Topic 3 Marketing

1|P a ge : T O P I C 3 – M A R KET I N G – C I E O L EV EL – C HA P A N G A Z A F I L ES
MARKETING
 It is identifying and meeting the needs of customers, profitably.
 the starting point should be market research
Roles of marketing:
 Identify customer needs: what products or services customers want, the prices they are willing
to pay, where and how they want to buy the goods or services, after sales services they might
want.
 Satisfy customer needs: right product, in the right place, at the right price
 Maintain customer loyalty: by building customer relationships, keep close links with customers,
check if products are continuing to meet customers’ needs and wants by responding to new
needs. NB: it is cheaper to keep existing customers than attract new ones.
 Gain information about customers: - to meet their changing needs and to establish a long –
term relationship with them. The business will research information which can be used to
understand why customers buy products and how they use them.
 Anticipate changes in customer needs: - identify new trends in customer demand or gaps in the
market so that the business can produce products that are not currently available.
IMPORTANCE OF BUILDING CUSTOMER RELATIONSHIPS
 Increase sales [k]

 Increase retention / customer loyalty [k] so customers keep returning to his shop
 Help build reputation / act as free advertising / recommendations
 Opportunity for feedback / help identify customer needs [k]
 Provide a competitive advantage [k] so can compete against
WAYS OF BUILDING CUSTOMER RELATIONSHIPS
Objectives of the Marketing Department/Objectives of Marketing:
 Raise customer awareness of a product or service of the business

 Increase sales revenue and profitability
 Increase or maintain market share
 Maintain or improve the image of products or a business
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 Target a new market or market segment

 Enter new markets at home or abroad
 Develop new products or improve existing products
MARKET CHANGES
 Sales of goods and services change from time to time.
Reasons why customer/consumer spending patterns change:
 Consumer tastes and fashions change, e.g. fashions for clothes may change, so consumers want
different styles
 Changes in technology, so new products are developed, reducing sales for old
versions/alternatives. E.g. iPads reduced sales for stand-alone computers.
 Change in incomes, if unemployment rise consumers will buy cheaper products. If employment
rise consumers will buy more expensive products.
 Ageing populations, e.g. rise in demand for anti-aging creams if the percentage of old people
increase in a population.
The importance of changing customer needs
 The customer is a king

 Failure to respond to changing customer needs may lead to failure of the business
 Competitors may quickly identify and respond to changes in customer needs and respond
 It may lead to falling sales for the business and make it file for bankruptcy
 Usually small businesses are usually quick to change yet large firms are slow
Why some markets have become more competitive
 Globilisation increased the number of suppliers of a product

 Improvements in transportation made it easier to get products from one part of the world to
another
 Internet/E-commerce where consumers can search for products and buy from overseas
markets.
How businesses can respond to changing spending patterns and increased competitions?
 Maintain good customer relationships: - so the business can continue to meet customers’ needs
and maintain customer loyalty.
 Keep improving its existing product: - so the business may become well – known for selling
differentiated products, e.g. Apple.
 Bring out new products to keep customers’ interests in their company rather than their
competitors. Can help maintain or even increase market share. E.g. Microsoft keeps improving
and developing its operating systems.
 Keeps costs low to maintain competitiveness as prices can be kept low.
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Meaning of a market
 It is the total number of customers and potential customers as well as sellers for a particular
good or service.
 It can either be a mass market or a niche market.
Types of markets
Mass marketing
 A mass market refers to selling the same/uniform product to the whole market e.g. table salt,
washing powder or toothpaste.
 Advertising and promotions are intended to appeal to the most customers.
Benefits
 Sales from the markets can be very large, leading to more revenue and profits
 The firm can benefit from economies of scale
 Risks can be spread, if one variety of the product fail, then the other products may still sell well
 Opportunities for growth of the business due to large potential sales
Drawbacks
 High levels of competition between firms

 High costs of advertising
 Standardized products may fail to meet the needs of some customers leading to lost potential
sales.
Niche marketing
 A highly specialised [1] sub part of a large market [1] e.g. Rolex watches or designer clothes.
Benefits
 Small firms may target these segments in order to avoid completion with large firms which may
be concentrating on niche markets.
 The business will focus on a specific need leading to greater consumer satisfaction
Drawbacks
 Limited market size, so sales are low, making business growth difficult
 No spreading of risks as businesses in these markets often specialize in one product
Market segmentation
 Refers to the process of breaking up a total market into subgroups/markets made up of

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customers with the same characteristics
A market segment is an identifiable sub – group of a whole market in which consumers have similar
characteristics.
TOTAL
A
MARKET Market Segmentation consumer s with
B
the same
C
characteristics
Ways of segmenting markets
1. Gender
 Markets can be divided into males and female market.
 this is because products preferred by men are different from those preferred by women e.g.
market for dress
2. Age
 Markets can be divided into 0-19, 20-35; 36-50 etc.
 this is because the types of products consumed may vary from one age group to the other
3. Income
 the income earned by consumers usually affects their spending
 therefore, markets can be segmented into low, medium and high income
4. Region/location
 Location of consumers may affect type of products used due to differences in culture, climate
etc.
 the market can therefore be segmented into cold and hot regions
5. Use of the product
 E.g. cars can be used by consumers for domestic use or business use.
 The advertising and promotion methods will differ
6. Lifestyle
 E.g. single person earning the same income as a married man with many children will spend
that income differently
Merits
 it makes advertising/promotion to be effective
 a suitable price can be charged
 the business can identify a segment which is not having its needs fully met, and therefore offer
opportunities to increase sales
 it makes research easy, thus making the business know people to include e.g. school children
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RECOMMEND AND JUSTIFY AN APPROPRIATE METHOD IN DIFFERENT CIRCUMSTANCES
Advantages of market segmentation (s19p11)
 Able to tailor goods to specific needs OR know what to produce [k] so that costs
/materials are not wasted producing wrong products [an]
 To help decide best place to sell [k]

