Marketing

Unit 5

17/1/2024

5.1 Identifying and understanding customers.

 Identify a business opportunity that provides a product or service customers will buy.
 Increasing sales
 Selecting the correct marketing mix
 Avoiding costly mistakes
 Being competitive

An exchange processes.

 Exchange occurs when someone gives up something in return for something else e.g. a
business exchanges a product for money.
 Businesses must ensure that the investment of time, money and labour is exchanged for
sufficient to make a profit.
 Customers need to believe the amount they pay for a product is value for money.

Identifying a business opportunity

 Businesses must offer a product that customers that want to buy. The makers of Harley
Davidson motorbikes have identified that older men are the customers they should offer
their product to.
 Businesses must identify peoples’ needs, something that needs to be fulfilled for us to
survive. We must eat, so we might eat at a Subway.
 Businesses can also identify wants, which are what we would like to satisfy our needs.
 You could make your own sandwich to satisfy the need to eat, but many like the taste of
Subway and are prepared to pay for it.

Consumers and customers

 A customer is someone who buys a product from a business.

 A consumer is someone who uses gods and services produced by the business but may not
necessarily buy them, e.g. you buy your friend a coca cola and they consume it.
 The customer and consumer are often the same person.
 However, businesses must identify the wants and needs of consumers and customers as
they may be different, e.g. You may want the most expensive mobile phone, the consumer,
but your parents who purchase it may need to just have a way of con.
 tasting you in an emergency, any cheap phone.

How can a business increase sale?

 Promotions
 Coupons
 Discounts
 Advertisements
  Social media
 Competitions

Selecting the correct marketing mix

 The marketing mix is a combination of factors that influence a customer’s decision to

purchase a product. Marketing Mix is made up of 4 elements, Product, Place Price, and
Promotion.
 For example, clothes you like, the layout of the clothes shop, where the shop is, staff
interaction, price of clothes, whether the clothes are seen as desirable and ease of return.
 The customer may want all their requirements met but a business needs to identify which
ones are very important so they can make the customer aware of these and tempt them into
the shop, rather than a competitor.

Avoiding costly mistakes

 Understanding customers is the key to getting sales and avoiding expensive mistakes.
 If a business gets a product or service wrong, it may have to withdraw the product as sales
are low.
 It may also have to amend the product which costs money.
 Or it may have to lower the price which can
reduce profits and the businesses future
reputation and success. The Nintendo Wii only sold 13 million units compared to the Wii’s
100 million and is regarded as a failure.

Being Competitive

 The competitiveness of a business means its ability to offer better value for money than its
rivals.
 Understanding customers wants means the business can satisfy these wants meaning a
product can be tailored to meet these requirements at the same or a lower price.

Questions

1. Some one who uses a product or service but does not have to the person purchasing the
product or service.
2. Is someone how purchases a product or service but does not have to the person purchasing
the product or service.
3. Something a customer requires to survive.
4. Something that is not needed to survive but the costumer wants as it may make their life
easier or more enjoyable.
5. When someone gives up something in return for something else.
6.
7. If a business dose not understand there customer effectively is that they may make a
product that their customers may not want or need this will result in poor sales.

5.3

Nature of Market research

Market research

■ The process of gathering, analysing, and processing data relevant to marketing decisions

Market segment

■ A group of similar needs within the overall market

Segmentation

■ Occurs when a market is divided into different groups of needs and wants.

Primary market research

■ (Also called ‘field research’), which involves gathering information for the first time, for
example using questionnaires to conduct a survey of potential customers.

Secondary market research

■ (Also called ‘desk research’), which involves using data that already exists, for example, using
information in a newspaper or published on a website.

Imagine You are the MD of Nintendo –

What five pieces of information would you want to find out to help your decision making.

Explain why you have chosen this information.

 The age rating of the game of console

Market research gathers information on

 Demand
 market share
 competition
 target market.

The purpose of market research

 Market research is the process of gathering, analysing, and processing data relevant to
marketing decisions.
 A business needs to gather information about the competitors, customers, and their
products to understand how to make and market products that will sell and make a
profit.
 When market research has been completed a business will be able to make more
informed decisions.

What are the benefits gained by businesses through conducting market research?

 Comparative advantage
  Cost saving

Use of market research

 To identify opportunities in markets, e.g. demand for electric cars

 To weigh up different possible actions, e.g. advertise on the internet or to
 To assess the effectiveness of actions that have been taken, e.g. after advertising on the
internet did sales go up.

