MARKETING
Marketing
MARKETING
Learning Intentions:
To introduce marketing and its significance in
modern business practices.
Success Criteria:
You should be able to:
• Describe what marketing means to you
• Describe consumer and industrial markets
• Describe and understand identifying, anticipating and
satisfying consumer requirements
BM Unit 2 - LO2
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MARKETING
Marketing – What it means to me?
BM Unit 2 - LO2
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MARKETING
What is a market?
 Any
place
where buyers
and sellers
meet.
MARKETING
Consumer markets
Consumer markets - are made up of
individuals who purchase
goods/services for personal or domestic
use.
Consumable goods, eg food,
cosmetics, magazines

Durable goods, eg cars, televisions,
clothes

MARKETING
Identifying Consumers’
Requirements




What do they want? Consumers must buy
products and continue to do so
Fierce competition and consumers’
expectations mean that products must be
constantly updated and altered to suit
Other factors - price, quality, prompt
delivery, attractive packaging and aftersales service
Advertising and promotion play a big part
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MARKETING
Industrial markets
Industrial markets - organisations that
purchase goods and services to use in the
production of other goods and services.

Consumable goods, eg raw materials

Durable goods, eg machinery and equipment
MARKETING
What is marketing?
 ‘Marketing
is the management
process responsible for
identifying, anticipating and
satisfying consumer
requirements profitably.’
MARKETING
Anticipating Consumers’
Requirements

What do they want today?

What do they want in the future?


Trends must be considered to
anticipate future needs
Volatile markets - fashion, toys,
technology (mobile phones,
computers, etc)
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MARKETING
Satisfying Consumers’
Requirements
“The customer is king!”

Businesses must be customer-focused

No customers

no business
Must offer - good service, quality
products, value for money, prompt
delivery, good after-sales service (eg
returns), well presented and packaged
goods, at the right price and available
at the right place
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MARKETING
Marketing objectives

To target a new market or market
segment.

To achieve or maintain market share.

To develop a new range of products.

To improve the image of the product.
MARKETING
Marketing activities
Market research
 New product development
 Selling
 Pricing
 Promotion and advertising
 Preparing publicity information

MARKETING
Assessment (looking) of the
Market

Where are the consumers of the
product?

How many consumers are there?

What are their attitudes and
preferences?

How effective are the distribution
methods?

What are the strengths and
weaknesses of competitors?
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MARKETING
Factors leading to the importance of
marketing
Economic growth and booms – with more
disposable income, marketing is needed to
gain market share.
 Fashion – marketing attempts to anticipate
trends and/or changes in tastes, lifestyle.
 Technology – new product innovation is
essential for firms to keep up with
competitors.
 Competition – rivals may come from
overseas. Firms have to be aware of the
market environment both at home and
abroad.

MARKETING
Learning Intentions:
To introduce marketing casualties and
success stories.
Success Criteria:
You should be able to:
•Identify and describe marketing casualties in both the UK
and World-wide markets
•Identify and describe marketing success stories in both the
UK and World-wide markets
•To describe product and market orientation
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MARKETING
The casualties of not
adapting to the market

The American car industry

The British motor cycle
industry

In pairs have a discussion to
see if you can think of any
others.
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MARKETING
Product/Marketing failures
Ford Edsel
 New Coke
 Sony Betamax VCR
 McDonald’s Arch Deluxe
 Sinclair C5
 DeLorean motor car
 http://www.bbc.co.uk/news/magazine11517129

MARKETING
Marketing Successes
Swatch
 Starbucks
 Easyjet and Ryanair
 In pairs have a discussion to
see if you can think of any
others.

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MARKETING
Product orientation
Production
capabilities
Manufacture
product
Aggressive
sales effort
Customers
Production orientation is when a
business focuses on the production
process and seeks to make goods that
are viewed as superior.
MARKETING
Product-led Product Orientated and
Production Orientated

Putting a product on the market
without prior market research

Assumption of best available and no
real competition

Often new inventions like Dyson
vacuum cleaners or Playstation 2


BM Unit 2 - LO2
A risky approach which can fail British motor bikes
Making as many products as possible
at the lowest price
20
MARKETING
Market orientation
Customer
needs
Potential
market
opportunities
Marketing
product and
services
Customers
Market orientation starts with the
consumer and looks at consumer needs.
It is customer orientated.
MARKETING
Market-led Customer Orientated and Sales
Orientated




Considering what the customers want before
putting a product on to the market
Competition has led to companies focusing on the
needs of the customer
Also looks at the influences on purchasing decisions
Pressure to sell to the public
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MARKETING
Advantages of market-orientated
approach
Can respond more quickly to changes
in market due to market research.
 Increased chance of new product
success.
 Stronger position to combat new
competitors/entrants.
 Can anticipate market changes.