 Research is simpler/help identify customer needs [k] so products better meet customer
needs [an]
 Help target advertising [k] to ensure maximum number of people see them [an]
 Help set prices [k]
 Identify gaps in the market [k]
Market Research
 A market oriented business: - a business that make use of market research information to
decide which product to produce.
 A product oriented business: - the one whose main focus of activity is on the product itself.
 Market research is the process of gathering, analyzing and interpreting information about a
market.
Types of market research
Primary research
 It is a process of collecting of original data via direct contact with potential and existing
customers.
 It is called field research
Advantages (w19p11)
 Up-to-date [k] so able to make more accurate decisions [an]

 Specific to the purpose of the business [k]
 Information is not available to other competitors [k] so may provide a competitive
advantage [an] for this small shop [app]
Disadvantages:
 High cost [k] which will increase her expenses [an]

 Takes long time to collect [k]
 Can be bias in questions or how questions are asked [k] leading her to make the wrong
decisions [an]
Methods of market research/primary market research
1. Questionnaire
 it is a list of questions assigned to collect data
 It can be conducted face-to-face, e.g. in the street, by telephone, by post or on the internet.
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Advantages of using questionnaires
 Detailed qualitative information about a product or service can be gathered, especially if open
questions are used. This will help to improve quality of decisions.
 It is cheap, especially if the questionnaires are posted online, so the profits of the business will
not be reduced significantly
 They can be linked to price draws and price draw websites to encourage people to fill in the
questionnaire.
 Customer opinions about a product or service can be obtained.
Disadvantages of questionnaires
 if the questionnaire are not well thought, the answers to them will not be very accurate, so the
business may fail to make sound decisions
 The response rate may be low, especially in the case of postal questionnaires. This can affect the
sample size and quality of decisions
 Carrying out questionnaires can take a lot of time and money.
 Collating and analyzing results can also be time consuming.
2. Face – to – face interviews
 It is when questions are asked by the researcher and responses are recorded
Advantages
 this method enables the researcher to ask follow – up questions or to verify information
provided, leading to accurate information
 the interviewer is able to explain any questions that the interviewee does not
understand, thus increasing the chances of obtaining correct information
 detailed information about what the interviewee like or dislike about the product can be
gathered
Disadvantages
 the interviewer can lead the interviewee into answering in a certain way, leading to interviewer
bias, which makes information less accurate
 Interviews are very time consuming to carry out and, therefore, they are often an expensive
way of gathering information.
3. Samples
4. Focus groups/consumer panels
 It refers to selection of people who have similar characteristics to target market who give their
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opinions on the product or service

 The researcher will facilitate the discussion and record the responses
Advantages
 They provide detailed information about consumers’ opinions.
Disadvantages
 it is time consuming, so can delay decision making

 can be very expensive, leading to lower profits
 they can be biased if some people in the panel are influenced by responses of others
 participants may discuss other issues other issues irrelevant, so decision making may be
delayed
5. Observations
Can be in the form of:
 Audits – counting of stock in a shop to see which products have sold well
 Recording – e.g. meters can be fitted to a monitor which television channels are being watched
 Watching- e.g. counting hoe many different types of vehicles pass particular billboards or
posters and how many different types of people enter into a shop and buy something
Advantages
 It is inexpensive, so expenses do not rise that much

 produces quantitative data which is easy to analyze, so decisions can be made quickly
Disadvantages
 The information only gives basic figures. It does not provide the business with reasons for
consumer decisions.
 the customers may change their behavior if they notice that they are being observed, so the
data may become inaccurate
Test Marketing
 It is when customers are given an opportunity to try the product on the a limited scale nd give
their opinions
Advantages
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 First-hand information is obtained which allows the business to make relevant market
decisions
Disadvantages
 some participants may lie to please the researcher
The need for sampling
Sampling
 It is a process of choosing a small group of people or items to participate in a research.

 A sample is a group of people who are selected to respond to a market research exercise, such
as a questionnaire
Relevant Population Sample
Population
900
13 million
people
people
out of 13
million
people
 a sample is therefore, a representation of the whole population from which conclusions about
the population can be made
 sampling is done because it can be impractical to invite the whole population for research
 generally, it must not be too large or too small because it can affect the conclusions, time
required to undertake the research and the cost of carrying out the research
Methods of sampling
Random sampling
 it is when people are picked from population without any order or reference to a particular
characteristic
M, F, F, F,
Male,
M,
Male
F,F,M,M,F,
M,M,M,M
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,F
Random sampling
Benefits
 everyone will have an equal chance of being picked
Drawbacks
 the method ignores the fact that the population is made up of different characteristics, so the
sample may not be a true representative of the population
Quota Sampling
It is when people are selected from the population basing on certain characteristics and the people
chosen must represent the contribution of the quota
 Characteristics may include gender and age
Advantage
The method therefore helps to ensure that each group is represented accordingly as compared to
random sampling.
SUMMARY
 observation / visiting competition [k]