Types of data used in market research.

 Quantitative data involves the use of numbers such as the size of market, the growth of
the market or number of customers a business has.
 Qualitative data involves opinions and views but does not provide statistically reliable
information, e.g. why people like a certain washing-up liquid over others.

Market size, growth, and share

 Market size can be measured by the value of the volume of sales using the equation.

 volume of sales = number of units sold × price per unit

 Example: 2,000 units are sold at £5 each means the market size is:

volume of sales = 2,000 × £5 = £10,000

Market share = (“£10,000 “)/" £100,000 “× 100 = 10%

Identify the advantages and disadvantages of using Secondary market research.

 Saves time.
 Cheap
 Can be inaccurate.

Secondary market research

 Advantages include it can be gathered quickly and

cheaply as the data has already been gathered, e.g. by specialist market research
companies such as Mintel or government reports.
 It can also provide information on large parts of the population which would be
unrealistic for a business to gather, e.g. economic growth of the country or average
earnings of the population.
 Disadvantages include that the existing data may not be exactly what the business
wants, e.g. spending habits for the whole country rather than just in Norwich.
 The existing data may also be out of date which
means the business risks making wrong business decisions, e.g. the last government
census of the population was 2011.

Primary market research

 Primary research can be tailored to meet the business needs and is up to date.
 It can be more expensive to gather than secondary research and must be done correctly or
else results will be misleading.
 Primary data can be gathered by observing such as watching shoppers buying habits in a
supermarket.
 It can also be gathered by experimenting such as offering a small number of customers a
trial of a new product and gathering feedback.
 Surveying can also be used where people are interviewed that may the product and asked a
range of questions, now done increasingly through online questionnaires.
From of market research Advantages Disadvantages
Telephone serve Easy one on one People do not pick up the
Detailed information phone.
Less travel People hang up
Door to door survey One to one Takes long time.
Could be dangerous
Focus groups Lots of different ideas Not very accurate
People want to go and do it
Internet research Cheap Might not be accurate.
Easy to complete People rush through them

questions

 Asking questions and looking up what would sell well in the market.
 So that you make products the audience wants to sell
 One is number data, and one is spoken dater words interviews photos.
 This is resketch which has already been car eyed out and you can look through it.
 Door to door serves may gather detailed information but it takes a long time.
 A focus grupe is a group of perple who descus a product and how it might sell.

 Lint
Galaxy ripple
Hotel choola

Kit cat
Celebrations
 Jd sports

Nike
Prymark Super dry
H and m Deben’s
Sheen motherland

Jhon Lewis
Tk max next
Prymark

Marketing mix

What is the marketing mix?

The marketing mix refers to all the activities influencing whether a customer buys a product. The
elements of the mix can be analysed using the four Ps: price, place, product, and promotion.

For example, when thinking about buying a car the price may be important or the fact that the
dealership is very close by.

Or it might be that the car is one that has features that you want and are willing to travel a great
distance to buy.

Or perhaps the advertising and information you have read and seen about the car has made it
appealing.

Products

Product refers to all the factors relating to design, specification, and features of the good or service
offered by the business.

For example, many chains such as McDonalds

and Costa coffee sell different types of coffee, so Starbucks has introduced the Reserve brand with
tasting rooms and unique coffee to become more distinctive.

A business can alter its products to increase their appeal to different customers, but this needs to be
profitable.
Price

Price can include payment terms where the business must decide whether a customer must pay
straight away for a product or can pay by instalments, e.g. large purchases such as cars are often by
instalments.

It can also include decide whether the customer can just use cash or credit cards and can the
customer gain a discount if they purchase often or in bulk.

How much will the customer be willing to pay and what is the price of competitor products, e.g.
charging more than other brands may mean fewer sales.

The costs of producing the product need to be covered

to make a profit. Bentley cars cost significantly more than a Ford, so number sold are very small but
profit per car large.

Promotion

Promoting a product means communicating something about it to potential customers.

This may mean letting people know the business exists, about a new product or special offers.

Communication can be through advertising in the newspaper, sponsoring charity events or through
social media.

For example, Kenco coffee has invested in a program to turn Honduran children away from street
crime called Coffee vs Gangs.

Place

Place refers to the way in which products are distributed to customers.

Some businesses sell directly to customers such as Dell computers via their internet store.

Others sell to wholesalers, e.g. Bookers are sold bulk amounts of products such as Heinz Beans by
manufacturers and then sell them to smaller shops in smaller quantities.