MARKETING
Review of learning
What are the 2 types of orientation a
product uses in the market.
 What are the features of each type.
 Give examples.

MARKETING
Learning Intentions:
To introduce marketing environment and how
it links to PESTEC
Success Criteria:
You should be able to:
•Describe how the market adapts to PESTEC (external
factors – that we have previously covered)
BM Unit 2 - LO2
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MARKETING
The marketing environment
The market
MARKETING
The marketing environment
Social - Consumer trends
and behaviour
Competition
The economy
Political
The market
Technology
Learning Intentions:
MARKETING
To introduce market share
Success Criteria:
You should be able to:
•Identify and describe market share giving examples of UK
supermarkets and business organisations
•Describe the benefits of a high market share
BM Unit 2 - LO2
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MARKETING
Market share and market growth
Market share is the percentage of
customers who buy/use a company’s
goods/services.
Market growth is the volume of new sales or
customers within a market.
MARKETING

Power to buy raw materials in
bulk

Special components – can make
them themselves

Research and development –
profits reinvested

Economies of scale
Having a High Market Share
30
MARKETING
Supermarket market share
Learning and Teaching Scotland
MARKETING
Soft drink market share
Learning and Teaching Scotland
MARKETING
Coca cola world wide share
Learning and Teaching Scotland
MARKETING
Online book retailers
Learning and Teaching Scotland
MARKETING
Learning Intentions:
To introduce MARKET RESEARCH and
MARKET SEGMENTATION.
Success Criteria:
To enable pupils to:
1.
To introduce pupils to market research and techniques,
linking to marketing mix from previous lessons.
2.
To introduce ICT and how it links to Market research
3.
How linking MKT RES and Market segmentation creates a
common goal – to aim product or service at particular
group.
4.
To be able to summarise marketing topic.
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MARKETING
Target markets
Undifferentiated or mass marketing
 When a product is sold to the entire market.
Differentiated marketing
 When a product is offered to a group or
groups within the total market.

This is done by market segmentation.
Click for clip
MARKETING
Market Segmentation
“Breaking down of markets into sub-groups
that can be targeted with a specific marketing
mix.”
Advantages
 Seller can meet buyers’ requirements
 Advertising can be focused - less wasteful
 Expertise developed for a specific market
 Higher sales
 Increased profits
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MARKETING
Methods of Segmentation








Age
Gender
Socio-economic grouping
Education level
Income
Religion
Residential area
Lifestyle preferences - hobbies,
politics
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aiming products and
services at the population as a
whole without producing
different products for different
market segments
MARKETING
Involves
eg Heinz Beans
*
39
MARKETING
Undifferentiated marketing
Firm
Market
Marketing mix
MARKETING
Involves providing different
products and services for
particular segments
*
41
MARKETING
Differentiated marketing
Segment 1
Marketing mix 1
Segment 2
Firm
Marketing mix 2
Marketing mix 3
Segment 3
MARKETING
Concentrated marketing
Segment 1
Segment 2
Firm
Marketing mix
Segment 3
MARKETING
Market Segmentation - Similar to a
Cake!
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MARKETING
Socio-economic group
A
Higher managerial, administrative or
professional
B Intermediate, clerical, administrative
or professional
C1 Supervisory, clerical, junior
administrative or professional
C2 Skilled manual
D Semiskilled and unskilled
E State pensioners, widows, casual
and lowest paid
MARKETING
Psychographic segmentation
Segments people according to lifestyle.
Lifestyle is a person’s individual pattern
of behaviour, including attitudes,
beliefs, interests, hobbies, habits,
religion.
MARKETING
Answer a question

Describe six methods that an
organisation could use to segment
their market.
(6 marks) 2009

12 minutes
Solution
MARKETING







Age – segments the market by different age
groupings, such as young or old, under 12, 13–19,
20–35, over 35.
Occupation – segments the market by different types
of occupation.
Education – segments the market by the level of
education attained.
Socio-economic – segments the market by grouping
customers into different economic classifications.
Geographical – segments the market by the area
they live in.
Cultural/religious background – segments the market
by religion or ethnicity.
Family lifestyle – segments the market by customers
being either married or single.
Learning Intentions:
MARKETING
To introduce market share
Success Criteria:
You should be able to:
•Identify and describe marketing share giving examples of
UK supermarkets and business organisations
•Describe the benefits of a high market share
BM Unit 2 - LO2
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MARKETING
Niche marketing

A niche market is when a firm
concentrates on selling to a specific
market segment.
Niche markets are normally very
small, but can be highly profitable.
 Niche markets normally know their
customers’ needs very well.

