathered can be used to further strengthen stars and improve riskier ventures such as question marks. 

Question marks/Problem Children: 

Products that have a low market share in a market with high growth potential e.g. manufactures of less popular brands of tablets. 

Question marks can be invested in due to their position in a promising market. 

They need development of a strong marketing mix if they are to be turned into stars. 

Dogs: 

Products that have a low market share of a market with low grow e.g. less popular brands in declining technology industries. 

Dogs can adversely affect profits. 

Dogs should be divested due to the lack of market share and the declining market for the product. They cannot be turned into stars. 

Method 

Advantages 

Trade Credit 

Manufactures offer retailers' credit to pay for goods at a later date. 

• No cash is required to stock products which is good for new or struggling businesses. 

• Retailers can purchase goods and then pay for them once they are sold 

Point of Sales Materials 

Free posters and display materials are given to retailers to display products to customers 

• This can enhance the look of a retail store. 

• It can draw customers’ eyes to the product display 

Sale or Return 

Manufactures are given retailers the option to return goods that do not sell 

• It allows retailers to try new products without the risk of being stuck with unsold inventory 

• It improves cashflow 

Dealer Loaders 

Discounts used to encourage retailers to stock up on a product e.g. buy ten boxes get one free 

• Retailers can save on the unit cost of products, allowing for greater profits. 

• Savings can be passed to customers to increase sales revenue 

Staff Training 

Manufactures can offer retail staff free training to give them the skills and knowledge to sell the product 

• Staff become experts in the product, which can impress customers. 

• The quality and motivation of staff are improved 

Pricing Strategy 

Advantages 

Disadvantages 

Cost Plus: 

The business calculates the unit cost of a product and then adds a percentage markup profit 

• A quick and easy way of setting the selling price 

• Ensures that total costs are covered, and a profit is generated 

• Doesn't cover indirect costs e.g. other expenses such as rent 

• Doesn't take external factors into account e.g. increasing prices during boom periods to maximise profits 

Competitive: 

The price of a product is set like the competitors  

• Avoids a price war 

• Encourages competition, which improves the market as a whole 

• Other elements of the marketing mix must be better that the competitions to improve sales 

Skimming: 

The price is set high to begin with and lowers over time e.g. with electronic such as the iPad 

• Sufficient “hype” around a new product enables higher prices to be charged which can increase profits 

• Lack of competition also allows maximum prices to be charged 

• High initial prices can put off some customers 

• Technique results in low initial sales numbers 

Penetration: 

The price is set low to begin with and increases over time  

• Encourages customers to try a new product 

• The business hopes to gain repeat custom once the price rises 

• Very little profit can be generated during the initial low-price period 

• Could result in a price war if competitors set lower prices 

Price Discrimination: 

Prices are altered depending on a discriminating factor  

• Ensures products appeal to different market segments 

• Allows for high profit margins on some price brackets 

• Harder to budget for sales revenue in advance 

Destroyer: 

The price is deliberately set extremely low for a period of time to force it competitors 

• Competitors are forced out of the market and then prices can increase again 

• Increases market share 

• Can only be used by larger companies that can afford to make losses while prices are low 

• This illegal practice could breach anti-competition laws 

Loss Leader: 

A promotional price of one or more products is set unprofitably low to entice customers in to buy other products 

• Creates greater footfall 

• Hopefully customers will buy normal-priced while buying loss leaders 

• There is a risk that some customers will only buy the loss leaders impacting on profits 

Advantages 

• Can target in app promotions and information on product that users will like based on their browsing history 

• Users of apps can share their experiences on social media sites allowing the business of free promotion and wider recognition 

• Apps can have integrated services such as airlines online check in services or online banking apps which increase usability 

• E-commerce can be integrated increasing sales potential to worldwide 

• Information can be updated quickly keeping customers informed thus giving the organisation good channel of communication 

• The app can integrate games videos and photos to grab attention and promote the business in a fun and engaging way