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BUSINESS STUDIES Unit 1: Introduction to marketing Photo: Morguefile.com Pedro Fernández Sánchez INSTITUT Milà i Fontanals.

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Presentation on theme: "BUSINESS STUDIES Unit 1: Introduction to marketing Photo: Morguefile.com Pedro Fernández Sánchez INSTITUT Milà i Fontanals."— Presentation transcript:

1 BUSINESS STUDIES Unit 1: Introduction to marketing Photo: Morguefile.com Pedro Fernández Sánchez INSTITUT Milà i Fontanals

2 Pedro FernándezINSTITUT Milà i Fontanals Marketing A. What’s marketing? B. Importance of marketing. C. Marketing mix.

3 Pedro FernándezINSTITUT Milà i Fontanals 3 A. What’s marketing? Detects customers’ needs and wants. It is a management process. Supplies customers with goods and services to make profit (mutually beneficial).

4 Pedro FernándezINSTITUT Milà i Fontanals 4 B. Importance of marketing. There is a need for customer satisfaction. There is a need for business specialization. Shows the development of an economy. sa_ _ _ _ _ _ tion. sp_ _ _ _ _ _ tion. de_ _ _ _ _ ment

5 Pedro FernándezINSTITUT Milà i Fontanals 5 C. Marketing mix. It is a combination of elements that affects customers’ decision to buy. The elements are the 4 Ps: – Product. – Price. – Promotion. – Place.

6 Pedro FernándezINSTITUT Milà i Fontanals 6 Product Is the good or service that a company sells.

7 Pedro FernándezINSTITUT Milà i Fontanals 7 Price Quantity or amount of money a customer pays. Photo: Morguefile.com

8 Pedro FernándezINSTITUT Milà i Fontanals 8 Promotion How customers are informed about the product. Photo: morgefile.com

9 Pedro FernándezINSTITUT Milà i Fontanals 9 Place How the product will be distributed. Photo:

10 BUSINESS STUDIES Unit 2: Marketing mix Photo: creativecommons.org/ author: Grochim Pedro Fernández Sánchez INTITUT Milà i Fontanals

11 Pedro FernándezINSTITUT Milà i Fontanals 11 Unit 2. Marketing mix 2.1 Product 2.2 Price 2.3 Promotion 2.4 Place

12 Pedro FernándezINSTITUT Milà i Fontanals Product A. Concept B. Types of products C. Product portfolio D. Product life cycle E. Packaging F. Brand (or Trademark)

13 Pedro FernándezINSTITUT Milà i Fontanals 13 A. Concept Good or service that satisfies customer’s need and her desire to buy it. Product differentiation is when a company chooses features to distinguish it from others

14 Pedro FernándezINSTITUT Milà i Fontanals 14 B. Types of products a) Consumption goods: they satisfy people’s needs directly. There are two types. – Non-durable goods: they disappear when we use them. Examples:________________________________ Morguefile.com

15 Pedro FernándezINSTITUT Milà i Fontanals 15 B. Types of products – Durable goods: we can use them many times. For example:___________________________ Morguefile.com

16 Pedro FernándezINSTITUT Milà i Fontanals 16 B. Types of products b) Industrial goods: they are used to make other goods. They do not satisfy people’s needs directly. For instance:___________________________ Morguefile.com

17 Pedro FernándezINSTITUT Milà i Fontanals 17 B. Types of products c) Services: are non-physical products or economic activities. Examples:_____________________________ Morguefile.com

18 Pedro FernándezINSTITUT Milà i Fontanals 18 ACTIVITY 3 – Classifying products GOODS Consumption Goods Industrial goodsServices Non-durableDurable Wood  Toothpaste  Machine  Clock  Water  Education  Theatre ticket  Microwave 

19 Pedro FernándezINSTITUT Milà i Fontanals 19 ACTIVITY 3 – Classifying products GOODS Consumption Goods Industrial goodsServices Non-durableDurable Belt  Wash & Laundry  Sheets of paper  Tools  Lorry  Chalk  Restaurant Meal  Calculator 