Click for clip
MARKETING
Niche marketing
Advantages
 Niche market may
be overlooked
 Gain competitive
advantage
Disadvantages
 If successful, larger
competitors may
enter market
 Niche markets are
smaller and may
suffer more
frequent swings in
consumer
spending
Learning Intentions:
MARKETING
To introduce market share
Success Criteria:
You should be able to:
•Identify and describe marketing share giving examples of
UK supermarkets and business organisations
•Describe the benefits of a high market share
BM Unit 2 - LO2
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MARKETING
Market research
What is market research?
‘The collection, collation, and
analysis of data relating to the
marketing and consumption of
goods and services.’
Click for clip
MARKETING
Market research is used to find
information about:
the market itself (size and make-up –
age, gender, income, tastes)
 promotional methods
 customer feedback (opinions, usage
and attitudes)
 sales data (best sellers, best stores,
best sales staff)
 influence and impact of competitors
 effect of price on market.

MARKETING
Primary (field) research
1.
2.
3.
4.
Questionnaires
Personal
interviews
Telephone
interviews
Postal surveys
5.
6.
7.
8.
Observations
Technology, eg
loyalty cards
Focus groups
Customer
panels
Used to collect primary data
MARKETING
Sampling
Sampling is a way to find out the views of the
population without asking everyone!
Random sampling – A randomly generated list
of individuals. Free of bias, but not targeted at
any market segment.

Quota sampling – A group selected to reflect a
proportion of the whole population. Cheaper than
random sampling but can be less representative
than the random method.

Click for clip
MARKETING
Primary research
Positives
 Only firm that
collects data has
access
 Can be
controlled/verified
Negatives
 Expensive to
collect
 Lengthy time
involved,
information could
be out of date
MARKETING
Secondary (desk) research
Used to collect secondary
data.
 government
Examples:
publications, eg
sales figures
Social Trends
annual reports and data  commercial
publications, eg
internet data (eg other
Keynote, Mintel.
businesses’ websites)
MARKETING
Secondary (desk) research
Positives
 Saves time
 Relatively
inexpensive
Negatives
 Not specifically
related to project
undertaken
 Cannot be
verified
MARKETING
Problems with market research
•
Human behaviour is unpredictable.
•
Sampling and bias.
•
Other forms of bias, eg leading
questions.
MARKETING
Answer a question

Describe four methods of field
research.
(8 marks), 2009

15 minutes
MARKETING
Solution

Personal interview: this is a face-to-face interview,
conducted in the street or at a person’s home, where an
interviewer asks a respondent questions.

Focus group: a small group of selected individuals are
involved in discussions about an organisation’s product or
service, led by a facilitator to provide qualitative
information.

Telephone survey: individuals are telephoned at their
home and asked specific questions by an interviewer.

Postal survey: questionnaires are sent through the post to
selected individuals, but the response rate is very poor.
MARKETING
Solution

Consumer audit: continuous market research is
carried out with a selected group of consumers who
record their purchases in a diary. This is then
analysed for trends by marketers.

Hall test: individuals are invited to try out a product
and then give their opinion on it. These are collated
and analysed.

Observation: customers’ actions and purchasing
patterns are observed by trained staff, who look for
consumer behavioural trends.

Test marketing: product is launched on a small area
to gauge the consumers response. If successful the
product can be mass produced.
MARKETING
Product
Physical
environment
Promotion
Price
Place
People
The Marketing Mix
Process
MARKETING
The Marketing Mix
Product
People
Price
Physical
Environment
Promotion
Process
Place
Now the 7 p’s not the 4 p’s
BM Unit 2 - LO2
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Learning Intentions:
MARKETING
To introduce product as one of the 7p’s
Success Criteria:
You should be able to:
•Describe core, actual and augmented products - giving
examples
•Describe the boston box principle of categorises success
against market share of products
•Describe and identify the product life cycle
BM Unit 2 - LO2
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MARKETING
Product/service
Product – the good or item to be made for
sale to customers.
From the product everything else follows in
the marketing mix (product, price, place,
promotion).
MARKETING
Levels of a product

Core – the basic product.

Actual – the product on sale to the
public.

