Business book answers

Contents:
1. The Role of Marketing
2. Marketing Planning
3. Sales Forecasting (HL)
4. Market Research
5. The 4 Ps
6. The 7 Ps - Extended Marketing Mix (HL)
7. International Marketing (HL)
8. E-Commerce (HL)

4. MARKETING:

4.1 The Role of Marketing:

Marketing:
The management task that links the business to the customer by identifying and meeting the needs of
customers profitably. Marketing makes the consumer KING/ QUEEN. The main purpose of marketing is to
shift the demand curve to the right (eg. advert may increase sales).

❖ Market size → the total level of sales of all producers within a market (measured in two ways volume of
sales or value of goods sold).
❖ Market growth → the percentage change in the total size of a market over a period of time. Businesses assess
whether to enter or not.
❖ Market concentration → measures the degree of competition that exists within a market by calculating the
market share of the largest few firms in the industry. The sum of these is known as the concentration ratio.

Why be a market leader:

Firm with the highest market share (eg. when the consumer calls the product by the brand).
- Can be used in promotion of products (consumers keen to buy the most popular brand?)
- Sales are higher than competitors and revenue & profits will be too.
- May have more power to negotiate lower discount rates with retailers.
- Retailers keen to stock & promote the best selling brands & best shop position.
- Popularity

Market share:
Is the measure of a firm’s sales revenue as a percentage of the market’s total sales revenue of the industry.
The percentage of sales in the total market sold by one business. Highest market share is normally the
market leader, although it does not necessarily mean a profitable business.

sales revenues
Market share= x 100
Industry sales revenue
How to increase market share:
- Promotion of brands
- Product development, improvements and innovation
- Motivation and training of the workforce
- Establishing property rights
- Use more efficient channels of distribution
- Lower prices

Things to consider when marketing goods & services:

- Intangibility - Product strategy
- Inseparability - Price strategy
- Heterogeneity - Promotional strategy
- Perishability - Place strategy

Types of markets:
Market is a place or process whereby customers and suppliers trade. They exist when there’s demand for a
product and a willingness to supply these products.
Consumer markets (b to c):
- goods and services bought by the final user of them.
Industrial markets (b to b):
- goods and services bought by businesses to be used in the production process of other products.
Market orientation:
- (outward-looking) basing product decisions on consumer demand.
Product orientation:
- (inward-looking) making products that can be made or have been made and then trying to sell them.
Asset-led marketing:
- marketing that bases strategy on the firm’s existing strengths and assets instead of purely on what the
customer wants.
Social (societal) marketing:
- Societal marketing is the planning and implementation of marketing programs designed to bring about
social change to benefit society.

Societal Marketing:
Societal marketing is the planning and implementation of programs designed to bring about social change to
benefit society. Not only considers the demands of consumers but also the effects on all members of the
public. It is an attempt to balance 3 concerns: company profits, consumer wants and society’s interests. It
considers long-term welfare.
Benefits:
- Businesses should aim to identify consumer needs and want to satisfy these more efficiently than
competitors do.
- Consumers may want to spend their money in businesses that are seen as CSR.
- It helps to build a better image for the company.
 - It gives a competitive advantage over the competitors.
- Useful in customer retention and long-term relationships.
- Increases sales and market share.
- Facilitate expansion and growth in the long term.
- Products and company policies should prioritize social welfare and society in general.
- Economic resources are properly used.
- Societal marketing raises the living standard of people in society.
- It ensures economic planning more significant and more fruitful to society.

Market characteristics:
- Competition
- Market size
- Customer base
- Geography
- Demographics
- Barriers to entry
- Market growth

4.2 Marketing planning:

❖ Marketing objectives → the goals set for the marketing department to help the business achieve its overall
objectives.
❖ Marketing strategy → a marketing strategy is a long term plan established for achieving marketing objectives.
❖ Market segmentation → the process of splitting a market into distinct groups of buyers in order to better meet
their needs. The main methods of market segmentation are based on demographic, geographic and psyc holographic
factors.
❖ Marketing strategy → refers to a business’s overall long-term game plan for reaching potential consumers and
turning them into customers of their products or services.