20 NESTLÉ Baby Food Cereals Chocolate Dairy Culinary & Frozen Food Ice creams CoffeeDrinks Nestlé Nativa Nidina Naturnes Chocapic Golden Grahams Cheerios Crunch Cereals Kit Kat Crunch Caja Roja Nestlé Noir Dolca After Eight La Lechera Sveltesse Ideal Buitoni Litoral Solís La Cocinera Extreme Nestlé Gold Maxibon Nestlé Nestcafe Pirulo Nestlé Gold Bonka Dolce Gusto Ricoré Nestea Nesquick Eko Viladrau Aquarel San Narciso Vittel Perrier S.Pellegrino

21 Pedro FernándezINSTITUT Milà i Fontanals 21 Length =Width = Product line 8 products lines40 products Line depth = 5 products

22 Pedro FernándezINSTITUT Milà i Fontanals 22 C. Product portfolio a) Length (of product mix): the total quantity of goods that the company sells. It is the group or set of product lines. b) Width (of product mix): the number of different products line. c) Product line: is a set of goods with similar characteristic. d) Line depth: number of products in a line.

23 Pedro FernándezINSTITUT Milà i Fontanals 23 D. Product Life Cycle (PLC)

24 Pedro FernándezINSTITUT Milà i Fontanals 24 PRODUCT LIFE CYCLE (PLC)Concept: It is the period of time from the introduction until the withdrawal of a product. TIME (Years) S A L E S (€ ) Product Life Cycle Curve STAGES PLC IntroductionGrowthMaturityDecline  The product is new; there are low sales and slow growth.  There are high costs of developing, making and advertising the product.  Usually the product makes a loss.  Adverts objective: Inform customer  Sales increase when more customers buy the product.  The production increases and costs fall (economies of scale).  Competitors enter the market when the product starts to make a profit.  Adverts objective: Differentiate from other products.  The product reaches maximum sales and profits.  There is more competition until the market reaches saturation.  Adverts objective: Maintain or increase market share  Sales and profit fall until the product makes a loss.  Adverts objective: Remind customers

25 Pedro FernándezINSTITUT Milà i Fontanals 25 E. Packaging a)Importance. It is important because it helps to sell and to distinguish the product (differentiates) More so for Fast Moving Consumer Goods (FMCG) Examples of FMCG: chocolates, soft drinks… PRODUCTS THAT WE CAN SELL QUICKLY AT RELATIVELY LOW COST.

26 Pedro FernándezINSTITUT Milà i Fontanals 26 E. Packaging a)Characteristics: BEFORE BUYING Easy to identify (e.g.______________) Attractive (encourages buying our product) e.g._______________

27 Pedro FernándezINSTITUT Milà i Fontanals 27 Packaging characteristics Inform about its content for non transparent packaging (e.g. _________________) AFTER BUYING Easy to open (e.g. _________________) Convenient to use (especially if we use often) e.g. _________________________ Ease of transportation and storage e.g._______________)

28 Pedro FernándezINSTITUT Milà i Fontanals 28 F. Brand (trademark) a)Concept: is a name (pronounced), symbol, logo (image), slogan or design that distinguishes a seller’s goods or services in the market.

29 Pedro FernándezINSTITUT Milà i Fontanals 29 F. Brand (trademark) b)Characteristics:  Short  Easy to remember  Associated with product (e.g.___________)  Sometimes we use brand to talk about product (e.g._____________________)

30 Pedro FernándezINSTITUT Milà i Fontanals 30 Brand Strategies I.Global brands. II.Multibrands.  Individual brands  Product line brand  Second brand III.Own-brands.