 questionnaires [k]
 surveys [k] ]
 interviews [k]
 experiments / free samples / test marketing [k]
 access government statistics [k]
 focus groups / consumer panels [k]
 use market research agencies [k]
 loyalty card data [k]
 articles / newspapers / magazines[k]
SECONDARY RESEARCH
 It refers to use of information that has already been collected and is available for use by others
 It is also called desk research
Advantages
 it is cheap, hence profits are not affected significantly

 speed/less time is consumed, so decisions can be made quickly
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 a variety of information will be available which can help to increase the quality of decisions
Disadvantages
10 | P a g e : T O P I C 3 – M A R K E T I N G – C I E O L E V E L – C H A P A N G A Z A F I L E S
 information may not be relevant to the problem at hand, so the business may fail to make the
right decisions
 information may be inaccurate because of errors made which can lead to incorrect decisions
 information may be out of date and maybe known to other competitors, so the business may
fail to get a competitive advantage
Internal sources of secondary research information
 Sales department records, pricing data, customer records, sales reports

 Opinions of distribution and public relations personnel
 Finance department
 Customer service department
External sources of secondary research information
 Government statistics
 Newspapers
 Trade association
 Market research agencies
 internet
IMPORTANCE OF MARKET RESEARCH (S18P12)
 Greater awareness of (current) consumer needs / preferences

 Help identify gaps in the market OR future trends [k]
 Find out about competitors OR size of the market [k]
 Helps set price [k]
 Produce the correct amount of products [k]
 Reduces risks OR products launched with more confidence [k]
 Help decide how best to promote its products [k]
 Help gain competitive advantage [k]
Factors influencing the accuracy of market research data (w18p12)
 the sample selected – e.g. quota sample is more accurate than random sample
 wrong sample size – the bigger the sample, the more accurate it becomes
 who carried out the research – primary research is more accurate than secondary research since
primary carries first-hand information addressing the specific market research problem at hand
 bias – articles in the newspaper usually have bias and important information is left out
deliberately
 information may be out of date – outdated statistics in secondary research do not show current
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trends as compared to primary research information

 How carefully sample drawn up OR characteristics of people asked [k]
 Way questions asked by interviewer [k]
 Poorly written questions OR questions not relevant [k]
 Who carried out the research [k]
 Dishonest opinions OR people say what they think you want to hear [k]
PRESENTATION AND USE OF MARKET RESEARCH RESULTS
INSERT
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MARKETING MIX
 It refers to all activities which goes into marketing of a product or service

 These activities are often described as the 4Ps
IMPORTANCE OF THE FOUR Ps OF THE MARKETING MIX
 Product – design and quality of the product. Product differentiation from competing brands. The
packaging that will lead to a successful product
 Place – channels of distribution selected. Methods used to get the product to the market.
 Price – the price at which the product will be sold at. How price compares to competitors’
prices. In the long-run price should cover costs
 Promotion – the way the product is promoted and advertised. Advertising media to be used.
Discounts that may be offered or any other types of sales promotion etc.
THE PRODUCT
BENEFITS OF DEVELOPING NEW PRODUCTS (N12P12, w19p21)
 The business will develop a USP, so the business will be the first into the market with the new
product. A Unique Selling Point (USP) is a special feature of a product that differentiates it from
the product of competitors
 boost sales OR increase market share [k] as wider range of/more customers can be
targeted [an]
 able to increase prices [k] as might give the product might have unique features [an]
 create additional consumer interest in the company [k] as better range/more up-to-date
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products available [an]

 increase brand loyalty OR Improve KE’s standing/profile in the market [k] as seen as
able to respond to market change [an]
 diversification [k]/Spread business risk [k] so if one product doesn’t sell, others might [an]
 Needed to replace products in decline stage of life cycle [k] this should help business
survival [an].
COSTS OF DEVELOPING NEW PRODUCTS
 The costs of carrying out market research and analyzing findings

 The costs of producing trial products including the costs of wasted materials
 Lack of sales if the target market is wrong
 Loss of company image if the new product fails to meet customer needs
 Increased production costs – new equipment/training/recruitment
 Increased marketing costs – to build customer awareness
 If target market wrong, the company reputation may be damaged
BRAND IMAGE
 A brand name is a unique name of a product that distinguishes it from other brands
 Brand loyalty is when consumers keep buying the same brand again and again instead of
choosing a competitors’ brand
IMPORTANCE OF BRAND IMAGE/BRANDING
 Higher price can be charged than unbranded products leading to higher profit margins
 Encourages customers to keep buying the product, leading to brand loyalty
 Quality is guaranteed as products if the same brand carry the same standard, leading to higher
sales
 Differentiate the firm’s products from competitors’ leading to customers choosing the product
ahead of competitors’
THE ROLE OF PACKAGING
 Packaging is the physical container or wrapping for a product.

