Business

Management
IB Diploma Programme

DIANA ZMICEREVSKA
M G . S C . O E C . , A S S I S TA N T P R O F E S S O R O F I S M A , H E A D O F
P R O J E C T D E PA R T M E N T
 Unit 4. Marketing

4.1 Introduction to marketing and its role

4.2 Marketing planning
4.3 Sales forecasting (HL only)
4.4 Market research
4.5.Marketing mix (4P’s and 7P’s)
4.6 International marketing (HL only)
4.7 E-commerce
Elements of
the marketing
mix
Element
s of the
marketin
g mix
Product
◆Products of a business refer to what it offers to sell to its customers. These may be
goods, which are tangible items, or services, which are intangible.
◆Tangible attributes of a product refer to its physical aspects, such as how it looks and
feels.
◆Intangible aspects of a product refer to aspects that cannot be touched but can still be
important to customers, such as the brand and its core values.
The relationship between the product life cycle,
product portfolio and the marketing mix
Product life cycle
◆Product life cycle
shows the stages of a
product over its
lifetime.
The product lifecycle
The product lifecycle
Stage 1: Research & Development - the product is designed.
 Generating ideas
 Screening ideas
 Creating a prototype
 Carrying out test marketing
 Commercialization
The product lifecycle
Stage 2: Introduction – the product is launched.
Price skimming setting a high price when introducing a new product to the
market.

Stage 3: Growth
Penetration pricing setting a low initial price for a product with the aim of
attracting a large number of customers quickly and gaining a high market share.
The product lifecycle
Stage 4: Maturity
Stage 5: Saturation - aggressive advertising in an effort to maintain sales.
Stage 6: Decline
Managers may use the product life cycle model to identify which stage a product is in at
any given moment and then adjust the marketing mix accordingly.
The product lifecycle
p.428
Extension strategies
An extension strategy occurs when marketing activities are changed to prevent sales
from falling.
Extension strategies
Methods:
 Increasing the usage of the product on any given occasion
 Encouraging the use of the product on more occasions
 Reducing the price
 Adapting the product
 Introducing promotional offers
 Changing the image of the product
p. 430
The relationship between the product life
cycle, investment, profit and cash flow
 Aspects of branding
Brand is a name, symbol, sign, or design that differentiates a firm’s product from its
competitors,
Branding the process of distinguishing one firm’s product from another.
Brand awareness measures the extent to which people are aware of and can remember a
particular brand.
Brand development involves building the brand identity and values as well as
communicating these to customers.

