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CAIE IGCSE
BUSINESS STUDIES (0450)
THEORY
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CAIE IGCSE BUSINESS STUDIES

The Role of Marketing:

1. Marketing Identify customer needs: this will be done via ‘Market
Research’. It will influence the development of a
product, its price, and the sales technique.
1.1. The Role of Marketing A good marketing department should also be able to
anticipate changes in customer needs (i.e. due to
Marketing Department: advancements in technology)
Marketing: Identifying and satisfying customer needs and Find new trends or gaps in the market with
satisfying them profitably. potential.
Customer: a person, business or other organisation which Satisfy Customer Needs: selling the exact product
buys goods or services from a business. customers want for a price they are willing to pay.
The different marketing department sections: Maintaining customer loyalty: maintaining close
Sales Team: responsible for the sales of products. If a customer relationships to discover the product's
product is exported, it may be called the export team. expectations and changes needed to be made. It’s
Market Research: responsible for discovering cheaper for businesses to keep existing customers than
customers’ needs, market changes and the impact of to attract new ones.
competitors’ actions. This report will be used in Customer Loyalty: existing customers continually
decision-making, research, developing new products, buy products from the same business. It is achieved
price levels, etc. by always satisfying customer needs.
Promotion Section: deals with organising the Building customer relationships to gain information
advertising for products. Arrange for advertisements about customers
and have a market budget. Customer Relationships: communicating with
Distribution: transports the products to the market. customers to encourage them to become loyal to
the business and its products.
Through customer relationships, changing needs
can be understood. Research information can be
applied to make effective marketing through these
relationships.
Anticipate changes in customer needs –
Identify new trends in customer demands or gaps in
the market.

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When the marketing department succeeds in Globalisation: products are sold all over the world
identifying customer requirements and future needs, it Transportation: it is cheaper, quicker, and easier to send
will enable the business to: products around the world now
Raise customer awareness of a product or service of the Internet/e-commerce: customers can now search for
business products or services and buy from somewhere else around
Increase in revenue and profitability the world
Increase or maintain market share The ways businesses respond to changing spending
Maintain or improve the image of the product or patterns and increased competition:
business Keep improving its existing products
Target a new market or market segment Bring out new products to keep customer’s interest
Enter a new market at home or abroad. Keep costs low
Develop new products or improve existing products. maintain good customer relationships

1.2. Market Changes 1.3. Market Types

Markets change because consumer spending patterns Market: the total number of customers, potential
change; this might be due to the following: customers and other sellers of a product/service.
Trends and Fashions Change: for some time, it might There are two types of markets:
be fashionable to have a specific product (i.e., Fidget Mass Market: where there is a vast number of sales of
Spinner), but a month later, no one bought them a product type.
Advancement in Technology: new products provide
Advantages Disadvantages
the latest technology so older versions (i.e., iPads or Total sales are very high Abundant competition
computers) don’t have high sales Can benefit from economies of scale High costs of advertisement and promotion
Standardised products or services, so it may not
Unemployment/Wages: Economies with high Opportunities for growth (large sales) meet the specific needs of all customers
unemployment rates/low wages will not have increased There are many variations of products, so the
risk is spread.
sales of expensive products
Ageing Population: different ages are interested in Niche Market: a SMALL (usually specialised) segment (part)
other products (i.e. anti-ageing creams) of a mass market. Specialised and sold by small businesses
Businesses have to keep up with customers' changing that would find it difficult to compete in a mass market (ex,
needs to stay relevant and maintain their customer a business specialised in scuba diving gear)
base/loyalty. The competitiveness of a business is majorly
Advantages Disadvantages
affected by its ability to respond to any changes in the Avoid competition with big businesses Small – limited sale potential
market. Customers' specific needs are focused, leading to Usually, they specialise in just one product; if the
product has low demand, it will fail. It would
high levels of customer loyalty and good require businesses to have multiple products to
customer relations.
Some markets have become more competitive because: spread risks.

