1. FUNCTIONAL AREA
MARKETING

2. In this unit you will learn about
Difference between Market and Marketing
Market Share and growth
Objectives of Marketing
The consumer
Branding and Generic goods
4Ps

3. What is a market? A meeting place for buyers (consumers) and sellers.
Shop, restaurant, telephone, internet, etc.
Consumer markets - individuals who purchase goods or services for personal or domestic use.
Industrial markets - organisations which purchase goods or services to use in the production of other goods and services.

4. What is marketing?
“…the process involved in identifying, anticipating and satisfying consumer requirements profitably”
The Chartered Institute of Marketing
Aims of marketing:
to identify consumers’ requirements
to anticipate consumers’ requirements
to satisfy consumers’ requirements

5. Why is marketing important?
Marketing ensures that firms produce what people want – it also makes customers aware of what a firm is producing.
If a firm can produce what customers want then they have a good opportunity to reach their objectives.
Marketing also allows firms to launch new products.
All firms will undertake
marketing – including charities.

6. Market Share & Market Growth
Most firms start off small.
A common objective of new firms is to grow in size.
Market growth can be obtained by increasing market share.
Market share is the firm’s percentage of all the sales in the market. For example, if the market for PCs in the UK is work a total of
Market growth is more difficult in an established market than a new growing market - due to the competition.

7. Objectives of Marketing
Marketing is linked to the overall objectives of the organisation and will therefore be different depending on the nature of the organisation.
For example, Charities will wish to increase donations to assist good causes, whereas public sector firms will wish to improve the service they deliver.

8. Objectives of Marketing
In the main the objectives of marketing include –
To target new markets or market segments
Increase revenue and profitability or income
Increase or maintain market share
Improve the image of products or the organisation
Improve existing products or develop new products

9. Business Orientation
A business will adopt a focus of attention with the hope of obtaining set corporate objectives.
Traditionally, the focus of attention of the business will centre on the product or the market (customers).
The orientation adopted will affect all the activities of the business.

10. Product-led Organisations
Focus on product and production process.
Emphasis on developing technically sound product.
Advertising will focus on how good the product is – rather than how the product will satisfy the needs of customers.
Many publicly funded organisations – like universities – advertise what they can provide rather than focusing on how they can satisfy the needs of customers.

11. Product-led: Concorde
Focus on Research and Development - was the aircraft technically possible?
Consumers and commercial viability viewed as being less important.
Developers assumed a supersonic aircraft would sell itself.

12. Concorde – After Launch
British Airways and Air France only buyers - mainly due to governmental involvement.
Other airlines deterred by high price and low passenger capacity.
Several airports - including New York - indicated possible ban due to noise pollution.
Technical success does not guarantee commercial success.

13. Market-led Organisations
Focus on the customer and what they want.
The firm will alter their product offering in line with what customers want.
Market research methods will be employed to identify the needs of target customers.
Many publicly funded organisations – like universities – advertise what they can provide rather than focusing on how they can satisfy the needs of customers.
Realise that their success depends on meeting the needs of customers better than competitors.

14. Market-led: Ford Model T
Henry Ford - one of the first to adopt a market orientated approach.
Before production he researched the market and identified a price that would allow large quantities to be sold.
Consumers’ needs were central to his decision-making.

15. Branding
The name given by a producer to a product or range of products is known as a brand.
The aim of branding is to distinguish the product from its competitors and to make it instantly recognisable to the consumer. A brand can be -
Company name - Heinz, Coco-Cola
Name given to a range of products - Fairy, Mr Kipling

16. HOW DOES A FIRM BRAND ITS PRODUCTS?
To brand a product a firm will use packaging and advertising.

17. Brand Names
Have a massive influence on purchasing decisions. So much so that the brands themselves are sold for considerable sums of money.
Nestlé purchased Rowntree Mackintosh to obtain Kit-Kat, Polo and Smarties.

18. Brand Loyalty Some customers are faithful to one particular product.
Marketeers strive to persuade customers that their product is better than competitors’ products and obtain brand loyalty which would allow them to charge higher prices.
Firms may add an existing brand name to a new product to increase the products chances for success.

