AS Business Studies Marketing
Another definition
Marketing is the management
process responsible for
identifying, anticipating and
satisfying consumers’
requirements profitably
Marketing Basics
 A market – a place or mechanism where sellers and
buyers meet to engage in exchange
 Consumer Market – final user is the person
(consumer) – buying yogurt at Metro
 Industrial Market – goods and services bought by
businesses to use in the production process SABMiller (Perú) buys silica to make glass bottles for
its beer production
Concepts
(required) for understanding
Marketing
 Human needs and wants – Marketer´s goal is to
convert needs into wants. You need to eat, but you
don´t need to eat an expensive steak Ruth Chris
Steakhouse tries to get you to go to its restaurant
 Value and Satisfaction – To maintain good long-term
relationships with customers, businesses should aim to
offer good value (and thus, satisfaction) at all times
Mcdonald´s consitency of product so customers return
Beginning Concepts
 Marketing Objectives (determined by senior
management!) – the goals of the marketing
department which will help the company achieve its
overall goals Examples: increasing market share,
rebranding a product, or increasing total sales
 Marketing Strategy – long term plan established for
achieving marketing objectives (later we will learn
about the marketing mix, product, place,
promotion, price)
More on marketing objectives
 All departments within the business need to work
together in order to achieve the overall corporate
objectives
 Marketing objectives will impact upon other
departments within the business
The impact of marketing
objectives
Marketing
department
Other type of Marketing
 Societal Marketing – this approach considers not
only the demands of consumers but also the effects on
all members of the public (society) involved when
firms meet these demands
 IT IS A BALANCE (don´t forget about profits but
don´t forget about the environment, fellow humans
either)

Impact of marketing (example)
A firm sets itself a marketing objective to increase its
number of sales. Its strategy to complete this
objective is through extensive promotion. How will this
affect:
 The Production Department: Responsible for
producing the product
 The Human Resources Department: Responsible for
organizing employees
 The Finance Department: In charge of the firm´s
finances
Examples, Societal Marketing
 Example 1 - Green approaches – could help a company
win over many customers in the long run
 Example 2 – paying good wages could build goodwill
or simply help society
Superbowl Commercials, two
types
 Gets the brand in your head
 Talks about specific characteristics of the product
(product differentiation)
AS Business Studies Marketing
Market share
Measure of Market Share: The firm´s sales as a
proportion of total sales
 Market share =
Total number of sales of the firm
Total number of sales in the market
x 100
Is Coca-Cola more successful
than Pepsi?
 In 2009, PepsiCo achieved a $42 billion revenue whilst
Coca-Cola achieved $30 billion
 This is because Pepsi operates in several markets other
than soft drinks
 The PepsiCo group also owns Lay´s, Gatorade, Lipton,
Doritos, and also works in partnership with Starbucks
and Ben and Jerrys
The value of knowing your
company´s market share
The ´brand leader´ benefits from:
 Knowing they have higher sales than competitors
 Retailers want to stock and promote the best selling
brands
 A higher price may be charged to retailers
 Being brand leader can be used in promotion
Competitors benefit from
 Considering the strategies that have been adopted by
the brand leader
Market Growth
The rate at which total
sales are increasing in
the market each year
Calculate market growth in the
following markets
Market
Total Sales 2008
Total Sales 2009
Sports Clothing
250,000,000
225,000,000
Sports Footwear
120,000,000
140,000,000
Sports Equipment
82,000,000
86,000,000
Market Growth Questions
1.
Explain two factors that may have increased the size
of the sports footwear and equipment markets
2. Explain one factor that may have lead to the decline
of the sports clothing market
3. If a producer of sports footwear maintained constant
annual sales over the period shown what would be
happening to their market share?
Market Growth
Determined by:
 General economic growth
 Changes in consumer incomes
 Development of new products, and markets that take
sales away from existing markets
 Changes in consumer tastes
 technological change
Other Important Marketing
Concepts
 Adding Value – The marketer needs to add value in
order to successfully charge a price higher than it cost
to make the product
 Create a luxurious shopping environment
 High quality packaging
 Promote the product as ¨must have¨ item
 Make the product very unique
Mass Marketing and Niche
Marketing
 Niche Marketing – identifying a small
segment of a larger market by
developing products that suite it
 Mass Marketing – selling the same
products to the whole market with no
attempt to target groups within it
Mass Marketing and Niche
Marketing
 http://www.youtube.com/watch?v=ktRWfHUQdUU
Other Important Marketing
Concepts and Definitions
 Product Differentiation – making a product
different so that it stands out from the competitor´s
products in consumers´ perception
 USP (unique selling point or proposition) – the
special feature of a producut that differentiates it from
competitor´s products
Practice – Page 260
 Read and discusss number 16
 2 Good house marks for 1st to finish with correct
answers and analysis
AS Business Studies Marketing

Review
- Why do Market
Research?