31 Pedro FernándezINSTITUT Milà i Fontanals 31 I. Global brands When the company uses the same name for all the products. E.g. __________________

32 Pedro FernándezINSTITUT Milà i Fontanals 32 II. Multi-brands Individual brands: we use a different brand for each product. E.g. Procter & Gamble, Henkel, Uniliver, Sara Lee

33 Pedro FernándezINSTITUT Milà i Fontanals 33 II. Multi-brands Product line brand: we use the same brand for similar products. E.g. Pascual - Zumosol

34 Pedro FernándezINSTITUT Milà i Fontanals 34 II. Multi-brand Second brand: Companies with an exclusive / luxury brand; they want to find another market segment (low price) to sell another brand. E.g. Rolex - Tudor

35 Pedro FernándezINSTITUT Milà i Fontanals 35 III. Own-brands When big supermarkets sell their own products, made by other companies, at a lower price. E.g. Dia, Mercadona, Carrefour

36 Pedro FernándezINSTITUT Milà i Fontanals Price A. Concept B. Fixing prices - Market based pricing - Cost based pricing - Competition based pricing C. Price strategies - Price skimming or creaming. - Penetration pricing - Psychological pricing

37 A. Price concept Price tells us the money that a company can earn selling its product (revenue).

38 B. Fixing prices MARKET BASED PRICING It uses the market demand to calculate price. Demand is the quantity of goods a consumer wants to buy. Supply is the quantity of goods that a company wants to produce and sell.

39 Demand & Supply Law The basic law of demand and supply says: - If price goes up, then demand falls and supply increases. - If price falls, then demand goes up and supply decreases. - At the equilibrium, demand equals supply and we have a market price.

40 GRAPH: Demand - Supply Law & Equilibrium QUANTITY (units) Price (€ - Euros) Demand (curve) Supply (curve) Equilibrium 40 units (Qe) €10 Pe m (40 units, €10 ) As price falls Quantity of demand goes up As price falls Quantity of demand falls

41 B. Fixing prices COST BASED PRICING It uses production costs to work out price. It takes fixed costs and variable cost, and adds a fixed percentage of the cost of making the product, called mark-up. Selling price = unitary production cost + mark-up; production cost = fixed cost + variable cost

42 COST BASED PRICING: A Practical Example A manufacturer business has a production unitary cost of €20/unit. Find the selling price if the company wants to get a 15% mark-up. DATA: Cu = €20/unit Mark-up = 15% o/Cu SOLUTION: Selling price = Cu + Mark-up Sell. price = €20/unit (€20/unit) Sell. price = €20/unit + €3/unit = €23/unit

43 COST BASED PRICING: Exercise A small firm has a unitary: fixed cost of €10/unit and a variable cost of €5/ unit. Find the selling price if the company wants to get a 30% mark-up. DATA: CFu = €10/unit CVu = €5/unit Cu = (€10 + €5)/unit Mark-up = 30% o/Cu SOLUTION: Selling price = Cu + Mark-up Selling price = (CFu + CVu) + Mark-up Sell. price = €15/unit (€15/unit) Sell. price = €15/unit + €3.5/unit = €18.5/unit

44 B. Fixing prices COMPETITION BASED PRICING Sets price based on competitors’ prices. There are three possibilities: Similar price (for similar products’ features). Lower price (we earn more selling big quantities). Higher price (we have a famous product or better quality).

45 COMPETITION BASED PRICING If the market has a leader (e.g. Telefónica), Then other businesses can: Follow the leader (similar prices) Set independent price (it can provoke a price war)

46 C. Price strategies Price skimming or creaming Penetration pricing Psychological pricing

47 C. Price strategies Price skimming or creaming: company starts with a high price (market segment) and reduces it later (to increase the market). It is used for: - products with no competitors - new products (e.g. latest Channel) - fashionable products (e.g. New Diesel jean) - technological products(e.g. Iphone4) ____________) ______________)

48 C. Price strategies Penetration pricing: when a product has a low initial price to enter the market. When sales go up, the price is increased. E.g. New Airplane Company. ___________________)