Position/ perceptual mapping:

Is a visual representation of where a brand, product or service stands among competitors.
Advantages:
- Help us better understand market segments
- Evaluate the performance of recent marketing campaigns and other marketing mix changes
- To check that our brand has a clear positioning space in the market
- To track how successfully our new products have been positioned into the market
- To monitor competitive brands and their changing market position
- To help our organization identify gaps in the market
- To monitor changes in consumer preferences over time

Disadvantages:
- Perceptual maps often simplify the consumer’s purchase decision down to two product attributes
- They tend to be more beneficial for low-involvement purchase decisions
- They are more relevant for individual brands, and less helpful for corporate brand image
- The data is often difficult or expensive to obtain (via marketing research)
 - There is often a difference between consumer’s perception of the brand’s benefits versus reality.

The marketing plan:

A marketing plan is often a formal written document which outlines in detail how the business unit intends to
achieve the marketing objectives derived from the corporate objectives. Normally based on clear awareness
of market trends, competitors’ actions and consumer wants to market research is vital. It will contain detailed
action programmes, budgets, sales forecasts and strategies (based on marketing mix).
- The marketing objective
- The marketing budget
- Segmentation and the target market
- Market research
- Marketing strategies
- Control tools.
(position map)

High quality/ demand

Price (low) Price (high)

Low quality/ demand

Market segmentation:
Market segmentation is the process of splitting a market into distinct groups of buyers in order to better their
needs. Most businesses don’t treat a market as a single entity, they instead break it into small pieces
(segments) where the consumers in each segment have similar characteristics.
- Geographic segmentation: based on geographic patterns
- Demographic segmentation: age, gender, income, etc.
- Psychographic segmentation: social class
- Behaviouristic segmentation: behaviour patterns

Marketing mix - SIVA:

Marketing planning begins with market research to determine PRODUCT (Solution), PROMOTION
(Information), PRICE (Value), PLACE (Access).

Coordinated marketing mix:

Key marketing decisions complement each other anc work together to give customers a consistent message
about the product.
- Based on marketing objectives (within marketing budget)
- Coordinated
- Targeted at the appropriate consumers.
Product:
- Varieties Place:
- Branding - Logistics
- Quality - Distribution
- Design - Delivery
- Packaging - Retail locations
- Download
Price:
- Costs of production Promotion:
- Demand - Direct marketing
- Rivalry - Advertising
- Aims - Sales promotion
- Supply - Sponsorship
- Time - Publicity
- Image - Personal selling

❖ Differentiation → the process of distinguishing a product or business from competitors in the market or industry.
❖ Product differentiation → the process that showcases the differences between products. It looks to make a
product more attractive by contrasting its unique qualities with other competing products.
❖ Consumer profile → (painting the ideal person for your product) a quantifies picture of consumers of a firm’s
products, showing proportions of age groups, income levels, location, gender and social class.
❖ Unique selling point (UPS) → differentiating factor that makes a company’s product unique, designed to
motivate customers to buy.
❖ Marketing audit → fundamental part of the marketing planning process. It considers both internal and external
influences on marketing planning, as well as a review of the plan itself.

4.4 Market research:

What is it:
The process of collecting, recording and analysing data about customers, competitors and the market. It is
concerned not just with whether consumers will buy a particular product or not, but also with trying to analyse
their reaction to prices, promotions, packaging and distribution.
Primary research: Secondary research:
- Questionnaires Internal sources:
- Focus groups - Company accounts
- Competitive analysis - Internal reports and analysis
- User groups - Stock analysis
- Postal/ telephone survey - Retail data
- Customer interviews External sources:
- Test markets - Government statistics
- Technology - internet feedback - Euro statistics
- Trade publications
- Commercial data
- Household expenditure survey

Purpose:
- Size of market
- Market trends
- Forecasting Sampling methods:
- Planning - Random samples
- Evaluation of strategies - Stratified or segment random sampling
- Assessing marketing mix - Quota sampling
- Identifying market segments/ consumer - Cluster sampling
needs/ competition/ opportunities/ gaps in - Contact sampling
the market. - Multi-stage sampling
- Reduce risk

❖ Quantitative data → states statistical facts; makes numerical analysis easy.