Augmented – a product with
additional features to boost its USP.
Let’s try the worksheet
MARKETING
Boston box
Market share
High
High
Market
growth
Low
Low
MARKETING
Boston box – strategies
Stars
Build sales/market
share
Invest to turn into cash
cow
Cash cows
Hold sales/market
share
Use excess cash to
invest in stars,
problem children
Problem children
Build selectively
Harvest or divest rest
Dogs
Harvest or divest
MARKETING
The Product Mix

Very few companies have only one
product

Some companies have a range of related
products eg Proctor & Gamble


Some companies have totally unrelated
products in their product portfolios eg
Imperial Group
It is important that you have new
products being launched to replace
products going into decline in your
“Product Mix”
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MARKETING
Product lifecycle
The product lifecycle is a theory that has
some assumptions:
•Products have a lifespan.
•All products pass through the stages
described.
http://news.bbc.co.uk/1/hi/uk/7814502.stm
•All products decline.
Click for Clip
http://www.bbc.co.uk/news/uk-wales20413234
MARKETING
Stages in cycle
Development – In this costly stage, money is
spent on research to create a viable
prototype.
Introduction – The product is launched onto
the market but normally sales are low due to
competition and lack of awareness from the
public.
Growth – Sales rise sharply as awareness
increases. This is the first stage where the
company starts making a profit.
MARKETING
Stages in cycle

Maturity – The product is now a market
leader and ways to expand sales become
more difficult. When there is an overkill of
supply, this is the saturation point.

Decline – Sales begin to fall, and the
product begins a slow death as trends,
technology or imitators overtake it.
MARKETING
Sales
• Sales
• Sales are low
• Product is
being designed
• Profits will be
negative
increasing
rapidly
•Sales reach
its highest point
• Similar
products enter
the market
• Profits will
reach their
highest at the
end of this stage
•Rate of growth
Slows
•Price lowered
• Product may
be unknown
Development
Introduction
• Sales falling
• Profits continue
to fall
•Competitors enter •Some
the market
businesses
my be forced
out of the
market
Growth
Maturity
Saturation
Decline
Time
MARKETING
Sales
Development
Introduction
Growth
Maturity
Saturation
Decline
Time
MARKETING
Product lifecycle
MARKETING
The Product Life Cycle
£000
Costs/Sales
New
Idea Product
Launch
Youth
Growth
Maturity
(Saturation)
Decline
Time
BM Unit 2 - LO2
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Death
MARKETING
Extension strategies
Change the product – have additional features
or upgrade the product.
Change the price – lower prices to make it
more appealing to non-users/buyers.
Change the place/channel of distribution –
look to more outlets or go online to widen
market opportunities.
MARKETING
Extension strategies

Change the promotion method –
introduce sales promotional
campaigns, such as BOGOF.

Change the packaging – to make it
more eye-catching to customers.
MARKETING
Effects of extension strategies
MARKETING
Extension of life cycle - LUCOZADE
From this
To this:
MARKETING
The Product Mix

Very few companies have only one product

Some companies have a range of related
products eg Proctor & Gamble
MARKETING
Product mix/portfolio

http://www.pg.com/en_UK/brands.shtml

Some companies have totally unrelated
products in their product portfolios eg Imperial
Group

It is important that you have new products
being launched to replace products going into
decline in your “Product Mix”
MARKETING
Answer a question

Changing the packaging of products
can make them more appealing and
eye-catching to consumers.

Explain five other methods of
extending the product lifecycle.
(5 marks) 2008

10 minutes
Solution
MARKETING







Improve the product by adding new or additional features
customers will want, eg cameras on mobiles.
Alter price, either lower or increase price to attract
customers.
Change the method of advertising, move the message, eg
from TV to radio.
Change the use of the product, eg Lucozade once was
used to reenergise ill people, now used as a sports drink.
Introduce line extensions to the product, create new
flavours, different sizes or even alter the format like the
PSP.
Change the name of the product, eg Opal Fruits to
Starburst, Marathon to Snickers.
Alter the place the product is sold, offer products online to
reach a wider customer base.
MARKETING
Product Innovation –step by
step process

Generating an idea

Analysing/market research of the idea

Producing a prototype

Test market

Adapt product to solve problems

Launch the product
Next: Product innovation by
diagram
MARKETING
MARKETING
Identify and describe 3 stages of the
product life cycle. 6 marks

Development − product is planned, developed and tested before being introduced onto the market.

Introduction − product is launched onto the market.

Growth − sales of the product are rising as consumers become more aware of it.

Maturity − product is well known in the market and growth is slowing down. Competition increases and
the price of the product falls.

Saturation − competition is very fierce and prices fall significantly.

Decline − sales and profits fall as new and more advanced products enter the market.

Death − product withdrawn from the market.