The store experience is also very important to

entice the customer to browse and buy.
McDonalds have just introduced self-service tills so that fast food can be even faster.

Key words

Price skimming

Setting a high price for a product when it first enters the market.

Penetration pricing

Launching a new product at a low price to achieve fast sales.

Competitive pricing

Matching the prices that competitors charge

Loss leader
 A product sold at a loss in the hope that the customer will buy other items from the business
where they make a profit.

Cost plus pricing

Where products are priced by covering the cost of it to the retailer and adding a percentage
on top

Price and demand

An increase in price normally leads to a fall in the quantity demanded.

The amount of fall in sales will vary depending on factors such as whether the product as a strong or
weak brand image, the product has a unique selling point and the size of the price increase.

For some products, such a small price rise may have little effect on demand, e.g. petrol.

Other products may be very sensitive to price rises, e.g. cinema tickets.

Price skimming is setting a high price for a product

when it first enters the market, with some buyers
not sensitive to price, e.g. when a new Apple iPhone is released.

Price skimming helps the business make money to recoup development costs and works best where
the product has a unique feature customer are willing to pay for.

Penetration pricing is launching a new product at a low price to achieve fast sales and works best if
customers are sensitive to price.

Production on a large scale reduces unit costs through bulk purchasing and so that the business can
still make a profit by selling many products.

PRRICE PNITRATION

Business sets a low price to gather customers.

Competitive prysing

This is when a business matches a price it is common for shops whose customs compare prices.

A loss leader is a product sold at a loss in the hope that the customer will buy other items from the
business where they make a profit.

The approach can be used to tempt customers into a shop with one or two low priced products, with
the hope that other products are purchased which gain the business a profit overall. The original
iPhone (RRP £199) was given away for free to O2 customers who made up the losses by paying £45 a
month for a phone contract.
Cost plus pricing is where products are priced by covering the cost of it to the retailer and adding a
percentage on top, i.e. costs are calculated to make and sell the product and a percentage added on
to make the sale price.

For example, if the cost of a retailer buying a pair of Levi jeans from the manufacturer is £20, they
can then add on 20% to come up with a selling price of?

£24.

Cost plus pricing is simple to apply but does not consider what the customer is willing to pay or
competitor prices.

Factors influencing the price.

 Costs need to be covered such as fixed costs (e.g. rent) and variable costs (e.g. raw
materials) to make a profit.
 Demand will determine how much customers are willing to pay for a
product with high demand meaning increased prices.
 The nature of the market where if there are many similar products prices must be more
competitive than if there are few rivals.
 A business objective and approach to pricing where a business might wish to make its
product well known it could use penetration pricing or wants to promote very high quality it
could charge high prices.
Factors influencing the price continued.

 Costs need to be covered such as fixed costs (e.g. rent) and variable costs (e.g. raw
materials) to make a profit.
 Demand will determine how much customers are willing to pay for a
product with high demand meaning increased prices.
 The nature of the market where if there are many similar products prices must be more
competitive than if there are few rivals.
 A business objective and approach to pricing where a business might wish to make its
product well known it could use penetration pricing or wants to promote very high
quality it could charge high prices.

Price skimming is product pricing strategy where a charge the highest initial price that customers are
willing to pay and then gradually lowers it over time.

Two factors that have allowed snow slopes Ltd to use price skimming are that they sell new high-
tech products this makes people really want them so customers will pay the higher price. Also snow
slopes Ltd introduces the latest trends which ads value to the product and allows them to use the
price skimming strategy.

Snow slopes ltd could use price cuts to expand their sales by doing this snow slopes wood increase
the number of customers as more of them would be able to buy their products this would find use
the profit per purchase, but they bay attract repeat customers who will spend moo in the author.

Distribution

Key words

Distribution channel

■ How the ownership of a product passes from the producer to the final customer

Wholesalers

■ Break bulk; they buy in large quantities from a producer and sell to retailers

Retailers

■ Shops that sell direct to the customer

e-commerce

■ Involves online trading

m-commerce

■ Online trading via a mobile phone

Direct marketing

■ When there is a direct link from the producer to the customer with no intermediaries

Intermediary

■ A link in the distribution chain between the producer and the customer.

Distribution channel

■ A distribution channel describes how the ownership of a product passes from the producer
to the final customer and is the ‘place’ in the marketing mix.

■ Producers supply goods and services, e.g. Ford produces cars and Spotify provides music
streaming.