❖ Qualitative data → gives an insight into the thoughts and opinions of people.

Problems: - Must ensure the appropriate method of

- Could be invaluable sampling is used
 - Must ensure an appropriate sample size is - Damage
used - Deceitful
- Must ensure that bias is avoided - Deceptive
Issues with unethical market research: - Disclosure
- Detachment

❖ New product development (NPD) → the process of bringing a new product into the market
❖ Unique selling proposition (USP) → refers to the unique benefit exhibited by a company to stand out from
competitors.

4.5 The 4 P’s of marketing:

Product:
Product portfolio analysis:
is where companies have lots of different products and they want to analyse where they are and what are the
best products. The position is determined by the amount of profit being generated and the sales of a product.

Design mix:
There are 3 main areas to be considered when designing a product.

How
does it
look/
feel

Is it simple
Does it work, is enough to be
it reliable, does made quickly
it fit the and

Product life cycle:

Used to find where a product is in its lifetime and therefore see how much effort is needed to be put into it or
to make a decision about the product.
0. Idea
1. Introduction of product
2. Growth
 3. Maturity
4. Decline
5. Obsolation
To prolong a product’s life you can use the 4 P’s.
- Product (changed; eg. launch of limited editions),
- Price (can be reduced to reflect competition; eg. PS2),
- Place (distribution patterns can be changed; eg. internet sale),
- Promotions (undertake new promotional campaign; eg. advertising or sales promotion).
Disadvantages:
- It’s not a useful forecasting tool (cannot predict how long it’s going to last; little use to tertiary
businesses)
- It’s less effective for firms with large product portfolios (difficult to illustrate)
- It only considers sales and profits (it ignores external factors such as market growth, market share and
economic circumstances).

Boston matrix: or BCG matrix (Boston Consulting Group).

It is an alternative method of managing a product portfolio and it assumes there is a close relationship
between market share and market growth. It is linked to profitability.

Stars:
- requires investment
- tend to yield neutral cash.
- Potential for growth in life cycle
Problem child/ question mark:
- Potential ‘stars’ of the future
- could turn straight into dogs.
- Intro in life cycle
Dog:
- Generally negative cash flow
- Firms will want to avoid having too many
- Decline in life cycle
Cash Cow:
- Bring in large amounts of cash
- Can be invested in other products.
- Maturity in life cycle

Problems of using the boston matrix:

- Assumes that high profits are always achieved when market share is high (not always the case)
- It only uses market share and market growth to assess a product portfolio (not always good to be in a fast
growing market → volatile)
- Current market share information tells us very little about the future prospects of a market.

Protecting products:
Businesses will want to protect their new products and ideas (‘intellectual property office’).
Patents (when you invent something): Trademark (name/ logo):
- safest, but most difficult and expensive. - Used as a marketing tool for brand
- Protects new innovations, products or recognition
processes - Registering a trademark prevents other
- Have to be applied and paid for companies from using it
- They last for 20 years - A fee must be paid to register a trademark
Copyright (intellectual property): Designs (appearance):
- Protects creative skill, such as writing, - Protects the appearance of a product
music and film. - Covers colours, shapes, textures and
- Protects against unauthorised copying patterns
- Does not have to be applied for - Designs can be protected for up to 25 years
- It applies immediately

Branding:
Is a product with unique character, for instance in design or image. It is consistent and well recognized. This is
a risk reducer (to competition) and image enhancer.
Advantages:
- Inspires customer loyalty leading to repeat sales and word-of-mouth recommendation
- The brand owner can usually charge higher prices, especially if the market brand is the market leader
(eg. price elasticity)
- Retailers or service sellers want to stock top selling brands. With limited shelf space it is more likely
the top brands will be on the shelf than less well-known brands.
Types:
- ‘Own label’ → they tend to be cheaper. (eg. hacendado en mercadona)
- ‘Global brands’ → the product is sold in many countries and the contents are very similar; they are instantly
known (eg. coca cola).
- ‘Brand extension’ → strength of the product can be exploited by a user to develop new products.