1 mark per stage − max 3
1 mark per description − max 3

(6)
MARKETING
Summary of learning

What have you learned today?
http://www.businessstudiesonline.co.uk/live/index.php?option=com_content&view=article&id=35&Itemid=23
http://www.businessstudiesonline.co.uk/GcseBusiness/Activities/Module3/Product/ProductLifeCycleProfitvSales/frame.htm
Learning Intentions:
MARKETING
To introduce market share
Success Criteria:
You should be able to:
•Identify and describe marketing share giving examples of
UK supermarkets and business organisations
•Describe the benefits of a high market share
BM Unit 2 - LO2
91
MARKETING
What is a new product?
New to the world
 New product lines
 Additions to existing product lines
 Improvements and revisions to
existing products
 Repositioned products

Click for clip
MARKETING
Product Innovation
BM Unit 2 - LO2

Generating an idea

Analysing the idea

Producing a prototype

Test market

Adapt product to solve problems

Launch the product
93
MARKETING
New product development stages
Generate ideas – Brainstorming session to
come up with ideas. Quantity rather than
quality is needed before refining the idea to
something realistic.
 Analysis and further research – Time and
money spent on discovering what is possible
and what is not. Can existing technologies be
used? Or will something totally new be
created?
 Are the products marketable? – Will
customers buy the product? Potential
customers may be surveyed at this stage.

MARKETING
New product development stages
(contd.)
Prototype – A working model is developed.
 Test marketing – Potential customers may
test several versions (or generations) of the
product, and feedback will be used to modify
the prototype.
 Full launch – If satisfactory, the product will
be put into full production and a marketing
campaign will be put in place to raise
awareness of the product, emphasising the
benefits it brings to customers.

MARKETING
Successful NPD
Does the product have a USP?
 Is there a specific market segment to
target?
 Is the market large enough and will
there be a return on investment?
 Are R&D and marketing
communicating?
 Was NPD process handled well?

Learning Intentions:
MARKETING
To introduce market share
Success Criteria:
You should be able to:
•Identify and describe marketing share giving examples of
UK supermarkets and business organisations
•Describe the benefits of a high market share
BM Unit 2 - LO2
97
Learning Intentions:
MARKETING
To introduce pupils to branding and own branding
Success Criteria:
You should be able to:
1. Describe the benefits of branding to an organisation
2. Describe the benefits of own branding to an organisation
BM Unit 2 - LO2
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MARKETING
Branding
A brand is a registered trademark of a
company, including the name or logo that
can only be used by that company.
Branding helps create USPs (unique selling
points), and via advertising and creating a
positive, desirable image, build brand
loyalty.
Brands promote an image of high quality,
which means a premium price can be
charged.
MARKETING
Unique Selling Point (USP)
Coca Cola
 Nike
 Kit Kat
 Sunny D
 Skoda Cars
 Mercedes
Cars
 Baxter’s
Soups
 Fairy Liquid
 Finish



Try to identify
the USP of each
of the products
listed opposite
Think of how they
are presented to
you in the
advertising you
see daily on TV, in
newspapers and
magazines
(dishwasher tablets)
MARKETING
Branding




Branding distinguishes a
product from its
competitors
Instantly recognisable by
consumers
Often linked to quality and
reliability – or “snob” value
Can command a premium
price
MARKETING
Advantages of branding
• Easily identifiable.
• Brand loyalty – repeat purchases.
• Premium pricing can occur.
• High quality is associated with brands.
• Can create a family of branded products.
MARKETING
Disadvantages of branding
• Brands take time to establish
reputation and quality.
• Advertising and promotion costs will be
expensive.
• Negative press can tarnish entire family
of products.
• Cheap imitations may flood the market.
MARKETING
Own Brands



Products branded
with the name of
the store selling
them
Most of the big
supermarkets
(Tesco) and chain
stores (Boots)
have their own
brands
Often cheaper
alternatives to
branded goods


Make a list of
as many “own
brands” you can
think of.
Indicate which
branded
product they
are designed to
rival
Eg “Wheat
Bisks” by
Safeway to
rival
“Weetabix”
MARKETING
Answer a question

Discuss the effects on an
organisation of branding their
products.
(6 marks) 2009