19. STRONG BRAND LOYALTY
Strong branding means that the firm can charge a premium price because the product is perceived as high quality, it has high visibility due to the amount of advertising and brand loyalty
Brands are facing challenges – customers are more price conscious and there has been an increase in the number of quality “own brands”

20. Own Brands
Many Large retailers – Tesco, Asda, Boots, etc… - sell a wide range of products under their own brand name.
Own brands now account for more than 20% of all retail sales.
Own brands have been successful at challenging well established brands by developing products of a similar quality, with similar packaging but at
cheaper prices.

21. Generic Goods
Very little marketing is carried out by companies who sell generic goods.
They are seen by consumers to have no differences between them – eg light bulbs, matches, etc,

22. The Marketing Function
Marketing decisions centre on four functional activities, known as the 4p’s.
Product
Price
Place (distribution)
Promotion
When combined these four areas are known as the Marketing-Mix.

23. Product
The product must meet the needs of customers and provide benefit to the customer.
Remember – a product can be a good or service.
Different versions of the same basic product (known as the core product) vary in quality, style, packaging and many other ways from their competitors’ products – eg cola and crisps.
These additional components of the core product are known as the augmented product.

24. Motor Car Core Product Augmented Product Safety Fuel Economy Comfort
Mode of transport
Performance
Credit Terms
Style
Warranty
Augmented Product

25. Our Life Cycle We are born and introduced to the world.
Then we grow into teenagers.
Then we mature into adults.
Finally, we get old and our health declines.

26. The Life of a Product Like humans, products have a limited life.
The Sega Mega Drive, Subbuteo and ‘O’ Levels have all been withdrawn from the market.
Before being withdrawn, a product will pass through four stages –
known as the Product Life Cycle.

27. Launch
The first stage of the product life cycle begins when the product is introduced into the marketplace.
Products recently launched include: Wii and Divine.

28. Growth
As more target customers become aware of the product, the popularity and sales of the product will increase.
Mobile phones and internet shopping are examples of growth products.

29. Maturity
Once target customers are fully aware of the product, the popularity and sales of the product will level off.
Products in their maturity stage include Sunny-D and the Spice Girls.

30. Decline The popularity of the product will eventually drop.
Customers will stop buying the product and sales will fall.
Products in their decline stage include - Butlins Holidays, Power Rangers and Cassette Tapes.

31. Product Life Cycle Chart
Sales
Maturity
Growth
Decline
Launch
Time

32. Variations in Product Life Cycles
Sales
Sales
Peter Andre
Coca-Cola
Time
Time

33. Companies use Product Life Cycles to:
determine the future of their products.
decide when to introduce new products.
decide when to withdraw products in decline.
decide which products to invest in.

34. Extending the life of a product
Sales
Time
Product Extension Strategies
- change/modify product - new variants
- alter packaging - alter channel of distribution
- change pricing strategy - alter promotional support

35. Price
The price is what the customer has to pay in order to obtain the product.
The product must be priced so that an organisation covers its costs and can make a profit.
If the product is priced too high – customers will not buy it (especially if a competitor has a similar more reasonably priced product on the market).

36. Pricing Decisions
The main pricing decision that a firm takes is whether to charge:
A low price in order to attract sales. This makes it possible for a successful firm to sell large quantities at low costs.
An average price in relation to competitors. The firm will need to use other elements of the marketing-mix to compete.
A high price. Firms can charge a high price if they are seen as being better than their rivals in meeting the needs of customers.

37. The Price is Right

38. The Price is Right
CK be by Calvin Klein
HIGH PRICE

39. The Price is Right
Ford Focus
AVERAGE PRICE

40. Chocolates from Thorntons
The Price is Right
Chocolates from Thorntons
HIGH PRICE

41. The Price is Right
Gola Trainers
LOW PRICE

42. Jeans from Marks and Spencer
The Price is Right
Jeans from Marks and Spencer
AVERAGE PRICE

43. Price-Quality Relationship
Having a lower price than competitors does not guarantee success.
Most people associate a high price with a high quality product.
Would you expect to pay more for a Rolls-Royce or a Skoda?
Why?