 It is also used for promotion and selling appeal
Importance (O/N12P12)
 Protects the product, so that products are not damaged, so that products are not wasted
 Make the product easy to transport
 Promotion/Attract customers to buy - Eye – catching, so it is a silent salesman
 Carries information about the product, so the business will state to avoid legal action
 Promotes the brand image
 Boost brand image / impression of high quality [k] especially a niche
market which can help increase sales / revenue
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 Easier to store / transport [
Disadvantages
 Can damage the environment especially, the non- biodegradable

 Can add costs to the product making it too expensive to the customer, leading to loss of
potential sales
THE PRODUCT LIFE CYCLE
 It is the pattern of sales displayed by the product over time

 Or the stages the product will pass through from its introduction, through its growth until it is
mature and then it declines.
Diagram
SALES VOLUME
INTODUCTION GROWTH MARURITY DECLINE
TIME
THE STAGES
1. INTRODUCTION: The product is launched onto the market. Most consumers are not yet aware of
the product, so sales will grow slowly. MARKETING MIX: informative advertising must be used
until the product becomes well known. Price skimming can be used if there are no competitors
or penetration if there is competition. A limited range of exclusive shops can be used if
skimming pricing is used.
2. GROWTH: - sales start to grow rapidly. New competitors enter and try to take some of the
customers. MARKTING MIX: - Advertising change to persuasive to encourage brand loyalty.
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Raise pricing if penetration was initially used or lower if skimming was used. Establish a strong
brand image by promotional activities. Increase the range of outlets and consider e-commerce
3. MATURITY: - sales now increase slowly and stabilize to their highest point. Competition becomes
intense. MARKETING MIX: - plan for changes or plan development of a new product. Lower price
to remain competitive and to extend this stage for longer. Sales promotion techniques to
encourage repeat purchases. Full range of distribution channels used.
4. DECLINE: - sales start to fall as new products come along or because the product has lost its
appeal. MARKETING MIX: - Adapt product to extend its life. Lower price as customers will be
attracted by competitors’ newer products. Re - launch the product as a form of extension
strategy. Sell mainly through lower cost distribution outlets.
EXTENSION STRATEGIES/EXTENDING THE PRODUCT LIFE CYCLE
 Extension strategy is a way of keeping a product at the maturity stage of the life cycle and
extending the cycle.
THE EFFECT OF EXTENSION STRATEGIES
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WHY DO BUSINESSES CREATE NEW PRODUCTS?
1. to replace old products

2. to keep in line with changes in customers’ needs and wants which helps the business to
maintain brand loyalty
3. to fight competition by having a Unique Selling Point (USP) or products that are different from
those of competitors
4. to increase market share by appealing to different market segments or providing total solutions
to customers
PRICE
REASONS WHY A BUSINESS ADOPT NEW PRICING STRATEGIES

 to try to break into a new market
 to try to increase its market share
 to try to increase its profits
 to make sure all its costs are covered.
IMPORTANCE OF PRICE
Increasing price will (W17P11)
 cover cost [k] especially if production costs are rising

 Could increase revenue if demand is price elastic [k] so more money available to cover
costs [an]
 Could lead to fewer customers [k] as higher price could encourage customers to switch
to competitors [an] so difficult to remain competitive
 They need to increase prices to
 Gives an impression of quality [k]
 Keeping prices low may increase market share [k] as lower price attracts customers
Reducing price will
PRICING METHODS/STRATEGIES
1. Cost – plus pricing
 it is the cost of manufacturing a product plus profit mark – up.

 e.g. if the cost of production per unit is $30 and a mark-up of 20% is applied, the price
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per unit will be

20
𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 = × 30 + 30
100
= $6 + $30
= $36
 e.g. a business manufactures chocolates. In 2012, 10 000bars were produced at a total

cost of $40 000. The business maintains a mark-up of 25%. Calculate the selling price per
bar
 Process
𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡
 calculate cost per unit =𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠
25
 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 = × $4 + $4
100
= $5
Advantages (w18 p11)
 Know that the costs will be covered [k] and they can make a profit per item [an]
 Simple / easy to calculate [k] so saves time when setting prices [an]
 Know their profit margin / profit per item [k]
 Different mark ups could be added [k]
Disadvantages
 Does not consider what competitors do [k] so price set might be uncompetitive [an]
 Does not take account of changes in demand OR spending patterns [k] so could lead to
fewer sales being made [an]
 Little incentive to control costs [k]
 Prices could be higher than competitors [k]
Penetration Pricing
 It is when the price is set lower than the competitors’ prices in order to be able to enter a new
market. The price will gradually increased
Advantages
 The strategy is used to attract customers and to create brand loyalty, especially in a
competitive market
 It is appropriate if the business produces a lot of products which will enable it to reduce the
cost per unit. This means it can sell at a lower price and still gain more profits by selling high
volumes
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Disadvantages
 Some customers may associate low prices with poor quality, which can lead to low sales
Price skimming
 It is when a high price is initially charged for a new product on the market. The price that will
be reduced as time progresses
 The strategy is appropriate if the business has a temporary monopoly or if the products are
unique
 The main object is to target high earners first and then reduce the price to target other
segments or when competition intensifies
ADVANTAGES (w17p11)
 Recover costs quicker [k] as need to sell fewer products to pay for development costs
 Gives the image of a quality product [k] which can attract wealthy customers [an]
 Higher revenue per item[k]
 Break even at a lower output [k]
DISADVANTAGE
 Put off some potential customers [k] leading to lower sales [an]
 Only work in short term [k] as competitors could produce cheaper alternatives [an]
Competitive pricing
 It is when a product is priced in line with or just below competitors’ prices to try to capture
more of the market.
ADVANTAGES
 Sales are likely to be high as a realistic price is charged ( not over or underpriced)
DISADVANTAGE
 The costs of production are not considered, which can lead to underpricing. This is because the
cost of production may vary from one organization to another
 It requires some time and money to research on the price of the competitors
Psychological pricing
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 It is when a price is charged to match consumer’s expectations