1.4. Market Segmentation

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CAIE IGCSE BUSINESS STUDIES

Market Segmentation: an identifiable subgroup of a whole Market Research: Gathering information about
market where consumers have similar characteristics or consumers' needs or preferences in a market
preferences. The roles of market research:
A market can be segmented by: Identify demand for the product and how much they are
Demographic segmentation - age, gender, and willing to pay.
income. Identifying the target audience is the most effective way
Geographic segmentation - region/location, where to promote to these customers.
people live (ex, people who live in wet areas will buy To measure the competitiveness of the market and the
more waterproof clothing than those who live in dry best way to compete with it.
areas) There are two types of businesses:
Psychographic segmentation - beliefs, values, lifestyle, Product-Oriented Business: a business that focuses
social status, activities, interests and opinions and other mainly on the product, disregarding market needs and
psychological criteria. wants. Often, it produces necessities for living, such as
Benefits of Market Segmentation: agricultural tools or fresh food.
You can use it to sell more products, creating different It may not have a brand name.
variations for different groups. Producers’ main concern is price and quality.
A more effective marketing strategy can be placed (as Risky due to the large market and many
the characteristics of consumers are known), resulting competitors.
in an increase in sales. A market-oriented business is a business that focuses
Identifying a market segment that is not having its on market research and finding out what the customer
needs fully met increases the opportunity for increased wants BEFORE a product, such as clothing or electronic
sales. devices, is developed.
Making marketing expenditure cost-effective by Better able to survive because of more adaptability
producing a product that can closely meet the needs of to changes in customer taste and trends.
those customers and targeting its marketing efforts to Takes advantage of new market opportunities.
that group only. Market Research Methods:
Which method of segmentation should be used Quantitive information (quantity related)
depends on factors such as: Qualitative information (where opinion or judgement is
Detailed analysis of the market and the ‘size’ of each necessary).
potential segment in terms of consumers and likely Can be gathered through:
sales. Primary Research: Gathering ORIGINAL data by directly
Company image and brand image - ‘high-tech ' contacting existing customers/potential customers.
businesses may not want to produce innovative, high-
Advantages Disadvantages
quality products for low-income consumers. Up-to-date and relevant Expensive in both time and money
For example, the cost of entering each segment is a Usually planned and carried out by people who want to
use the data first-hand. Not available immediately
specially designed product and advertising campaign. It is most effective when used for a specific problem.
Not available to other business

1.5. Market Research

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Process: Sampling: A group of people who are selected (randomly)

Purpose of market research to respond to a market research exercise (i.e.
Decide on the most suitable method of market research questionnaire). 2 standard methods of sampling:
Decide the size of the survey and who is going to be A Random Sample is when people are selected
asked. randomly as a source of information for market
Carry out the research research.
Analyse the data and results Advantage: Everyone has an equal chance to be
Produce a report of the findings picked, but not everyone in the population may be a
Methods of Primary Research: product consumer.
Questionnaires A Quota Sample: People are selected based on specific
They may be conducted face-to-face, by telephone, characteristics. They can find out the views of a specific
or online. group.
Advantage: can find out the views of these specific
Advantages Disadvantages
If questions are not well-thought-out, answers groups.
Detailed qualitative information can be gathered. may mislead the business, as there may not be
accurate answers. Secondary Research:
The customer’s opinion can be obtained. Lots of time and money are needed. Information that has already been collected and is
Online surveys may be cheaper and make it Collating and analysing data also takes a long
easier to collate the results. time. available to others
They can be linked to prize draws and encourage
people to fill them.
Benefits Limitations
It is cheaper than primary as research has You do not get specific results for a particular
Interviews: A person will interview another person and ask already been done by others
There is some information (i.e. economic
product or service; you get broad results
Data may be outdated or incorrect as others
questions. forecasts or population size) that can’t be
obtained by primary research collected it
Advantages: Other businesses has access to the same
information
The interviewer will be able to explain the questions
and clear confusion.
Detailed information about the interviewee can be
gathered.
Disadvantages:
The interviewer may lead the interviewee to answer
in a certain way.
It is time-consuming and Expensive.
Focus Groups: collect opinions and feedback from a group
of people about a specific product, concept, or service.
Advantages Disadvantages
Provide detailed information It is time-consuming and expensive if done by a
specialist market research agency.
Interacting between members can help The discussion could be based on some people
businesses understand the reason for peoples’ being influenced by the opinions of others.
opinions.
Quicker and cheaper than individual interviews. A few people can dominate it, so researchers
must have experience dealing with this.

