Unit 2. Topic 1 - Marketing

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Unit 2



• Internet

• Advantages and disadvantages of e-commerce

• QR codes

• Social Networks

• Deal of the Day

• Apps

• Text Messaging

• E-mail advertising

• On-line ratings

• YouTube

• Other Advertising methods

• Special offers

• Celebrity endorsement

• Ethical Marketing Market Research

• Field/Primary research

• Costs/benefits of field research

• Desk/Secondary research

• Costs/benefits of desk research Functional Activities


• Market Growth, Market Share, Market Leader • Market Segmentation • Target Market Product • Product Development • Risks involved • Product Mix • Product Lifecycle • Branding Price

• Factors affecting price

• Pricing Strategies Place

• Location Factors

• Distribution Channels







Activities of a








There are four functional activities of a



What is




Marketing involves trying to meet the needs and

wants of customers by finding out what they want

and providing it at a price that can make a profit.

In large organisations, marketing will be done by

a the marketing department. In small

organisations it may be done by the owner, along

with many other tasks.

What is Marketing?


What is a Market?

 Outdoor market

 Shopping mall

 High street shop

 Ice-cream van  Housing market  Banks/mobile banks  Through an app  Mail order  Dispensing machine

 Door to door eg Avon

 Telephone sales

 TV shopping channels

 Internet – e-commerce/e-business

A market is where buyers and sellers come together. How many different types of markets can you think of?

If people buy products/services in quantity, there is a market. A market requires buyers and sellers


It can attract new customers by letting them

know about the range of products the

business has

It can allow the business to enter new markets

(eg using the internet to sell a product on the

other side of the world

It can help the business grow

It can increase the amount of profit a business


Why is Marketing Important?


Marketing can help a

business grow it’s number

of customers – Market


This increases the

proportion of customers it

has from the market –

Market Share

If they have more

customers than all other

providers, they are

Market Leaders

Market Growth, Market Share, Market





Market share


Sex/Gender – eg Male/Female – products directly produced for females or males

Age – eg Pampers, teenage magazines, SAGA holidays


class - eg people who can afford the latest gadgets when they first come onto the market (socio-economic groupings A, B, C1, C2, D and E)

Where they

live - eg garden centre who specialise in plants for the local area (weather/soil).

Religious or

cultural belief – eg Halal meat (speciality butcher for beliefs and religion)

Lifestyle – eg into sport/fitness

Occupation - eg - Stethoscope

Market Segments


Target market

A target market is the group of people that

a business thinks are the most likely to buy

their good or service. Consider:

Since you are not old enough to drive, you

are not the target market for car


You do phone a lot so you are a target

market for phone providers and




To make sure the product is suitable and meets

the specific needs of a customer group

Make sure it is sold where those people will see

and buy it

It is priced so that it reflects the target group

To use the correct advertising and marketing



How do we define or describe a target


Marketing use different things to group

people. Often, the product will be targeted

towards a segment that is made up of

different types.






This is the good or service which is sold on the market

The product must be what the customer wants –

market research helps with this


This is how much a business charges for the good or service.

Different pricing

strategies can be used

The price must suit the customer. If competitors prices are lower, customers will buy from them. Price should reflect quality


This is how customers are told that the product

exists and are

encouraged to buy it

The product must be advertised so customers know about it. Promotion encourages customers to buy


This is the way businesses make the product available and where it is sold

The product must be accessible often via different places eg

websites, shops, apps, TV

The Marketing Mix



mix -




To succeed, all businesses must attempt to

be ahead of their competitors.

All businesses must be aware of:

developments in technology

development in their own market

changing needs and wants of the market

To do this they need to invest time and

resources in order to come up with new

ideas (ie to be innovative).

Billions are spent each year on product



Have a look at these videos of product

development …

dyson toothpaste transit mobility aid snowboard google food Burrs! Note – some of these products are

completely new, others are changing/improving to remain competitive Return


Stages in Product Development and Research

Market Research Carried out to find out what the customer wants

Ideas developed, either from extensive scientific research, from identifying a market through market research or through ‘brainstorming’ sessions

Prototype or development

lab experiments or production of a model may be necessary, designs have to be shaped and altered and perhaps even some preliminary testing undertaken.

Test marketing stage where the product is tested on a representative sample of consumers. This results in useful feedback and hopefully reduces the risks of failure when the product is finally


Changes Based on feedback received from testing the prototype Method of


Has to be decided, eg mass production? Price Price charged will have to be decided Place Decide where the product will be sold



video Mackie's Vision

is to be a global brand from the greenest

company in Britain created by people having


The main elements in our vision are

•to build our brand and increase export (which includes England and the rest of the world),

• to look after our environment and continually reduce our carbon footprint (leaving nothing behind except ice cream)

• to have fun.