 E.g. pricing meant to create an impression in the mind of customers that the goods are of high
quality of affordable e.g. $1.99;$999
ADVANTAGE
 It can help to attract high income earners by reinforcing their perception and brand image if
the price is high. This will help ensure sales
 if prices are not rounded up, sales volume may increase because customers may think products
are cheap, so they buy
DISADVANTAGES
 Competitors may do the same and so reduce its effect
Promotional Pricing
 It is when a product is sold at a very low price for a short period of time
ADVANTAGES
 The method helps the business to clear inventory/to increase sales during off peak period
 It will help to renew interests in the business if sells are falling
DISADVANTAGES
 The business will sacrifice some profits as some customers were prepared to buy at a higher
price
 Some customers would just target the promotions which can affect normal sales
W16 p11
 3(c) Identify and explain two possible pricing methods that Amelia might use.
 Knowledge [2] – award 1 mark for each role identified
 Application [2] – award 1 mark for each relevant reference to this business
 Relevant points might include:
 penetration pricing [k] as need to get people to try her sweets [app]
 price skimming [k] as it’s a niche market [app]
 cost plus pricing [k] as likely to have large set up costs [app]
 promotional pricing [k]
 competitive pricing [k]
 psychological pricing [k]
 4 Application: sweets / candy, new
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 business, business plan, money spent on

 packaging, secondary data, people like
 sweets, niche market, adult.
Factors considered when setting a price

1. Cost of production
 usually a business can calculate the cost producing or buying a product and then adds a mark-
up to arrive at the price
 the price must cover costs of production
2. Level of competition or prices charged by competitors
 a business can charge a price that is equal to or less than the prices charged by rivals or
competitors
 if a business over – price its products as compared to competitors, it may lose customers to
such rivals
3. Quality of the product
 usually high quality products will attract a high price and a low quality product will
attract a low price
4. Stage in the product life cycle
 usually products in the introductory stage attract a high price compared to products in
the decline phase/stage
5. The objectives of the business
 if a business wishes to capture a large market, it may charge a low price
 if a business intends to establish a brand image, it may charge a high price
6. Level and nature of demand
 generally, if demand is high and inelastic, a business may charge high prices because
customers will continue to buy at a high prices
 HOWEVER, if demand is low and elastic, the business may charge low prices so as to
attract customers
RECOMMEND AN APPROPRIATE PRICING METHOD IN GIVEN CIRCUMSTANCES
PRICING EXAMPLE OF WHEN USED JUSTIFICATION

METHOD
Cost-plus Single product business –easy to The business may have few competitors so a
calculate fixed profit mark – up can be earned on each
product sold
Competitive Selling a product such as petrol Consumers will be unlikely to buy product at
which is difficult to ‘brand’ and make higher prices unless they think they are ‘better’
different from competitors. than those sold by other businesses
Psychological Setting a high price for a quality A low price will make consumers believe that
branded product the product is not of high quality
Penetration Setting a low price for a new product Likely to achieve high market share quickly
in a competitive market
Skimming High price for a newly developed Earns a high profit per unit and helps to cover
product development costs
May 2, 2020
Promotional Low prices to sell unwanted Although low profit will be made it reduces
inventory inventory holding costs
Dynamic Charging different prices to different Increases revenue from seats availableon each
groups of airline passengers flight
Price Elasticity of Demand (PED)
 It is a measure of the responsiveness of quantity demanded to a change in price

 Price elasticity can be less than one or more than one
 If it is less than 1, demand is said to be inelastic.
 If it is more than 1, demand is said to be elastic
a) Inelastic demand
 It means customer are less sensitive to price changes, that is the change in
price will be more than the change in quantity demanded
 e.g. in 2004 Knowstics Academy charged $1 980 and 350 students were
enrolled
 In 2015 the fees were increased to $2 500 and 345 students were enrolled
 Calculate the price elasticity of demand:
May 2, 2020
% 𝑜𝑓 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑑𝑒𝑚𝑎𝑛𝑑𝑒𝑑

𝑝𝑒𝑑 =
% 𝑜𝑓𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑝𝑟𝑖𝑐𝑒
350 − 345 2 500 − 1980

= × 100 ÷ × 100
350 1 980
1.43
= 26.26
= 0.05, therefore, demand is inelastic
 If demand is inelastic prices should be increased, to increase sales revenue and profits
 if prices are reduced, the business may reduce sales revenue as customers will not buy more of
the product
 usually, demand is inelastic if:
i. product is a basic commodity or habit forming
ii. if customers are loyal to the product
iii. if there are no close substitutes
Elastic Demand
 It means customers are price sensitive such that they respond more to a price change
 e.g. a business sales holiday facilities, the business increased the prices by 10% and demand
increased by 15%. Calculate the price elasticity of demand and comment.
15%
10%
= 1.5, therefore demand is elastic
PLACE – DISTRIBUTION CHANNELS
 It refers to the means by which a product is passed from the place of production to the
customer or retailer.
 Or a path or route taken by a product from producer to consumer.
 Channels of distribution can be direct or indirect
Distribution channels
May 2, 2020
Distribution channel 1: - Producer selling directly to the consumer (Direct channel)
 It is when goods are sold by the producer to the consumer, so no middlemen is used
 BENEFITS of using a direct channel include:
 producer will have control over the product, so can sell it in the way it want
 producer can offer after sales services, leading to customer loyalty
 producer can collect data from consumers which will help in improving products
 cuts out wholesaler/retailer, so can sell the product at a lower price, hence become
competitive
 BUT:
 the producer may fail to sell many goods if outlets are limited, so many consumers not
leaving near the factory will not buy
 the producer will deprive himself from middlemen services like storage, delivery and
advertising
 It may be very expensive to send the product by post, therefore, it may not be cost
effective
NB: can also be used when selling from manufacturer to manufacturer e.g. selling of car
components
Indirect Channels
May 2, 2020
Distribution channel 2: Role of a retailer
 Retailer buy in bulk and sell in small quantities to consumers.