12 minutes
Solution
MARKETING







Products in the brand range are instantly
recognisable and are uniquely different from other
products.
Brand loyalty can be built up, which can lead to
repeat purchases.
Brand is perceived to be of high quality, which can
mean premium prices can be charged.
Makes it easier to launch new products onto the
market as there is already a brand family of products.
Brand names can be expensive to build up as it
takes time to achieve their reputation.
Bad publicity can affect the whole brand, which can
ruin the brand’s reputation overnight.
Imitator and fake products are common, which can
damage sales in the long run.
Learning Intentions:
MARKETING
To introduce market share
Success Criteria:
You should be able to:
•Identify and describe marketing share giving examples of
UK supermarkets and business organisations
•Describe the benefits of a high market share
BM Unit 2 - LO2
107
MARKETING
Own brands
Own brands are goods made by a producer
who sells them to a well-known retailer such
as Tesco or Sainsbury’s, who repackage
them and sell them at a low price under their
own brand label.
What are the own brands for the major
supermarkets?
MARKETING
Advantages of own brands
• Own brands will attract more customers
and more sales within the store.
• Producer will have guaranteed sales.
• Products are cheaper.
Disadvantages of own brands
Some customers believe own brands are of
lower quality than established brand names
(although this is not necessarily true).
MARKETING
Answer a question

Discuss the advantages and
disadvantages of selling own brands.
(4 marks) 2008

8 minutes
Solution
MARKETING







Own labels require very little advertising as customers will
be normally be regular shoppers.
The retailer does not need to produce the own-brand
products as they can buy them from manufacturers and
re-label them.
A range of products with own labels can be sold because
a brand family is established.
Some own brands can be seen as value for money and a
quality product when customers look for good deals.
Own labels are cheaper to customers as the price is
always lower than that of regular brands.
Whole brands can be tarnished over one product’s failure
or problem. This can ruin reputation overnight.
Run the risk of imitator brands, which can damage sales.
Learning Intentions:
MARKETING
To introduce market share
Success Criteria:
You should be able to:
•Identify and describe marketing share giving examples of
UK supermarkets and business organisations
•Describe the benefits of a high market share
BM Unit 2 - LO2
112
Learning Intentions:
MARKETING
To introduce PRICE. Price being one of the factors linking
into the MARKETING MIX.
Success Criteria:
To enable pupils to:
•describe pricing objectives
• identify how businesses use pricing strategies to price
products and services
•describe short-term pricing tactics and give current examples
•be able to describe pricing methods and elasticity of demand
BM Unit 2 - LO2
113
MARKETING
BBC Price Clip
BM Unit 2 - LO2

http://www.tutor2u.net/blog/in
dex.php/businessstudies/comments/pricing-inuk-supermarkets/
114
MARKETING
Price
Price has to be set appropriately or else
customers will not purchase the product. High
quality and high price normally go together
and vice versa.
In determining price firms have to consider:
•production costs of materials
•profit mark-up
Click for clip
•the market price (what competitors charge).
MARKETING
Long-term pricing strategies
Low price – Price lower than competitors. Only
appropriate where there is a little brand loyalty and
competition in the market is high.
Market price – Setting price at a similar price to
competitors. Homogeneous product means that price
competition is not of benefit. They compete in other
areas, eg service.
High price – High-quality products, premium goods and
services where image is important, such as perfumes.
MARKETING
Short-term pricing strategies
Market skimming – In a new market a high
price is set and then once the first
customers have bought, the price is lowered
to continue to skim the cream of the market
layer by layer.
Penetration pricing – A low price used to
enter a new highly competitive market.
MARKETING
Short-term pricing strategies
Destroyer pricing – An illegal pricing tactic used to
eliminate competition where a ridiculously low price is
charged (sometimes at a loss) to smash competitors.
Once market share is achieved, prices soar.
Promotional pricing – A short-term strategy to gain
media attention and renew consumer interest, eg
BOGOF or loss-leader tactics.
Demand-oriented pricing – When different prices are
charged at different times for the same good/service
based on high demand or lack of demand.
MARKETING
Answer a question

Describe three pricing tactics that
could be used when an organisation
attempts to break into a new market.
(6 marks) 2009

12 mimutes
MARKETING
Solution

High price – price is set higher than competitors to
give the image of quality and exclusiveness.

Low price – price is set lower than competitors to
attract customers to their product/service.

Skimming – price is set high initially, when no
competition exists. When competitors enter the
market, price is lowered to market price.

Market/competitive pricing – price is set at the same
level as competitors, normally used for products that
are identical.
MARKETING
Solution (cont’d)

Penetration pricing – price is set slightly lower than competitors
to attract customers; once a customer base is established, the
price is slowly increased to same as competitors

Promotional pricing – a low price is set for a short period of time
to boost sales in the short term, possibly even making a loss on
the product. This is often used by supermarkets to attract
customers.

Destroyer pricing – price is set very low compared to competitors
and once there is no competition in the market the price is then
put back up to the previous level or higher. This is mainly used by
larger organisations to destroy competition, as you must have
large reserves to sustain this tactic over any length of time.