Customers may not want to buy the product

(ie there is no demand for it)

The money invested in developing the product

would be wasted

The business reputation could be damaged if

nobody wants the product or if it is inferior


External factors (eg the economy or

competitors) might impact upon the success of

the product.

Some Risks

Click for video


Many organisations produce a large range of products

This is done for a number of reasons, including

• To spread the risk and not be dependent on one single product

• To suit different types of customers

The Product Mix

Range of Procter and Gamble products


Once a product has been launched onto the market, it has a life cycle. The product life cycle shows the different stages of the product’s life. The four stages are:

Product Life Cycle

Research and


Lots of market research and testing. The business is spending money but receiving no income from the product. At this stage, some products are abandoned if there is no prospect of selling.


The product is introduced or launched onto the market. Lots of

promotion and advertising to encourage sales but product is not really profitable


Once customers know about the product, sales begin to grow. Lots

of advertising. Later in this stage, the organisation starts to make profit. Other businesses may have developed similar products


Everyone who wants the product has heard of it, they have a loyal

customer base – sales are at their highest and other companies will enter the market selling similar products. Spend money developing new products


Sales begin to fall – product is getting older and newer versions are coming on the market – customers no longer want the product.


Product Life Cycle Graph


When a product reaches decline stage, the organisation may take steps to extend its life. To do this, they will look at the marketing mix

Product – does the product have to be changed to attract new customers

Price – should the price be dropped, or should special offers be introduced to attract interest

Promotion – this may include preparing a new brand image for the product along with a fresh advertising campaign

Place - better offers and display materials to the shops stocking the products. Sell on-line to increase market

How organisations can extend the

product life cycle

Return to index


What is a brand

A brand can be a logo, symbol or name that

is given to a group (eg Cadbury) or type of

product (ipad). Branded products usually

have an easily identifiable logo and a slogan

Vorsprung durch Technik


It is

easily identifiable and is recognized

by customers

It is used to

differentiate from competitors


customer loyalty and repeat


It encourages people to

pay more

It is used to get customers to

try a new


– they already

know and trust



What are the Reasons for Developing a



Very expensive and time consuming

process to develop a brand

One product getting a bad reputation

can damage the name of the brand

Some organisations try to copy

brands and produce low quality, fake


Drawbacks of Branding



mix - PRICE


The stage in the

life cycle

Price charged by


How much it costs to


How much


is wanted

How much of the product can be



market segment

that the product is aimed


The decision may depend on:


Life Cycle At the beginning of the life cycle, the product may be priced high as they are in high demand. They may also have incurred high costs in research and development. As demand begins to fall, the price may be reduced so they continue to sell

Competitors’ prices

If price is higher than competitors, they may lose customers to them

Manufacturing cost

A business must cover its costs in order to break even. It must calculate the cost of the product before it can set a realistic price

Profit required The more profit wanted, the higher the price that will have to be charged. Some organisations do not exist to make a profit so will set prices accordingly.

Rarity value Products made in small quantities may be priced higher eg high performance/value cars or limited edition prints

Market segment

Products aimed at people with high incomes may be priced higher (Waitrose) where products aimed at low income (eg Tesco value) are priced lower.

Some further information on Price

Return to index


High Price

Setting price higher than competitors – customers will think it is better quality eg branded goods like Tesco finest

Low Price

Setting price lower than competitors – customers

looking for a bargain will buy the product “own brand” goods like Tesco value

Cost plus


The manufacturer calculates the cost of the product then usually adds on a % in order to make a profit. This ensures a profit is made eg building jobs



Set the price low for a new product when there are already similar products in order to penetrate the market. Increase price as product is established eg new cereals/chocolate bars/crisp flavours

Pricing Strategies


Pricing Strategies (cont)



Charging a high price for a product that is new. Customers are happy to pay a high price – status eg new iPhone



Setting price low to destroy the competition eg selling newspaper for 10p



Price charged is lower than normal for a short period, eg after Christmas prices lowered to get rid of excess stock



Price charged makes the customer think they are getting a bargain eg £1.00 99p



mix - PLACE


Disneyland, Paris

Opened in 1992

An estimated 17

million people could

drive there within 2


300 million could fly

there within a few



Place - Braehead Shopping Centre

Why is Braehead located where it is?