?
Why?
 Examples –
 Reduce the risks associated with a new product
 Predict future demand changes
 Explain patterns in sales of existing products and
market trends
 Assess the most favored flavors, designs, promotions
and packaging for a product
MARKET RESEARCH – KEY TERMS
 Qualitative Research - research into the in-depth
motivations behind a consumer’s buying decisions or
behavior
 Quantitative Research – Research that leads to
numerical results that can be statistically analyzed
Statistical Terms
 Mean is the average
 Mode is the most frequently occurring data point
13543434444412445444
 Median is the middle data point

1234
5
6789
Statistical Terms
 Range – difference between the highest and lowes
 2 to 50 (48)
 inter-quartile range - middle 50% of data
 1 to 25
26 to 75
76 to 100
AS Business Studies Marketing
What is the marketing mix?
The four key decisions that
must be made for effective
marketing of a product
Product, Price, Promotion, Place
The 4 Cs as an alternative
 Customer Solution – what the company must do to
meet the customers needs and wants
 Cost to customer - total cost including delivery and
packaging
 Communication with customer – up-to-date
information provided, much communication
 Convenience to customer – easily accesible pre-sales
info and easy to find place to buy the product
Customer Relationship
Marketing
using marketing activities to
establish successful customer
relationships so that existing
customer loyalty can be
maintained
 CRM –
More about Maturity Stage of
the Product Life Cycle
 Extension Strategies – these are marketing plans to
extend the maturity stage of a product before a brand
new one is needed
 Examples -
Developing new markets for existing products
(exports)
2. New uses for existing products and product
relaunches involving new packaging or advertising
1.
AS Business Studies Marketing
Fixed Costs, Variable Costs, Per unit
cost, and Economies of Scale
 Fixed costs, rent for the factory the company has,
insurance , salaries of senior management
 Variable costs vary by the amount that is produced
(number of units), examples are electricity, raw
materials, labor costs
 Fixed Costs + variable costs = total costs
Economies of Scale
the cost per unit
declines as you make
more units (spreading
the fixed costs over
more units)
 …..
Mark up Pricing
Adding a fixed mark-up
for profit to the unit price
(cost) of a product
Mark-up Pricing Example
 Total cost to make your product = $40
 50% mark-up over your cost
 So you charge a price of ___________?
Answer
 $60
 50% x $40 = $20
 $40 + $20 = $60
Target Pricing
Setting a price that will
give a required rate of
return at a certain level
of output/sales
Example – Target Pricing
Total units 10,000, total costs $400,000 (or $40 per unit)
Required rate of return 20% (.2 x 400,000 = $80,000)
Total revenue needed to make required return
$480,000 which, divided by 10,000 units, gets you the
price to charge of = $48
Full Cost Pricing
Setting a price by calculating a
unit cost for the product
(allocated fixed and variable
costs) and then adding a final
profit margin
Full Cost Pricing
 First find out the cost of production
 Annual fixed costs $10,000
 Variable costs per unit $5
 Currently producing 5,000 units per year
 Fixed costs of $10,ooo + variable costs of $25,000 =
total costs = $35,000 or $7 per unit
 A price of $7 needs to be charged to break even
Full Cost Pricing

If the company adds a 1% profit margin it will
charge $7.07
 If it adds a 10% profit margin it will charge $7.70
 If it adds a 100% profit margin it will charge $14
Contribution (marginal) cost
pricing
Setting prices based on the
variable costs of making a
product in order to make a
contribution towards fixed costs
and profit
Contribution Pricing
 Fixed costs are $40,000
 Variable cost per unit - $2
 The company decides it wants the price of its product to
allow it to contribute $1 per unit sold towards the fixed
costs, so it makes the price $3
 After it sells 40,000 units, it will have covered the fixed
costs
 If it sells 60,00 units, it will have a profit of $20,000,
etc..
Competition Based Pricing
A company will set its price
based on what the
competitions’ prices are
Penetration Pricing
Setting a relatively low price
often supported by strong
promotion in order to achieve a
high volume of sales
Psychological Pricing
Set price just below some key level,
like at 99 cents, or $9.99
Also, rely on your market research
to not set prices at levels which
consumers view as inappropriate
for the style and quality of the
product
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 (inelastic)
Loss Leader strategy
Price some products very low, even
below their variable costs…..the
hope is that customers will also
purchase other products
Example of Loss Leader Srategy
 Gillette razors – IT SELLS THE RAZOR AT A LOSS
BUT IT MAKES A LOT OF MONEY ON THE
REPLACEMENT BLADES
Discrimination Pricing
Airline example (first class vs.
economy or early purchasers vs.
last minute purchasers)
Destroyer Pricing
A large, powerful company in the
market lowers its price to the point
where it will force some of the
weaker competitors out of the
market
Price – additional issues
 Price wars to gain market share – note that the weak
may not survive (remember destroyer pricing)
 Non-price competition – there can be fierce and
competitive promotional campaigns designed to
establish brand identity and dominance
 Collusion – almost always illegal
AS Business Studies Marketing
Promotion
Promotion
Promotion
Promotion - Baseball
Promotion
 http://www.youtube.com/watch?v=RDiZOnzajNU
Fedex
 http://www.youtube.com/watch?v=MLnzF5NcAc4
 Fedex DID NOT pay for this movie to feature them,
but the movie increased brand awareness
 Other times, COMPANIES DO PAY FOR THEIR
PRODUCTS TO BE IN SHOWS OR MOVIES
 http://www.youtube.com/watch?v=pX4dTg-6YZA
Promotion / Ice Rink
Mcdonald’s ok to keep
promoting toys…..
 http://www.youtube.com/watch?v=wDTuOcmcUNE
 http://abcnews.go.com/blogs/health/2012/04/06/mcd
onalds-can-keep-happy-meal-toys-court-rules/
More Promotion during Sports
events
While there is an interview / Champions
League / 2013
 http://www.youtube.com/watch?v=fO3H6syCJJk
Soccer - many
companies advertising!
 http://www.youtube.com/watch?v=wEhniGlFDtA
Societal Marketing?
 http://www.youtube.com/watch?v=KXD7VgavogE