49 C. Price strategies Psychological pricing: It is based on how customers associate a price with a feature of a product. TYPES: - Regular price - Premium prices - Price on customers’ expectation - Critical price point

50 C. Psychological pricing (TYPES) TYPES: Regular price (daily used product such as milk, tea, sugar…) Premium prices (or prestige pricing, for luxury products; e.g. Ferrari limited edition) Price on customers’ expectation (depending on customer satisfaction) Critical price point (e.g. €99.99 or €4.95) e.g.___________________) (e.g.______________) (e.g.__________________)

51 PRICE Mind Map (Grid) ________

52 GRAPH: Demand - Supply Law & Equilibrium QUANTITY (units) Price (€ - Euros) Demand (curve) Supply (curve) Equilibrium 40 units (Qe) €10 Pe m (40 units, €10)

53 3. Promotion (or promotion-mix) A.ADVERTISING B.SALES PROMOTION C.PERSONAL SELLING D.PUBLIC RELATIONS

54 A. Advertisement a)Concept. b)Basic objectives (AIDA Model). c)Principles. d)Advertising media. e)Stages to design an advertisement message.

55 Concept of Advertisement It is a message that companies (firms) send to inform customers and/or to persuade them to buy a product. It uses a channel of communication or media so you need to pay (cost).

56 Basic objectives of Advertising (AIDA Model) A – Attention (attract customers’ attention). I – Interest (raise customers’ interest demonstrating advantages). D – Desire (convince customers that our product will satisfy their needs). A – Action (convince customers to buy, most important and difficult).

57 Principles of Advertising Be simple (don’t make them think too much). Be creative (your product will be different from others). Be repetitive (to remember the message: slogans, songs…). Be honest (you cannot cheat a customer twice).

58 Advertising Media (I) TYPESPROSCONS TV - Can reach a lot of people and target customers - Good for mass-market products - It is profitable - It is very expensive Radio - It is short, dynamic & very repetitive - Low cost - Can target listeners (only sound) - Small audience

59 Advertising Media (II) TYPESPROSCONS The Press - It is easy to target effectively. - It is silent and static. Poster & Billboards - Have high visual impact. - Many people see them - Only see them for a few seconds. - Limited information Internet - Global coverage - Low costs - Security problems - Great competition

60 Stages to design an advertisement message 1.Market research. The business needs to know: - If the product has a market. - If the product raises interest for futures sales. 2.Advertisement strategies. - Define the market segment (customers we target). - How much the firm wants to earn. - Show Special qualities that the company has to offer.

61 Stages to design an advertisement message 3.Advertisement message. - Media (the ads depend on the media we choose), e.g. magazines play with colour. e.g. TV plays with sound, voice, music. - Target audience (it depends on the market segment). e.g. small car, low price.

62 B. Sales Promotion a)Concept. Businesses use it to produce a short-term increase in sales. b)Reasons: - Increase market share- Cash needs - New product or new use- Stock surplus

63 B. Sales Promotion c)Examples: - Special offers (buy one get one free) - Free gifts - Sales (in January / July, 50% off) - Discount vouchers (€5 off the next book you buy) - Free samples of the product.

64 C. Personal Selling a)Concept. – There is direct contact between the sales person and the customer. – The sales person can satisfy customers’ needs better.

65 C. Personal Selling b)Characteristics: – Transmits the image of the company. – Informs, persuades the customer to buy. – It has a quick response. – Sales person needs to know the product very well.

66 D. Public Relations a)Purpose. It is to improve and keep good relations between company and the public. b)How? In charity events, sponsorships, concerts, conferences…

67 D. Public Relations c)When? Change the company’s image Update the company’s image The company is in a new market The company has been discredited

68 4. Place A.CONCEPT B.FUNCTIONS C.INTERMEDIARIES D.CHANNELS E.STRATEGIES

69 A. Place concept The product needs to be at the right time, in the right amount and in the right market. The product usually passes through intermediaries before arriving at the customer (e.g. wholesalers, retailers…).