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Aspects of branding
Brand loyalty is measured by the extent to which customers return to buy a particular
brand and the extent to which they prefer this brand over rivals.
 Makes customers less price sensitive
 Encourages repeat customers
 Creates a customer base that are likely to recommend the product
 Increases the value of the brand (a brand has a financial value, although this is not
always easy to quantify precisely)
 Increases the chances of success when launching new products.
Brand value how much a brand is worth in terms of its reputation, potential income, and
market value.
Importance of packaging
Packaging concerns the design and production of the physical container or wrapper of a
product.
 It provides physical protection
 It offers convenience
 It provides information
 It can help reduce security risks
 It aids promotion
Factors determining the price of a
product
 Factors determining the price of a
product
 The type of product - ‘shopping good’  Competitors
products.
 Pricing points
 Other products are known as speciality
 The objectives of the business
items
 Capacity
 The cost of producing a unit
 The stage in the product life cycle
 The ability of customers to pay
 The rest of the marketing mix
 The demand for a product
 The sensitivity of demand to price changes
Pricing methods
■ Cost-plus (mark-up) - is the process of establishing the price of a product by
calculating its cost of production and then adding an amount which is profit.
Pricing methods
■ Penetration pricing - setting a low initial price for a product with the aim of
attracting a large number of customers quickly and gaining a high market share.
Pricing methods
■ Price skimming - firms set high prices when introducing new products to the market.
Pricing methods
■ Loss leader - businesses that charge a low price for a product, usually below its
average cost.
Pricing methods
■ Predatory pricing - occurs when one business reduces its prices to a low level to
undercut the competition.
■ Premium pricing - is used to convey the quality of the brand. A premium is charged
because the business is positioned as exclusive or luxury and offers higher benefits than
the competition.
■ Dynamic pricing - occurs when prices are changed at different times to reflect
demand conditions.
Pricing methods
■ Competitive pricing - takes into consideration what competitors are charging for their
product. It involves charging a price that is in line with or just below the competitors’
prices.
Pricing methods
■ Price discrimination - charging different prices to different groups of consumers for
the same product.
Pricing methods
■ Psychological pricing - refers to when firms consider how pricing affects consumers’
perception of the value of their products. It considers the psychological effect of pricing
on consumers.
Pricing methods
■ Contribution pricing
Price elasticity of demand (HL only)
- measures the sensitivity of demand to a change in price, with all other factors
unchanged.
By calculating the price elasticity of demand, a business can identify how changes in
price may affect the quantity of its sales and, therefore, revenue. This should lead to
better pricing decisions.
Price elasticity of demand (HL only)
Calculating the price elasticity of demand
Price elasticity of demand = percentage change in quantity demanded/percentage change
in price
measures the percentage change in quantity demanded following a price change, when
all other factors remain the same.
◆Price elastic demand is greater than 1 and means that the impact of a change in price
leads to a larger change in the quantity demanded (in percentages), with all other factors
unchanged.
Price elasticity of demand (HL only)
Demand is price inelastic if the value of the price elasticity of demand is less than 1.
Is affected by several factors:
 The availability of similar product
 Time
 The type of product
 The proportion of income spent on the product
 Demand for the brand versus demand for the product
Price elasticity of demand, total
revenue and profits
If demand for a product is price elastic, a business can increase its revenue by lowering
the price.
Whether this increase in revenue also means an increase in profit depends on what
happens to the costs when the firm produces and sells more.
If demand for a product is price inelastic, the revenue will fall when the price is cut.
Promotion
- involves communicating about it to
existing or potential customers.
The objectives of promotion:
The purposes of promotion:
to increase sales of a business
 informing customers
to increase the market share of a product
 persuading them
to position the product relative to
 reassuring buyers competitors in the minds of customers.
The
promotiona
l mix
Above-the-line promotion
is paid for mass market marketing communications such as advertising.
Above-the-line promotion is not very targeted and it can be difficult to measure its
immediate impact on sales and profits.
Is often used as a long-term strategy to build brand loyalty.
Managers must determine the most appropriate media to use for advertising.
The main forms of advertising media include television, newspapers, magazines,
cinema, radio, posters, billboards, and the Internet.
Below-the-line promotion
- are activities that target a specific group through direct contact with them rather than
using mass media.
Is very focused on converting interest into purchases and the return on the spending can
be measured more directly than with advertising.
Includes:
Sales promotions Direct promotion
Personal selling Public relations
Through-the-line promotion
Through-the-line promotion combines above-the-line and below-the-line promotion in
that it attempts to raise brand awareness and target specific customers and convert their
interest into sales.
An example of this would be a national TV campaign complemented by targeted flyers
and newspaper adverts
Choosing the right promotional
mix
Certain factors will need to be considered for an effective promotional mix:
 Cost
 Legal framework
 Target market
 Stage in the product life cycle
 Type of product
The impact of technologies on
promotional strategies
 Social media
 Social networks
 Social media marketing (SMM) - the use of technology to build relationships, drive
repeat business, and attract new customers by individuals sharing with other individuals.
 Viral marketing - is a form of peer-to-peer communication where individuals are
encouraged to pass on promotional messages within their social networks.
The benefits of new technology on
promotional strategies
 Wide reach
 Engagement
 Market information
 Cost savings
 Brand recognition
 Speed
The limitations of new technology
on promotional strategies
 Accessibility problems
 Distraction
 Lurkers
Guerrilla marketing
marketing form which involves the use of “untraditional” activities that help companies
weaken their rivals and stay successfully on the market, even with limited resources.
It adapts the “hit and run” guerrilla warfare tactics where you hit if you can win but run
if you cannot.
Differences between traditional and guerrilla
marketing
 Methods used in guerrilla
marketing
● Peer marketing – bringing people with similar interests or ages together to build up interest in the product.

● Product give-aways

● SMS texting and video messaging

● Roach baiting and buzz marketing – where actors are used to behave as normal customers to create interest,
controversy, or curiosity in a product or service.

● Intrigue – the process of generating mystery to engage customers

● Live commercials – using people to do live commercials in key places such as clubs and pubs

● Bill stickers – an approach used to promote DJs and club events

Place
Place is about how the product reaches consumers, how the product is distributed to
make it available to consumers.
The distribution system includes getting the right product to the right place at the right
time.
Distribution of a good or service refers to the way in which the ownership of it passes
from the producer to the consumer.
Place
Producers use intermediaries, these include:
 Retailers, which are the final stage in the distribution chain: Many goods are sold
through retailers rather than direct to the customer.
 Wholesalers: These buy products in bulk from producers and sell them on to retailers,
who then sell direct to the final consumer.
Types of distribution channel
Choosing a distribution channel
The choice of distribution channel will depend on:
 Access to markets
 The desired degree of control
 Costs
Digital distribution
Oxford full case p. 319
People
People - the human capital in terms of skills, attitudes, and abilities necessary in
the production of goods or the provision of services.
Processes
Processes the procedures and policies pertaining to how an organization’s
product is provided and delivered.
Physical evidence
Physical evidence the tangible or visible touch points that are observable to
customers in a business.
Oxford full case p.325
Ethical considerations
https://www.bbc.com/news/av/technology-16533289

https://www.bbc.com/news/av/technology-20957848
The marketing mix and different types of products