44. + Pricing Strategies Cost-plus pricing
The most common method of pricing in the UK
Companies calculate the cost of producing one item then add a profit ‘mark-up’, say 20%, to determine the selling price.
The extent of the mark-up will vary from industry to industry - car dealers will usually add 17% onto the cost they pay manufacturers whereas fashion clothing retailers may add between 100%-200%. +

45. Pricing Strategies Penetration pricing
A low price is set for a new product to attract customers and penetrate an existing market where there is likely to be strong competition.
Losses may be incurred in the short-term, however once a foothold in the market has been obtained prices may be increased to allow profits to be made.
Brand products launched into consumer markets will use penetration pricing. For example, breakfast cereals such as Kellogg’s Golden Grahams.

46. Pricing Strategies Going-rate pricing
Also known as competitive pricing.
The firm will set the price of its products at a level similar to competitors.
This occurs in markets where businesses try to avoid price wars. Firms will set their prices at roughly the same level.
Companies offering petrol for cars adopt going-rate pricing.

47. Pricing Strategies Hour-based pricing
The firm sets a price for a service based on time.
The company will offer a quote for the service demanded by a customer - based on an estimate of the time for completion and an hourly charge rate.
Car mechanics and cleaners use hour-based pricing.

48. Pricing Strategies Skimming
Involves setting a high price for a new product.
Once the first target segment is saturated, the producer will lower the price in order to tap a fresh segment of the market. The process continues until a large section of the total market is catered for.
Electronic and pharmaceutical manufacturers often use skimming pricing.

49. Pricing Strategies Destroyer pricing
Employed to undermine the sales of rivals.
The price of an existing product is reduced to an artificially low level in order to destroy competitor’s sales.
Only adopted by very large businesses with sufficient resources.
Stagecoach buses applies destroyer pricing when starting new bus routes.

50. Place The ‘place’ where the final exchange occurs.
Refers to all activities undertaken by companies in distributing products to targeted consumers.

51. What is meant by distribution?
The steps implemented by a company to make goods available for customers to buy.
Objective of distribution = to make the product available in the right place at the right time.
The company must make decisions about the channels of distribution through which the product will pass and the methods of transport to use.

52. Channels of Distribution
The means by which an organisation and its customers are brought together in a particular place in order to buy and sell.
This may be in a shop, over the telephone, on the internet or in an office.
The channel of distribution that a manufacturer may select to get products to target consumers may include intermediaries.

53. Intermediaries
Intermediaries - commonly known as ‘middlemen’ - may assist in the distribution of products to consumers.
The two main types of intermediaries are:
Wholesalers who buy from manufacturers and then sell to retailers. For example Cash and Carry firms.
Retailers who buy from wholesalers or direct from manufacturers then sell onto consumers. For example, RS McColls.

54. Which Channel of Distribution?
Producer A B C
Customers
Retailers
Whole - -
salers

55. Effects of Technology on Place
New technology has changed the ‘place’ where the final exchange occurs.
For example, banking was always carried out across the counter in a bank.
We now use:
automated tellers
telephone banking
online computer banking

56. The Internet
Developments in satellite and internet technology have greatly increased the number and variety of products being made available for customers to buy from their homes.
People can now purchase goods quickly and often at less cost from the comfort of their own homes.

57. The Marketing Environment
Competitors
Consumers
THE MARKET
Government
Technology
Economy

58. Promotion
any form of communication used in an attempt to draw attention to a product/service – to make customers .
Three aims - persuade, inform and remind.
Two main types:
Above-the-line promotion - aka Advertising
Below-the-line promotion – other methods of promotion which can be controlled by the firm – eg direct marketing

59. Advertising using the media to communicate messages to customers.
Two main types - persuasive and informative.
Choice of advertising media will depend on -
cost, audience, competitors, impact, the law and the other components of the marketing-mix.
Controls on advertising include - the ASA, ITC, pressure groups and the Trades Descriptions Act 1968.

60. Advertising Control The British Code of Advertising Practice
The Advertising Standards Authority (ASA)
The Independent Television Commission
Pupil Task:
Read page 118 of Business Studies For You and note the purpose of each of the above organisations
Complete the match-it on pg 119.