■ Wholesalers buy in large quantities from a producer and sell in smaller quantities to
retailers, e.g. Bookers is a warehouse where retailers can go and buy products and WH Smith
delivers newspapers to local corner shops for resale.

■ Retailers are shops that sell direct to the customer, e.g. Tesco sell washing up powder and
Carphone ware house sell phone contracts.

Channels can have various levels

 Each party in a distribution channel is called an “intermediary”

Levels of distribution

■ Intermediaries are the link in the distribution chain between the producer and the customer
of which wholesalers and retailers are examples.

■ Zero level means there are no intermediaries between producer and customer, e.g. Direct
line sell insurance only from their own website.

■ One level occurs when there is one intermediary between producer and customer, e.g.
producer such as Apple sells iPhones to Three who then sell them to customers.

■ Two levels occur when there are two intermediaries between the producer and the
customers, e.g. a producer sells in bulk to a wholesaler who then sells in smaller numbers to
a retailer who finally sells to the customer.

Intermediaries in distribution

■ Advantages include the producers have immediate access to a wholesaler or retailers many
outlets rather than the expense and possible limited number of places the producer may
have.

■ Selling products in another business stores also allows customers to purchase a range of
products as it is unlikely they would visit many stores for a most type of goods, e.g. the
weekly shop is under one supermarket roof.

■ Disadvantages include intermediaries will want to make a profit so will increase the price
meaning the product will be more expensive to customers than if a producer sold directly.

■ The producer also loses control of the product and the way it is sold, e.g. displays and
promotion or where it is in the store.

e-commerce and m-commerce

Advantages Disadvantages

Customers can order any time Need to be able to distribute to a much wide
logistical and cost issues

Customers can order from home Need to be able to handle returned goods; b
try on or touch items they are more likely to

Customers can order from anywhere in the world potentially Need to ensure the security of the site and p
logistical and cost issues when distributing o
products and can impact on competitiveness
Selecting the right distribution channel depends upon:

■ Costs comparing selling directly to selling through intermediaries.

■ Lack of control looking at how much control the business wants to retain over how the
product is distributed.

■ For example, luxury brands such as Cartier jewellery

will want to manage this carefully compared to
products such as John West tinned fish that are happy to sell through any channel.

■ The product will consider where and how customers are expected to purchase, e.g.
speciality items such as sports cars mean customers are happy to make longer journeys but
newspapers need to be conveniently placed in local newsagents for sales.

Importance of getting distribution right

■ Sales will only happen if the product is where customers wish to buy it or they will purchase
and alternative.

■ Image means that if the product is sold in a place that does not meet customers brand
expectations sales will be lost, e.g. expensive Rolex watches are sold in upmarket jewellers
rather than in the local market.

■ Costs of distribution need to be considered when

working out the final price of the item with the
more intermediaries the more the price is likely to rise, e.g. look at the issue of food miles.

Product Price Place Promotion place

A compony that sells to outher business in bolk
A business that sells to coustomers
4
?
So people can riseave the product quickly efishently and cheaply people
don’t want expensive postage

Advising
Sayles promotions

• Sales promotion is the process of persuading a potential customer to buy the product.

• Sales promotion is designed to be used as a short-term tactic to boost sales – it is not really
designed to build long-term customer loyalty.

• When undertaking a sales promotion, there are several factors that a business must take
into account:

• What does the promotion cost – will the resulting sales boost justify the
investment?

• Is the sales promotion consistent with the brand image? A promotion that heavily
discounts a product with a premium price might do some long-term damage to a
brand

• Will the sales promotion attract customers who will continue to buy the product
once the promotion ends, or will it simply attract those customers who are always
on the look-out for a bargain?

Personal selling

Sponsorship
Public relations

Public relations is the practice of managing the spread of information between an individual or an
organization and the public. Generally for no cost.

• Public relations, which is often shortened just to "PR", has several advantages over
advertising in terms of promotion:

• No direct charge is made for PR, though a business will need to pay for its own PR
department or external PR consultant

• PR is arguably more powerful because the message the business communicates through PR
is often more believable than paid for advertising

Factors influencing promotional activities.

• Costs and finance - Some forms of promotion are more expensive than others

• Target Market – do you want to aim at a small group of people in a region or worldwide?

• Competitor actions – If competitors do a big campaign there may be pressure to respond.

• Nature of market- Factors such as the size of the market, total amount spent and where
customers are based. If is is a mass market product with many sellers TV advertising may be
cost effective.

• Nature of product – The brand image/ is it a premium product then sales promotions and
discounting would ‘cheapen’ the brand.