Cost-plus pricing – is the cost of buying in the materials with a
mark-up added on.
Learning Intentions:
MARKETING
To introduce market share
Success Criteria:
You should be able to:
•Identify and describe marketing share giving examples of
UK supermarkets and business organisations
•Describe the benefits of a high market share
BM Unit 2 - LO2
122
MARKETING
Place - Distribution Channels
Producer 1
Producer 2
Producer 3
Consumer
Retailer
Wholesaler
Consumer
Retailer
Consumer
BM Unit 2 - LO2
123
MARKETING
Place
Click for clip
Producers
Producer to
wholesaler
Producer to retailer
Wholesalers
Direct selling
Two or more intermediaries
Retailers
Consumers
MARKETING
Choice of distribution channel





Projected level of
demand
Geographical
spread
Optimum methods
of stock control
Seasonal trends
Costs of
distribution
Speed of
distribution
 Legal restrictions
 Changes in buying
habits and life style
 Existing buying
habits

MARKETING
A distribution
channel
Manufacturer
Wholesaler
Retailer
Consumer
MARKETING
Direct channel

This is from manufacturer to consumer.

Fastest way (perishable goods?).

Cheapest for consumer (no costs added on
by each part of the chain).
Manufacturers
B
MARKETING
A
C
C
Company
D
E
Wholesalers
warehouse
Company
Retailers
Retailers
outlets
o
n
s
u
m
e
r
s
E-tailers
MARKETING
The Wholesaler Function





Buys in bulk from producers (low
transport costs) and sells to retailers in
smaller quantities
Bears stock-holding risk
Offers a wide variety of goods in small
quantities
Packages and labels goods
Offers advice to both producers and
retailers as to which goods are selling
well
BM Unit 2 - LO2
129
MARKETING
Advantages of using wholesalers
Buy in bulk, saving manufacturers the
delivery costs of many small runs.
 They bear the risk of holding stock.
 Break down the bulk supplies and sort
into quantities retailers will buy.
 Give advice to manufacturers,
knowing what goods will sell well.

MARKETING
The Retailer Function




Breaks down bulk to quantities
consumers wish to buy and store at home
Provides information to consumers
through advertising, displays and trained
staff
Stores a variety of goods, displays them
and marks on prices
Offers range of related services credit, HP, after-sales service and
delivery
BM Unit 2 - LO2
131
MARKETING
Types of Retailer

Independent - convenience stores, corner
shops

Multiple Chains - M&S, Dixons, Boots

Supermarkets - Tesco, Asda, Safeway, etc

Co-operatives



Department Stores - Jenners, Harrods,
Selfridges
Franchises - Benetton, Body Shop, McDonald’s
Others - mail-order, internet, direct-response
advertising, telephone and TV shopping channel
BM Unit 2 - LO2
132
MARKETING
Key terms

Manufacturer – firm that makes goods.

Wholesaler – company that stores goods in
bulk before selling them on in smaller
batches.

Retailer – firm that sells goods to end-users.

Consumer – person who uses final
good/service.
MARKETING
Answer a question

Discuss the advantages and
disadvantages to a manufacturer of
using a wholesaler.
(5 marks) 2008

10 mimutes
MARKETING
Solution
Advantages
 Saves on a number of smaller deliveries as retailers will buy in
bulk.
 Less money tied up in stock as the wholesaler stores the
materials.
 Wholesalers may label the product for the retailer, saving costs.
 Wholesalers break product down into smaller more saleable
sizes that can be packaged and sold by the retailer.
 Wholesalers can give market research direct to manufacturer,
which may affect future buying decisions.
Disadvantages
 Loss of control of how the product is presented because it is
normally packaged already.
 Lower profits as wholesaler, as intermediaries, take their cut.
Learning Intentions:
MARKETING
To introduce PROMOTION. Promotion being one of the
factors linking into the MARKETING MIX.
Success Criteria:
To enable pupils to:
•describe types of promotional activities
• identify how businesses use promotional techniques to sell
products and services
•describe types of advertising and give current examples
•describe the role of Public Relations (PR) within promotional
activity.
BM Unit 2 - LO2 136
MARKETING
Types of promotion
Advertising
Merchandising
Sales
promotion
Direct
mail
Promotion
Exhibitions
and trade fairs
Public
relations
Personal
selling
MARKETING
What is promotion?
Promotion is the way firms inform
customers of their products and try to
generate sales.
Click for clip
MARKETING
Methods of promotion
•
•
•
•
•
•
•
•
Advertising
Sales promotion
Public relations
Merchandising
Packaging
Exhibitions and trade fairs
Direct mail
Personal selling
Click for clip
MARKETING
Advertising Decisions

The effect on Sales?