Where the

customer is

Locate close to the people who will

buy the products


A business may have specific

requirements, eg kitchen or large

warehouse area


Customers need to be able to park


Water, fuel, transport

Place - Many factors will be considered

when deciding where to locate:




Sometimes the Government or

Local Authority will offer grants to

businesses setting up in the area



Being close to the market segment,

eg Soar – ski wear shops



Employees needed to work. May

require particular skills eg



May wish to be far away or close to

increase market share



Consider the impact on the

environment eg windfarms



Mail Order Catalogue Retail Outlets



Newspaper and


Home shopping parties

Telephone ordering


E-commerce websites


Tv shopping channels

Vending machines

Place - Where the product is sold:

We have already considered this topic (What is a market – see early slides)


Place – Distribution Channels





warehouse Wholesalers Eg Bookers

Company outlets eg Ikea Retailers eg Soroba Shop Retailers Eg Tesco direct eg from farmer to customer at farmers’ market Return


Place - Advantages and Disadvantages of

Different Channels

Channel Advantages Disadvantages Producer to


Cheaper – no middle man. Better quality

May have to collect

Manufacturer wastes time selling goods

Producer to retailer to customer

Cheaper than chain including wholesaler Retailers bear marketing costs

Retailer will have a mark-up so increasing the cost

Producer to wholesaler to

retailer to customer

Small retailers can obtain variety of goods

Goods more expensive as wholesaler and retailer will add to cost

Return to index


What are the different methods of

physically getting the product to the




mix -




Product promotion involves persuading customers to buy the product using a variety of techniques, for example

competition entry, money-off vouchers, discounts,

BOGOF – customers think they are getting a good deal.

Advertising involves making customers aware of the

product. It also gives information about the product and tries to encourage customers to buy it.


Using Technology to raise awareness of



Lots of information about products can be made available using company websites. Websites can also be used to sell the company products – this is called e-commerce. Many people now do shopping online and look for


Internet websites

Click for video Return


Advantages of E-commerce to the business

Disadvantages of E-commerce to the business

Customers worldwide can be targeted Customers may not want to disclose personal details

Product information can be updated quickly

Can be expensive to make and maintain a website

Businesses may not have to pay for premises to display stock

Employees need training to maintain and update the website

More environmentally friendly than printing leaflets

Advantages of E-commerce to the customer

Disadvantages of E-commerce to the customer

Customers can buy online 24/7 The goods can’t be seen or handled before buying

Customers can usually buy cheaper than going into a store

There is no personal contact with the organisation

Stock availability can be checked instantly

Will have to wait for the product to be delivered

Products can often be personalised eg


Can be used to direct people to company websites

QR Codes


Facebook, Twitter, blogs, wikis are very

useful for raising awareness of


Social Networking


Deal-of-the-day (also called flash sales or one deal a day) is an ecommerce business model in which a website

offers a single product for sale for a period of 24 to 36 hours. Potential customers register as members of the deal-a-day websites and receive online offers and

invitations by email or social networks. Examples Groupon, itison

Deal of the Day


Apps which allow customers to browse

products and buy online are becoming

more popular eg the Amazon app

Can be used on the move

Can be used using wifi


Training would be needed by creator so

that app is easy to use

Depends on good internet connection



Text messaging is widely used by businesses to

communicate and promote products to customers. Specific customers can be targeted quickly with


• This is cheaper than some other methods of promotion

• Lots of customers can be targeted However

• Texts only include a small amount of information

• Customers may receive lots of text messages and start to feel annoyed!

Text Messaging


Many businesses use e-mail to send mailshots to customers. Customers can sign up to a mailing list and be e-mailed with detaails of special offers, new products and other promotions.

• E-mails can be sent at any time

• Message can be sent to many different people simultaneously

• Can be sent worldwide at little cost

• Environmentally friendly However

• Some e-mails can be filtered as spam

• Receiving lots of e-mails can be irritating to the customer

• Viruses can be spread through e-mails

E-mail Advertising


Can help customers to decide whether or not buy

a product based on information provided by other


On-line Ratings


Companies can post videos of their products in

action and allows customers to view before they

buy the product



Other Advertising Methods

Method Advantages Disadvantages

Television Reach millions Target audience

Expensive Cinema visual/sound impact target particular

films. captive audience

Expensive Leaflets and Junk


Cheap to produce Easy to ignore Newspapers/


Know their readers – can target Often read twice

Can be expensive

Radio Target audience, cheaper Smaller audience Poster/


High visual impact In place for long time

Can’t contain

much information Internet High visual impact

Can link to buy product

Product placement Manufacturers pay for products to be used in films/television productions Video clip


Choosing a Method of Advertising




Christmas function

in Royal Hotel Local newspaper – Oban Times Not too expensive Reaches target audience

New restaurant

opens in Oban Menus delivered to doors by postman Fairly inexpensive Customers keep info

Cadbury launch

new chocolate bar TV and cinema adverts Info must reach large audience Rock Concert to be

held in Hampden ? ?