❖ Brand stretching is where the brand is used for a diverse range of products, not necessarily connected.

Packaging:
In marketing it concerns itself with the presentation of a product to a consumer. It serves different functions for
products and serves a practical purpose of helping to store, handle, transport and display the product.
Packaging can be an important source of product differentiation and USP.
Functions of packaging:
- Helps with customer perceptions. Quality of products are associated with quality packaging.
- Helps with product differentiation.
- Helps with protection
- Helps with information
Colours:
- Colour increases brand recognition by up to 80%
- Consumers buy based on colour
 - RGB are the base colours
- CMYK create a wide array of colours
- PMS the colour system created by pantone inc.

Price:
The amount of money for which something is exchanged irrespective of its value or worth.

Pricing strategies:
Short term pricing: Adding a fixed mark-up for profit to the unit
- Penetration: price of a product. Selling price, of goods
the price of a product is initially set low to and services, is determined by adding a
rapidly reach a wide fraction of the market specific fixed markup percentage to a
and initiate word of mouth. singular product's unit cost.
- Discount/ sales: - Psychological pricing:
used to sell discontinued or unfashionable where prices are set to influence consumer
products perception. eg. 1,99
- Loss leader: - Competition-based pricing:
selecting one or more retail products to be where the number of competitors in the
sold below cost – at a loss to the retailer – market influences price. Eg. games
in order to get customers in the door. Eg. consoles
“free mobile phone” with certain contracts - Demand-based:
- Market skimming: where the price is reflective of the demand
firm charges the highest initial price that for a product. Eg. oil.
customers will pay and then lowers it over - Price discrimination:
time. identical or largely similar goods or services
- Predatory pricing are sold at different prices by the same
The act of setting prices too low in order to provider in different markets. Eg. flights are
attempt to eliminate competition. expensive during the holidays.
- Price leadership:
Long-term pricing: prices and price changes established by a
- Cost-plus: dominant firm. Aligning the price with the
competition.

What it means to different people:

- Buyers → see price as the opportunity cost of making the purchase
- Sellers → it represents revenue and so affects profits
- Government → concerned about prices, since they determine inflation

Promotion:
Refers to the methods of communicating messages to the market with intention of selling a firm's products.
Part of the marketing mix that focuses on persuading people to buy the product or service.

Objectives:
 - Inform:
to alert the market to a firm’s products, especially new ones or used to raise awareness of the
business itself
- persuade :
encourage customers to make a purchase, to switch from rival brands and to create brand loyalty.
- Remind:
retain customer awareness and interest in an established product.
Short-term:
- Sales promotion: risky because people can stock up and only worthwhile if it attracts brand new
customers (eg. BOGOF)
- Direct sales: mostly by telesales, high labour costs, people get annoyed with calls
- Merchandising: displaying the bran in store, shops will charge rent for the space but extra sales can
make up
The promotion mix will depend on:
- The size of the market
- The type of product
- The cost
- Market research.

❖ Above the line promotion → refers to the use of paid mass media sources (internet, magazines, television, etc)
❖ Below the line promotion → refers to the use of non-mass media promotional activities (free samples, discount
vouchers, etc).
❖ Ambient promotion → using your surroundings to advertise a product.

Promotional mix:
Is the combination of promotional techniques that a firm uses to communicate the benefits of its products to
customers. It helps you assess how effective your promotion is.
Tools:
- Advertising tools → to create awareness, persuade customers and reinforce a firm's existence.
- Public relations → involve a sustained attempt to develop a firm’s reputation by using the media to help create
the image they desire.
- Sales promotion → above and below the line promotion.
- Direct marketing → it enables a firm to target specific consumer groups very accurately.
- Personal selling → most effective form of promotion because it allows a firm's approach to be tailored to the
needs of an individual consumer.
- New technologies → to surprise and make your promotions more modern and effective.
Assess:
A - attention
I - interest
D - desire
A - action