70 B. Place Functions a)Transport. We need to decide lot size and frequency to choose one. It depends on type and price of the product. E.g. FMCG (see packaging). b)Store. Intermediaries buy goods in large quantities (bulk), and then divide them into smaller quantities  breaking bulk process.

71 B. Place Functions c)Customers’ information & advice: important to introduce a product into a new market.

72 C. Intermediaries a)Types:  Wholesalers. Buy goods from manufacturers and sell to other wholesalers or retailers. Types: specialised (e.g. PLATAFORMA) and general (e.g. MAKRO)  Retailer. They only sell to final customers

73 C. Intermediaries b)Functions: (they justify their added value)  Physical Distribution. It cuts down the number of transactions between manufacturers and retailers. It makes distribution simpler.  Financing. Wholesalers pay the total amount for the products to the manufacturer. This way manufacturer does not have to wait to charge.

74 D. Place Channels a)Concept: It is the route a product takes from the producer to the consumer. b)Types:  Channel 1. Producer  Customer (e.g. jewellery, it is important to give customer’s advice) __________ _______  _______ (e.g.______, (________ ______)

75 D. Place Channels b)Types:  Channel 2. Producer  Retailer  Customer (e.g. Supermarkets)  Channel 3. Producer  Wholesaler  Retailer  Customer (e.g. FMCG – traditional distribution) _______  _______(e.g. _______ (e.g.____________)_______

76 D. Place Channels c)Alternative channels:  E-commerce. It is becoming a more and more important way to distribute your products.  Franchising. It is when a firm (franchisee) uses the business model of another company (franchisor). The franchisee has to pay the franchisor (e.g. Pan’s & Company) ___________ __________. ____ __________________ ____ _____________________

77 D. Place Channels c)Alternative channels:  Teleshopping. Goods are bought on the phone with credit card.  Vending machines. E.g. tobacco, soft-drinks, cinema, theatre… _______ _____________. _____________, _________,_________...

78 E. Place Strategies a)Intensive distribution. b)Exclusive distribution. c)Selective distribution.

79 A. Intensive distribution B. Exclusive distribution C. Selective distribution ConceptDistribution of low priced or impulse purchase products Limits the distribution to a single retailer Small number of retailers chosen with large geographical distribution ChannelChannel 3Channel 2 ProductFMCG or impulsive purchase product Important to give customers’ advise Computers, TVs,… ExamplesChocolates, soft drinks,… Bang & Olufsen, iPod,… Computers: Media Markt, PC City,…

80 E. Place Strategies a)Intensive distribution. c)Selective distribution. Strategies a) and c) require selecting an intermediary which has experience, credibility and is known by the target audience. _________, _________.

81 BUSINESS STUDIES Unit 3: Merchandising Photo: Morguefile.com Pedro Fernández Sánchez INTITUT Milà i Fontanals

82 1. Elements of merchandising. A.CONCEPT It is a way of attracting consumers to a product and persuading them to buy it. B.POINT-OF-SALE (POS) material It is the most important form of merchandising. _____________ ________. ___________ ___________________.

83 Examples of POS Display stands and cases Moving or illuminated in-store displays Pavement models, such as palm tree in summer Wire racks, like those that store packets of crisps Show cards, posters… _______ ________ ____________ _____________, _______, ______________...

84 Examples of POS High quantity of products (especially for dairy products to show they are fresh) Pile presentation (no need to have a perfect look, untidiness) Hypermarket displays (height levels 1-2-3, impulse purchase products, well known brands…) (_________________ ______________________________________) ___________________________________) (_________________________ _________________________, _________, _________________ _________________________,

85 POS Hypermarket displays (examples) Height levels Level 3 (eyes):to level 1 –32%; to level 2 –20% Level 2 (hands):to level 1 –40%; to level 3 +63% Level 1 (feet):to level 2 +34%; to level 3 +78%

86 POS Hypermarket displays (examples) Height levels 3-2-1


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