61. Forms of Advertising TV/Radio Posters Magazines Billboards
Sponsored events Newspapers
Network of shops/outlets Cinema
Word-of-mouth
Packaging
Internet
Sales People
Direct Mail

62. Advertising Media
Television: Ads can reach millions and you can target people who watch particular programmes but it is very expensive.
Cinema: Ads have a high visual and sound impact and you can target particular films. You have a captive audience but they are expensive
Leaflets and Junk Mail: They are cheap to produce and distribute but they’re easy to ignore.
Newspapers and Magazines: They know a lot about their readership so it’s easy to target effectively. They’ll often be read more than once.

63. Advertising Media
Radio: Ads are usually cheaper and you can still target listeners of particular programmes but it’s sound only and audiences are usually smaller.
Posters and Billboards: Ads have a high visual impact and stay in place for a long time. Can be seen by lots of people but usually only for a short time so they can’t contain much information.
Internet Sites: Ads can have a high visual impact, be interactive and link directly to buying the product.

64. Sales Promotion
Shops may hold sales to encourage customers to buy what they may not have purchased at the full price.
Sales may encourage customers who would not normally go to the shop to venture in.

65. Market Research Market research is used to find out:
Market research provides managers with information about what customers want and need and what will influence them to buy a product.
Market research is used to find out:
Consumer wants regarding existing products
What makes consumers buy a firm’s products
What customers think of new products
What customers what from future products
What competitors are doing to satisfy customers

66. Importance of MR Market research:
Indicates the size of a market and potential growth
Provides information about the best place to sell products
Helps identify customers’ needs and wants
Allows firms to identify what makes some products successful
Helps firms avoid costly mistakes – buy launching unwanted products
Gives firms ideas on how to promote products
Takes some risk out of launching new products
Allows firms to identify who their target customers are.

67. Methods of MR There are two methods of market research:
Primary (Field) - information collected by the company itself.
Secondary (Desk) - information already collected for another purpose

68. Field Research
Questionnaires/Surveys – questions specifically designed for the task. May be face-to-face, over the telephone, by mail or over the internet. The number of respondents will depend on the firm’s budget. The ‘sample’ must represent the total market.
Test Market – launching a new product into a small section of the market to measure it’s suitability
Consumer Panel – where a selected group of people are given a product and asked to comment in detail

69. Field Research Advantages It is first hand
It is more likely to meet the needs of the organisation
Disadvantages
It is more expensive
It takes time to gather

70. USING A QUESTIONNAIRE
Questionnaires are used to obtain meaningful information from a large and varied group of consumers.
The business will analyse the responses and modify the product/service to appeal to the market

71. HINTS ON PREPARING QUESTIONNAIRES
When designing a questionnaire you
should:
Keep it short
Make it simple and easy to understand
State clearly the purpose of the questionnaire

72. HINTS ON PREPARING QUESTIONNAIRES
Questions should not rely heavily on the respondent’s memory
Begin with a few factual, easy to answer questions
Include some closed Yes/No response question
Follow up closed questions with open questions
Finish with a filter question designed to place the respondent in a market segment

73. Desk Research
Internal Sources - Sales figures, Stock figures, Accountancy records, Customers comments, etc…
External Sources - Government Stats, Competitor information, Trade Journals, Market Research Organisations, Newspapers, Magazines, CD-ROMS, etc...

74. Desk Research Advantages It is cheaper than field research
It is quicker than field research – as long as the information is available
Disadvantages
Data may be out-of-date
The information will be available to competitors

75. Effect of New Technology on Market Research
Databases
EPOS
Loyalty Cards
Internet

76. Problems with Market Research
Sampling bias
Human behaviour
Interviewer bias

77. Which Market Research Method?
Depends on:
Cost
Time available
Alternatives
What will happen without the research

78. The Importance of marketing for different types of organisations
Marketing is important to all organisations – they all must meet customers needs and make target customers aware of what the firm offers.
However, marketing may be carried out differently depending on the type of organisation and the product they offer
For marketing to be successful for any organisation, they must combine:
The right product
Sold at the right price
In the right place
Using the most suitable promotional methods

79. Charities: Reason & Method of Marketing
Advertising and promotion encourages people to donate money
Tend to concentrate on letting people know what good things they have done – in the hope that target viewers will think the charity is worth giving to
Some charities try to obtain donations from all sections of the community – rather than specifically targeting a particular segment. Others – eg Greenpeace and Amnesty International target particular groups – as do local charities – eg for a local hospital appeal.