Marketing strategies:
Launching a new product: - Be informative
 - Reach the target audience - Attract new customers
Differentiating the product: Increasing market share:
- Identify the special features of the product - Attract new customers
- Persuade customers that it is different/ - Reinforce buying in existing customers
better Building brand identity:
Extending the life : - Increase awareness of the company
- Reinforce the reasons for buying - Create consumer recognition and loyalty
- Highlight new features

Guerrilla marketing:
Is an advertisement strategy that uses traditional, unconventional and perhaps unruly but creative and original
methods of promotion to boost sales. On a relative low budget, favoured by small businesses since they
cannot afford ATL methods.
Advantages:
- High credibility Disadvantages:
- Great reach and efficiency - It often works slowly; you won’t see results
- Cheap and the low end it’s free; meets the instantly
needs of small businesses - It’s a high-risk marketing communications
- Uses the network effect of the internet so technique since it requires significant initial
that the marketing messages can reach a investment in the viral agent and selling
mass audience rapidly and effectively. - No guarantee it will ‘go viral’
- It’s fun, improving the image of the - As it can spread quickly positively, it can
business also happen negatively
- Inflate profits

❖ Viral marketing → a sales technique that involves word-of-mouth information about a product or service to
promote it at a rapid rate.

Place:
Refers to the distribution of products. It is all about how products get to the consumer.

Channels of Distribution:
are the chain of intermediaries a product passes through from a producer to the final consumer.
Importance of choice of channel:
- Consumers may need access to a firm’s products to allow them to try before they buy, to make
purchasing easy and to allow, if necessary for the return of goods.
- Manufacturers need outlets for their products that give as wide a market coverage as possible, but
with the desired image of the product appropriately promoted.
Zero-channel:
uses no intermediaries so the manufacturer sells directly to the customer (eg. farmers that sell their
agricultural produce straight to consumers).
Advantages: - Producer has complete control over the
- No intermediaries, no markup or profit marketing mix (how the product is sold,
margin taken by other businesses promoted and priced to consumers)
 - Quicker than other channels - No retail outlets limits the chances for
- May lead to fresher food products consumers to ‘see and try’ before they buy.
- Direct contracts with consumers offer useful - May not be convenient for consumer
market research. - No advertising or promotion paid for by
Disadvantages: intermediaries and no after-sales service
- All storage and stock costs have to be paid offered by shops.
by the producer
One-channel:
involves selling to retailers. Used for consumer goods, but could also be an agent for selling industrial
products to businesses. (eg. Large supermarkets, holiday companies)
Advantages: Disadvantages:
- Retailers holds stocks and pays for cost of - Intermediary takes a profit mark-up and this
this could make the product more expensive to
- Retailer has product displays and offers final consumers
after sales service - Producers lose some control over
- Retailers often in locations that are marketing mix
convenient to consumers - Retailers may sell products from
- Producers can focus on production (not on competitors too, so there is no exclusive
selling the products to consumers) outlet
- Lose control
- Producer has delivered to the retailer.
Two-channel:
involves the goods going via wholesalers and retailers.
Advantages: - Maybe the best way to enter foreign
- wholesalers holds goods and buys in bulk markets where the producer has no direct
from producer contact with intermediaries.
- Reduces stock-holding costs f producer
- Wholesaler pays for transport costs to Disadvantages:
retailers. - Another intermediary takes a profit markup
- Wholesaler ‘breaks bulk’ by buying in (may make final goods more expensive to
large quantities and selling to retailers in consumer)
small quantities. - Producer loses further control over
marketing mix
- Slows down the distribution chain.
Three-channel:
used an agent (eg. to sell products overseas) who sells the goods to wholesalers on behalf of the product.

❖ Intermediary → a third party business that offers distribution services between two trading parties.