 Their main functions/BENEFITS of using them include:
 breaking bulk, so consumers can buy in small quantities leading to higher sales
 gathering market information or consumer complains

 providing credit to well - known customers
 promoting products on behalf of producers e.g. OK Grand Challenge
 producers sells large quantities to retailers
 Examples of retailers include: OK, Spar, TM, Bon Mache
 BUT:- there is no direct contact with customers, making it difficult to respond to changing
customer’s needs quickly
Distribution channel 3: Role of a wholesaler
Wholesalers
 It is an intermediary that buys in bulk [1] and sells to other businesses/ retailers (rather
than to consumers) [1]
 buys in bulk from the producer and resells them in bulk to retailers
 Importance/BENEFITS of using wholesalers include:
 provide storage facilities, which saves storage space for small retailers and
reduce storage costs
 wholesaler may deliver to small retailers thus saving on transport costs
 can advise small retailers and manufacturers on what is selling well, leading to
higher sells
 Examples of wholesalers include: Mohammad Mussa, Metro Peach etc.
 BUT: -
 It is more costly to a retailer/consumer as compared to buying straight from
manufacturer
 Wholesaler may not have a full range of products to sell
 Takes longer for fresh foods to reach the shop, so it may not be of good quality
 Wholesaler may be a long way from the small shop, delaying supplies
Advantages to the producer/manufacturer of using a wholesaler in the distribution channel [CIE W15
12 Q1d]
 Access to many retailers/markets as wholesaler might have links in many

places/countries leading to more sales
 Hold less inventory, so improve the firm’s working capital as it does not need to store
many products
 Wholesaler provides distribution/transportation, so lower costs for the business which
in achieving high profit margins
May 2, 2020
 Able to focus on other tasks/no need to deal with lots of retailers, saving time for the
business
 Wholesalers buy in bulk
 Help advertising, so more people become aware of the product
 Lower administration costs/no additional employees as there will be fewer invoices to
send/chase
 Wholesaler gives feedback from customers/identify trends

 May receive cash more quickly, improving cash flow
Distribution channel 4: Role of an agent
 An agent is an independent person or business that is appointed to deal with the sales and
distribution of a product or range of products
BENEFITS:
 May know the best way to sell products in other markets compared to manufacturers
 Agents will be aware of local conditions and will be in the best position to select the most
effective places in which to sell
DISADVANTAGES
 Less control over the way in which the product is sold to consumers
Factors considered when choosing a channel of distribution/RECOMMEND AND JUSTIFY AN

APPROPRIATE DISTRIBUTION CHANNEL IN GIVEN CIRCUMSTANCES
 Complexity of the product:

 if the product is complex and require back-up services, a direct channel can be used.
 This will enable the producer to give technical support to the consumer periodically
 E.g. a manufacturer of industrial generators may need to sell, deliver, install and
maintain the generator
 Perishability
 perishable products are usually sold using a direct channel so that the product reaches
the final consumer quickly
 BUT, in some instances, the product can be refrigerated. HOWEVER, the product cost
will increase.
 Location of consumers
 If consumers are dispersed an indirect channel can be used to ensure that all
customers get the products
 Methods used by competitors
 a business can use a different method from those used by competitors to distinguish
the product or increase sales
 e.g. if a competitor is using a direct channel, the business can use an indirect channel
May 2, 2020
so as to sell more products

 Cost of the product
 usually, high value products are sold using a direct channel so as to control the price
 if an indirect channel is used, the good may be unaffordable to consumers
 Frequency in which a product is bought

 Frequently bought products should be readily available in many retail outlets
PROMOTION
 It is where marketing activities aim to raise customer awareness of a product or brand,

generating sales and helping to create brand loyalty.
THE AIMS OF PROMOTION:
 inform / raise awareness / introduce new products (w18p11)

 create/improve brand image
 compete with competitors’ products
 persuade / increase sales / attract customers
 Build customer loyalty
FORMS OF PROMOTION
 Advertisements
It is any paid for form of promotion using advertising media.
Types of advertising:
 Informative advertising – emphasis on giving full information about the product

 Persuasive advertising – trying to persuade the consumer that they really need the product and
should buy it.
Advertising media (INSERT)
 Television
 Radio
 Newspapers (national or local)
 Magazines
 Posters/billboards
 Cinemas, DVD and blu – ray discs
LEAFLETS
May 2, 2020
Advantages
 Leaflets can contain lots of information about her products [k] these can be handed out
outside related businesses to attract appropriate target market which could lead to
increased sales
 Leaflets can be handed out in the local area [k] which is cost effective [an]
 Cheaper than television or radio [k]
 BUT, People may throw leaflets away or see leaflets as litter [k]
 Internet – used on e - commerce

 Product placement
 Sales promotion:
 Price reductions
 Gifts
 BOGOF
 Competitions
 Point – of sale displays and demonstrations
 After – sales service
 Free samples
 It is the use of short-term incentives to increase sales
 IMPORTANCE/BENEFITS of sales promotion:

 draw the attention of customers
 clear inventory as customers may prefer cheap products
 BUT:
 the business will sacrifice profits by selling goods at lower prices and giving free gifts
 some customers may wait for promotion time only, so normal sales can be reduced
Public relations/Sponsorship
 It is when a business engages in newsworthy activities to create a good image.