The target market?


Why do the consumers NOT buy
the product?
Which is the best medium to
use?
BM Unit 2 - LO2
140
MARKETING
Types of advertising
Informative: Health Education Board for Scotland
– smoking, drugs, alcohol etc
Persuasive: used in very competitive markets,
uses powerful images and language – ‘Probably
the world’s favourite lager’.
Corporate: promoting the whole company not a
single product – BP adverts focus on their ‘green
image’ not on the product (petrol)
Generic: the whole industry comes together to
promote the whole industry – Scottish beef,
Scottish tourism
Some classic
adverts
Click for clip
MARKETING
Types of advertising media
Print: newspapers and magazines
Broadcast: TV, radio, internet
Outdoor: billboards, buses, round football grounds etc
Which one is chosen depends on:
• cost: TV expensive but memorable
• target audience: choice of programme, newspaper
• competitors’ advertising: match to competitors
• impact required: new product  wide variety of
methods
• the law: tobacco and alcohol
Click for clip
MARKETING
Sales promotion – out of the
pipeline and into the pipeline
Into the pipeline targets retailers to purchase
from suppliers. It also includes materials to help
them sell to customers, eg merchandising
displays and posters.
Out of the pipeline targets customers and end
users, eg trial packs and BOGOF.
MARKETING
Main Types of
Sales Promotion
Into the pipeline


Enhancing sales
to trade outlets
Helping retailers
to sell to their
customers eg
displays, posters,
videos, etc
BM Unit 2 - LO2
Out of the pipeline


144
Helping to
persuade
customers to buy
from retailers
Providing free
samples, a
percentage extra
free, 2 for 1
offers, money-off
coupons, etc
Learning Intentions:
MARKETING
To introduce market share
Success Criteria:
You should be able to:
•Identify and describe marketing share giving examples of
UK supermarkets and business organisations
•Describe the benefits of a high market share
BM Unit 2 - LO2
145
MARKETING
Public relations (PR)
This is when an organisation tries to
communicate with customers, shareholders,
employees and the government – all of whom
form the organisation’s ‘public’.
The aim of public relations is to improve the
image of an organisation’s products and the
image of the organisation itself.
MARKETING
The role of PR





Provides public with information about the
organisation.
Builds confidence/reputation of the
organisation and awareness of its products.
Develops goodwill in the community.
Presents the organisation in a positive way.
Supports and enhances other areas of the
promotional mix, such as advertising and
selling.
MARKETING
PR activities





Opening a new store
Charitable donations
Event sponsorship
Celebrity product endorsement
Press conferences and press releases
It is important to remember that PR is always
conducted with ‘spin’ involved. In other words it
always tries to have the firm viewed in the best
possible light.
MARKETING
Merchandising
• Merchandising involves making sure a firm’s
products are laid out in the most enticing or
attractive way possible to customers.
• Special displays, stands or posters may be given to
retailers to help point-of-sale advertising.
• ‘Eye level is buy level’, for example when a new
DVD comes into the local supermarket expect giant
posters and cardboard cut-outs of the characters to
be emblazoned around the store!
MARKETING
Packaging
The ‘cover’ or packaging of the product can also
generate sales.
Design – the colour scheme should help make the
product stand out from rivals.
Protection – is the packaging appropriate to ensure
it doesn’t get damaged during distribution or when
being taken home by the customer?
Information – most products sold in supermarkets
have to carry labels with information on their content
or to indicate if they pass the BSI quality standard.
MARKETING
Answer a question

Describe and justify four different
methods of direct selling that could be
used by an organisation.
(8 marks) 2010

15 minutes
MARKETING
Solution

Personal selling – Products are sold by experienced
sales personnel. Direct contact can be made with the
retailer or consumer. Can be tailor-made to customer
requirements. Demonstrations of the product or service
can be shown.

Mail order – Goods sold via catalogues. Offers credit
facilities. No need for high-street stores. Internet selling –
making use of websites to sell products. Consumers can
order online from offices or homes. Is available worldwide.
Can be accessed 24/7.

Specialist magazines – Used to describe and sell
specialised products or services. Customers who are sent
or purchase the magazine are directly interested.
Consumers can phone in orders or speak to specialists.
MARKETING
ICT and Market Research





Databases compiled by research
agencies
Electronic point of sale information
(EPOS)
Supermarket loyalty cards
Stock control software gives sales
breakdown
Web sites - customers can e-mail
comments back to the company
BM Unit 2 - LO2
153