Types of distributors:
Direct distribution:
Zero-channel network distribution that involves the producer selling the good or service without using an
intermediary (eg. hair salons).
 - The internet has created an alternative channel for producers to sell directly to the consumer (eg.
amazon

Retailers:
Are businesses that sell direct to consumers (eg. walmart).
- They are often multi-sore outlets, offering choice and convenience for customers.
- Drawback → retail stores often have to pay expensive rent which means they will end up charging higher prices
for the manufacturer’s products.
- Eg. chain stores, department stores, discount stores, supermarkets, superstores.
Wholesalers:
They buy large quantities of products directly from manufacturers and then sell these to customers in smaller
quantities (‘breaking bulk’).
- Retailers benefit from this rather than buying directly from the manufacturer.
- Producers benefit from wholesalers due to lower transaction costs and fewer deliveries. Wholesalers
also take care of promotion, saving costs for the manufacturer.
Mail order:
Is the use of the postal system to distribute goods.
- It traditionally relies on the use of catalogues and order forms although the internet had reduced the
reliance on hard-copy catalogues and order forms.
- It’s a short distributional channel so helps to cut production costs and possibly prices for customers.
E-commerce:
Is the use of the internet to conduct business transactions.
- It had created an array of opportunities for both producers and retailers to sell to customers.
- It is a relatively inexpensive distribution channel, providing customers with worldwide access, 24 hours
a day from the convenience of their home or office.
- With increased access to the internet and the global trend of greater use of mobile devices, e-
commerce created a huge opportunity for businesses to use the internet as a distribution channel.

How to select the appropriate distribution channels:

Type of product: - E-commerce could be a viable distribution
- whether it is a producer good or consumer channel for customers located in rural
good or technical good. areas or in overseas markets.
Frequency of purchase: The availability of rival products:
- Whether it is bought in mass markets on a - Producers will compete with rivals by
daily basis or infrequently. selling their products using the same
The price of the product distribution channels.
- An expensive product with an exclusive The size of the market:
image will be sold in a limited number of - Mass-produced goods would require a
retail outlets. system of geographically widespread
- Mass-market products are sold in a wide distribution channels, possibly including
range of retail outlets and other distribution overseas markets.
channels. The available finance:
Location of customers:
 - The better the financial position of a - Longer channels can cause communication
business, the greater its distribution problems to be more costly.
networks can be. Legal considerations:
The degree of control expected: - There could be certain legal limitations (eg.
- The more intermediaries used, the less tobacco, alcohol).
control a producer has over the marketing
of its own products.

Supply chain management:

Is the process of managing the network of businesses that are involved in the provision of final products to
consumers.

❖ Additive manufacturing processes → 3D printing

4.8 E-Commerce:
The trading of goods and services through the internet has become an increasingly important method of
business activity as e-commerce allows businesses to operate 24 hours a day, with an international reach.
Is the use of the internet to conduct business transactions.
Advantages:
- Opportunity to reduce costs or production by reducing overheads.
- opportunity to increase sales
- opportunity to access new markets across the globe
- Chance to target market segments more effectively
- Provide more accurate information and improve customer service experience
- Improves efficiency of the supply chain
- Improve employee motivation through more flexible working methods.
- relative inexpensive distribution channel, providing customers with worldwide access, 24 hours a day
from the convenience of their home or office.
- Provides convenience and comfort for customers.

Disadvantages:
- Some countries have poor internet connections and computer ownership is not widespread.
- Consumers cannot touch, smell, feel or try on tangible goods before buying
- Product returns may increase as consumers and dissatisfied.
- The cost and reliability of postal services in some countries may reduce the cost advantage of internet
selling.
- The website must be kept up to date
- Worries about internet security and ethical considerations.
- It relies on trust and can lead to legal issues.

Impact on marketing mix:

Product:
 - Each consumer can be communicated with individually and individual product requirements can be
built into the product or service to suit different needs.
- Eg. airline tickets, customizable products (shoes).
Place:
- Internet has transformed the buying shopping experience
Price:
- Markets are much more competitive as prices can be compared rapidly (B2C and B2B markets)
- Competitive pricing is much more likely to be used than cost plus → customers are now more in control.
Promotion:
- Banners, pop-ups, text messages, web pages, social marketing, qr codes, youtube partnerships, paid
search, viral marketing (came up recently)
- Promotional opportunities have been greatly expanded, but it’s more difficult to attract attention of
customers.