 These activities include:
 donating to the less privileged
 sponsoring sporting activities e.g. Banc ABC sponsoring Dynamos Soccer team
 inviting media houses when launching new products e.g. Telecel go or when the
organization excels
 IMPORTANCE:
 sales will increase because customers will like to be associated with the brand
 BUT,
 the business may be donating/sponsoring, so profits of the business can also be
May 2, 2020
reduced
Personal selling
 It is when the use of sales people who will encourage customers to buy by explaining to
customers how a products is used or informing them about the products that are available
 IMPORTANCE of personal selling:
 customers will have a clear understanding of the product, so sales may increase
 BUT,
 sales people require salaries, which will reduce profits
 the impact will also depend on the communication skills of the sales person.
Marketing managers must ensure that advertising is cost effective, meaning they must get more sales
from every dollar invested in advertising
 HOWEVER, advertising is usually cost effective in the early days because it increases awareness
and sales, BUT, as time progresses the market can become saturated such that customers will
not respond to advertisements.
A marketing Budget
 It is a financial plan for the marketing or product range for a specified period of time.
The importance of the marketing budget
 It specifies how much money is available to market the product or a range of products. This
enables the marketing manager to know how much to spend
 It enables cost effectiveness. The business will be able to compare the cost of advertising with
the increase in expected sales
RECOMMEND AND JUSTIFY THE MOST EFFECTIVE PROMOTIONAL METHOD
 The stage of the product life cycle that has been reached e.g. informative advertising for a new
product
 Nature of the product itself – consumer or producer product
 Cultural issues involved in international marketing – e.g. competitions not suitable for some
cultures, literacy issues etc.
 Nature of the target market e.g. local, national or international etc.
Technology and the marketing mix
 Product - It has responded to respond to new technology. E.g. adding new features to cell –
May 2, 2020
phones. Digital products such as games, dvds etc have been developed
 Price - Dynamic pricing can be used as a means of raising revenue.
 Promotion - Social networking cites such as Twitter, po-ups, sponsored links, blogs etc are being
used to promote products
Benefits of using websites to sell products

 Wider target market / more people to sell to / accessible worldwide

 Lower fixed cost
 24 hour access
 Reinforce image
 Provide information
 Way to obtain / ask for feedback
Limitations
 Potential customers may not see the website as the page may come up in a list of pages
when using search engines such as google
 Design cost of the website may be high
BENEFITS OF USING SOCIAL MEDIA NETWORK FOR PROMOTION (w18p12)
 Cover wide area OR seen by many people [k] leading to additional revenue [an]
 Low cost method of advertising [k] so fewer cash outflows
 Easy to update OR quick to update [k] spend time on other tasks [an]
 Way to build relationship OR communicate with customers [k]
 Can target specific groups [k] could encourage brand loyalty [an]
Disadvantages:
 No internet access OR not everyone uses social media OR message lost among many
messages on social media [k] which results in less revenue [an]
 Lack of control OR comments can be altered OR hacked [k]
 Takes time to continually post OR monitor messages [k]
Place: E-commerce
It is the buying and selling of goods and services using computer systems linked to the internet
May 2, 2020
May 2, 2020
MARKETING STRATEGY
It is a plan to combine the right combination of the four elements of the marketing mix for a product or
service to achieve a particular marketing objective(s).
Marketing objectives include:
 Increasing sales of an existing/service by selling to new markets or selling more to the existing
market
 Increasing sales of new product or service by improving an existing product – extension strategy,
or a totally new innovative product
 Increasing market share which will include increasing sales but also taking market share away
from competitors
 percentage or proportion of the total market sales [1] held by one brand or
business [+1]
 OR business sales/total market sales 100
 Maintaining market share if competition is increasing

 Increasing sales in a niche
 Build customer loyalty: -likelihood of existing customers to continue to buy from a
business
May 2, 2020
Ways a business can use to increase market share (w19p13)
 takeover rival business [k] so able to gain customer base of the other business [an]
 offer new products[k] in addition to the existing so able to attract customers to use their
services rather than competitors [an]
 spot new trends or market gaps quicker than rivals [k]

 enter new markets [k]
 offer better customer service (to maintain customer loyalty) [k]
 get existing customers to buy more [k]
 sell through new channels [k]
IMPORTANCE OF DIFFERENT ELEMENTS OF THE MARKETING MIX IN INFLUENCING CONSUMER

DECISIONS IN GIVEN CIRCUMSTANCES
RECOMMEND AND JUSTIFY MARKETING STRATEGIES APPROPRIATE TO A GIVEN SITUATION
May 2, 2020
May 2, 2020
THE IMPACT OF LEGAL CONTROLS ON MARKETING STRATEGY
 Misleading promotions/advertisements – it is illegal to give consumers misleading impression

about a product. Advertisements must be truthful
 Faulty and dangerous products should not be sold – if consumers come across such product,
they have the right to return and get a refund. They can also sue the company for compensation
if there are damages caused.
 If is an offence to sell underweight goods or use weighting equipment that is inaccurate
 It is illegal for a business to make misleading price claims about a product e.g. , “$20 0ff for this
week only”, when the product’s price was the same that previous week.
OPPORTUNITIES AND PROBLEMS OF NEW FOREIGN MARKETS
Opportunities
 Growing potential of new markets in other countries as incomes may be rising in those
countries.
 Home markets might be saturated as these markets give the chance for higher sales
 There is wider choice of location to produce products and this encourages businesses to sell as
well as produce in these countries
 Trade barriers have been reduced in many parts of the world making it profitable and easier to
enter these markets
Problems faced when entering new markets abroad (s19p11)
 Lack of knowledge – e.g. competitors or consumer habits in these markets.