80. Public funded service providers (eg schools/hospitals): Reason & Method of Marketing
Will develop promotional documentation to attract and reassure customers. Many customers of such organisations will not have much choice of an alternative service provider.
Such documentation will be in the form of prospectuses, handbooks or through positive publicity in local newspapers.
The organisation will on be viable if customers continue to use the service on offer.
Not as much money will be invested by such firms on marketing – these firms are non-profit making organisations and tend to to have high marketing budgets

81. Private firms offering a service (eg a restaurant or bank): Reason & Method of Marketing
Marketing may be carried out differently as the company cannot illustrate the service easily – eg bank services
Sales personnel will require specialised training to deliver the service
If the company is a chain or franchise – it may benefit from national advertising but local firms will market their business on a much smaller scale.
Marketing is important to maintain or increase the market share available to the business.

82. Market Segmentation
Business Organisations can divide the market into different types of customers to meet their individual requirements:
Demographics
Socio-cultural groups
Student Note:
Demographics – this segments people according to their own individual facts, eg income, where they live, type of work, family grouping, age, gender
Psychographics – this segments people according to the type of life they lead, ie lifestyle, eg attitude, interests/hobbies, behaviour/habits.
Pupil Task: Business Studies For You:
1 Read over page 96

83. Market Segmentation
Demography is the division of the population into different social groups

84. Market Segmentation Markets are segmented into different groups
of people. The main segments are:
Age distribution of the population
Gender
Location
Social class – A- professions to E - unemployed
Culture or religion

85. Social Economic/demographic Groups
Social Grade
Social Status
Occupation A
Upper middle class
Highest managerial/ administrative or professional B
Middle class
Intermediate managerial/ administrative or professional C1
Lower middle class
Supervisory or clerical, junior managerial, administrative or professional

86. Social Economic/demographic Groups
Social Grade
Social Status
Occupation C2
Skilled working class
Skilled manual workers D
Working class
Semi and unskilled manual workers E
Subsistence level
State pensioners or widows (no other earner) casual or lowest grade workers

87. Other consumer related factors
Taste, fashion and lifestyle
Disposable income
The Government
Technology
Economic forces
Household class
We’re all
different ages -
we want
different
things

88. Private firms offering a product (eg a food/car manufacturers): Reason & Method of Marketing
These companies are dependent on customers buying their products to make a profit
Without marketing consumers will not be aware of the products or companies and will buy competitors products
Privately owned companies usually have a budget for marketing and often have a marketing department.
Such firms will usually invest a great deal in marketing and promotional activities

89. Customer Service
This is what affects the relationship between customer and business, ie
the way the customer is treated by sales staff
how queries and complaints are handled
use of technology, eg phone system, press 1 for sales, press 2 for information, press 3 for advisor, and so on.
Pupil Tasks: Using Business Studies For You
Complete the task on pg 97
Complete the match-it on pg 98

90. Protecting The Consumer
The Sale of Goods Act, 1979
The Trade Descriptions Act
The Weights and Measures Act
The Food and Drugs Act
The Food Safety Act
Pupil Note:
Further reading for this has to be completed by the pupil reading and taking necessary notes from Business Studies For You chapter 33, pages122 to Pupils must complete the tasks on page 123 and 125 also the match-it on page 126.

91. Advice for The Consumer
Trading Standards
Environmental Health
Citizens’ Advice Bureau
Trade Associations, eg BETA
Utilities watchdogs, eg gas, water, electricity
The Consumers’ Association – they produce Which? magazine

92. MORE INFORMATION ON MARKETING
You will need this information to prepare your study notes for the Marketing Topic.
Topic
Chapter
Pages
Functional Department Ch
Pg 19
The Market, Market Research, Segments Ch
Pg 23-24
Channels of distribution
Customer Service
Ch 3 3.4
Ch 3 – 3.4
68-69 72
Market Research
Marketing Mix Ch
Pg 80
Pg 83-91