Promotion – Special Offers



BOGOF (buy one

get one free) Eg Boots 3 for the price of 2. Customer usually buys more than required Free

gifts/samples Eg fast food restaurants. May be used to increase demand at quieter times of the year Loyalty cards Eg Tesco, Boots. Regular customers save points to

spend in store. Also used to monitor customer purchases

Discounts Encourage purchase of particular product. May be money off voucher

Competition Eg prize draw on wrapper of product if purchased Point of sale

advertising Special display cases in store

Sales Encourage people to visit shops they wouldn’t normally.


Promotion – Celebrity Endorsement

Celebrities are used to

raise awareness of a

product or encourage

customers to buy it


All marketing and advertising must be:

an accurate description of the product or service





socially responsible (not encouraging illegal,

unsafe or anti-social behaviour)

Ethical Marketing/Advertising





Market Research is the the process where businesses find out information about their customers and the market. It involves finding out what customers want, but also

finding out about what other businesses are selling and for how much. This allows businesses to make key

decisions like

• Altering the price of the product

• Changing the product in some way

• Launching a new product

• Changing where the product will be sold


Primary or Field Research

Secondary or Desk Research

There are 2 main types of Market



Field Research involves going out into the market

place and finding out


information for your

own business. This is called

primary information



Return to index



Personal interview Face to face discussion where interviewer asks questions

• The interviewer can encourage the respondent to answer questions

• Points can be clarified

• Time consuming and expensive to carry out

• Interviewers will need training

Postal Survey Questions are sent out through the post

• Fairly cheap to send the survey

• Survey can be completed at own pace

• People may not go to the bother of completing survey

• No opportunity for clarification

Tel Survey People are contacted by phone to answer questions

• Large numbers can be contacted

• Less expensive than personal interviews

• Information obtained instantly

• People get annoyed about receiving phone calls

• Useful for short surveys only as people don’t want to spend time Online Survey Questions are displayed on a website

• Links can be set up for large numbers of people

• Inexpensive

• Relies on people having internet connection

• No personal contact

Methods of Field Research (1) - Surveys

Return to index


Focus Groups This is a discussion among a specially chosen group of people, eg BBC viewers • Feelings and views can be observed

• Points can be clarified and expanded upon

• Time consuming and expensive to carry out

• Info can be difficult to analyse

• May not be a representative group

Observations This involves watching and recording situations eg number of visitors to a shop or

children playing with a new type of toy

• Facts and figures are easy to analyse

• People being observed may not act naturally

• Those being observed are not usually asked for opinions

• Privacy and ethical issues

EPOS Electronic Point of Sale gathers information at the chechout

• Large quantities of information • Expensive to buy system

• No opinions sought from customers Social


FB and Twitter used to gather feedback from customers. Often used to interact with customers and find out their reactions and opinions

• 2-way interaction

• Large numbers can be contacted

• Information not usually private

• Not all customers join websites Hall Tests Product is given to customers to try and feedback sought

• Product is tried and feedback is based on experience

• Response may give the response they think the organisation wants to

Field Research (2) – Other Methods


Costs (Disadvantages) of Field Research

Benefits (Advantages) of Field Research

Expensive to carry out this type of research

This provides up-to-date and reliable information

Can be time consuming to carry out and find results

The Information has been

gathered for a specific purpose and is therefore relevant to the business

Costs and Benefits of Field Research


Desk Research involves finding out information


existing sources

, using information that has

already been gathered

for another purpose. This

is called

secondary information




Government records The government publishes information from a variety of sources eg the census for population figures, import and export


Printed information This could include books, journals, magazines and newspapers

Online research There is a vast amount of information

available from websites which can be used for market research. If using this data,

however, it is important to ensure that the websites being used are reliable and

contain accurate information.

Methods of Desk Research


Costs (Disadvantages) of Desk Research

Benefits (Advantages) of Desk Research

The information may not be exactly relevant to your needs

The information does not always cost money to obtain

The information may not be accurate or up-to-date – if it has been gathered by

someone else

The information is usually easy to obtain as the research has already been carried out

Costs and Benefits of Desk Research



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