 Different tastes [k] e.g. different countries might prefer different products adding to
production costs [an]
 Exchange rates – fluctuation of these may make imports expensive and hard to sell in foreign
markets
 Import restrictions e.g. tariffs and quotas – make imported products expensive compared to
domestically produced ones
 Increased risk of non – payment – methods pf payment used in those markets may make it hard
for payment to be received
 Increased transport costs – due to long distances involved. BUT, use of containers and
containers ships can lower these costs
 Different standards/legislation [k] so may not be able to use certain products stopping
possible sales [an]
May 2, 2020
Methods to overcome the problems of entering new markets abroad
Joint ventures (w19p13)
Advantages
 Enables the business to gain local knowledge so that culture and customs can be adapted to
enable a more successful entry into the new market.
 Access to new markets [k] increasing brand awareness [an]
 Wider range of contacts / better access to resources [k] so the business might be able to
obtain cheaper materials / lower costs [an]
 share costs / Increased capital [k] which is important if there are concerns about liquidity
 Increased capacity [k] so the business is able to meet potential demand [an]
 Way to avoid government restrictions [k]
 Risks are shared [k]
Disadvantages
 Different management styles or objectives / culture [k] could lead to conflict or problems
with decision making [an]
 Skills and expertise of partners differ [k] so might have to spend more time or money
than other company [an]
 Any mistakes might damage reputation [k] lowering revenue [an]
 Have to share any profit with joint venture partner [k]
 Disagreements over important decisions might occur [k]
Licensing
The business gives permission for another firm in the new market being entered to produce the
branded or ‘patented’ products under license.
Advantages
 no physical transportation of the product to the new market, which will save time and transport
costs
 trade restrictions are avoided
International franchising
Advantages
 Local knowledge is used to choose the best place to locate outlets
Localizing existing brands
Advantages
 Thinking global acting local. Same brand adapted to local tastes and culture of the country
May 2, 2020
concerned, leading to increased sales.

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1|P a ge : T O P I C 3 – M A R KET I N G – C I E O L EV EL – C HA P A N G A Z A F I L ES

IMPORTANCE OF BUILDING CUSTOMER RELATIONSHIPS

 Increase sales [k]

WAYS OF BUILDING CUSTOMER RELATIONSHIPS

Objectives of the Marketing Department/Objectives of Marketing:

 Raise customer awareness of a product or service of the business

 Target a new market or market segment

 Sales of goods and services change from time to time.

Reasons why customer/consumer spending patterns change:

The importance of changing customer needs

 The customer is a king

Why some markets have become more competitive

 Globilisation increased the number of suppliers of a product

 High levels of competition between firms

 Refers to the process of breaking up a total market into subgroups/markets made up of

customers with the same characteristics

Ways of segmenting markets

RECOMMEND AND JUSTIFY AN APPROPRIATE METHOD IN DIFFERENT CIRCUMSTANCES

Advantages of market segmentation (s19p11)

 To help decide best place to sell [k]

Types of market research

 Up-to-date [k] so able to make more accurate decisions [an]

 High cost [k] which will increase her expenses [an]

Methods of market research/primary market research

Advantages of using questionnaires

2. Face – to – face interviews

4. Focus groups/consumer panels

opinions on the product or service

 They provide detailed information about consumers’ opinions.

 it is time consuming, so can delay decision making

Can be in the form of:

 It is inexpensive, so expenses do not rise that much

 some participants may lie to please the researcher

The need for sampling

 It is a process of choosing a small group of people or items to participate in a research.

Relevant Population Sample

 everyone will have an equal chance of being picked

 observation / visiting competition [k]

 it is cheap, hence profits are not affected significantly

Internal sources of secondary research information

 Sales department records, pricing data, customer records, sales reports

External sources of secondary research information

IMPORTANCE OF MARKET RESEARCH (S18P12)

 Greater awareness of (current) consumer needs / preferences

Factors influencing the accuracy of market research data (w18p12)

trends as compared to primary research information

PRESENTATION AND USE OF MARKET RESEARCH RESULTS

 It refers to all activities which goes into marketing of a product or service

IMPORTANCE OF THE FOUR Ps OF THE MARKETING MIX

BENEFITS OF DEVELOPING NEW PRODUCTS (N12P12, w19p21)

products available [an]

COSTS OF DEVELOPING NEW PRODUCTS

 The costs of carrying out market research and analyzing findings

IMPORTANCE OF BRAND IMAGE/BRANDING

THE ROLE OF PACKAGING

 Packaging is the physical container or wrapping for a product.

 Easier to store / transport [

 Can damage the environment especially, the non- biodegradable

THE PRODUCT LIFE CYCLE

 It is the pattern of sales displayed by the product over time

INTODUCTION GROWTH MARURITY DECLINE

EXTENSION STRATEGIES/EXTENDING THE PRODUCT LIFE CYCLE

THE EFFECT OF EXTENSION STRATEGIES