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Internal Sources of secondary data – within the firm’s own Marketing Mix: a term used to describe all the activities
records: that go into marketing a product or service.
Sales department records, price data, customer records, The marketing mix can be summed up as the 4 Ps:
sales reports, etc. Product - applies to the product or service. Design,
Opinions of distribution and public relations personnel features and quality.
Finance department. Price - the price at which the product is sold,
Customer service department comparisons between prices of competitors.
External Sources of Secondary Data: Place - channel of distribution that is selected.
Government Statistics: a detailed source of general Promotion - how the productivity is advertised and
information (ex: population and its age structure) promoted.
Newspapers: useful articles about the general economy You should always mention the 4 Ps when answering
state questions about Marketing Mix!
Trade Association: information about business in the
industry 1.7. Product
Market Research Agencies: specialist agencies
researching on the company’s behalf; the commission is Some products are sold to consumers, and some to other
paid. businesses.
Internet: easily accessible source. Paper-based sources They are usually grouped:
can also be found. Consumer goods: bought by consumers for their own
Regardless of which type of research a business chooses to use. Can be perishable goods such as food or long-
use, the accuracy of the research data depends on the lasting such as furniture.
following: Consumer services: services bought by consumers for
How carefully the sample was drawn up their own use. Ex. Cleaners
How the questions in questionnaires/interviews were Producer goods: there are goods that are produced for
phrased to ensure honest answers were given. other businesses’ use to help with the production
The sample itself and its size. By using quota process. Ex. Trucks
sampling, you might get more reliable results. Producer services: services that are produced to help
The bias – some secondary research will be biased (i.e. other business. Ex. Accountants.
articles in newspapers), which means the information Identifying the type of product is important as it decides
might be unreliable how the product would be advertised/marketed and
Age of the information: older data might be developed.
inaccurate. Points to consider about choosing product:
Presentation of data from market research: Satisfying existing needs and wants of consumers
Tables or tally chart Not be expensive to produce.
Pie Chart New and original idea
Diagram Unique selling point
Bar chart Capable of stimulating new wants from their
Line graph consumers.

1.6. Marketing Mix Development of New Products:

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1. Generate ideas 1. Development: First, the product is developed. The

2. Select the best idea for further development prototype will be tested in the market before its launch.
3. Decide if the company will be able to sell enough for the There are no sales during this time.
product to be a success. 2. Introduction: Then it is introduced or launched in the
4. Develop a prototype market. Sales are often slow. No profit made as
5. Launch the product in one area to test the market development costs are not yet covered.
6. Go to a full launch of the product to the whole market. 3. Growth: The product gains more sales. Advertising is
changed to persuade and encourage customer loyalty.
Benefits Drawbacks
USP – a unique selling point: a special feature Prices reduced due to competitors and profit starts to
Costs of carrying out market research and
about a product that differentiates it from its
competitors’ product.
analysing the findings be made.
Diversification Cost of producing trial products, including waste
materials
4. Maturity: sales increase slowly. Competition intense
Allows businesses to expand into new and Brand image is damaged if the product fails to and advertising is used to maintain sales growth and
existing markets meet consumer demand
The lack of sales if the target market is wrong profit is at its highest.
5. Saturation: sales have stabilised at their highest point.
Importance of Brand Image Competition and advertising is high and stable, but
profit starts to fall as sales static and prices are reduced
Brand name: the unique name of a product that to be competitive.
distinguishes it from other brands. 6. Decline: sale of product starts to decline as new
Brand loyalty: when consumers keep buying the same products enter, or it has lost its appeal. Product is
brand again instead of choosing a competitor’s brand. withdrawn from market and sales, prices and
Brand image: an image or identity given to a product which advertising low until it stopped.
gives it a personality of its own and distinguishes it from its
competitors.
Good branding includes:
Brand name
Higher quality than unbranded products.
Unique packaging
Brand loyalty
Assured quality
Creates a brand image associated with consuming the
product. How Stages of PLC Influence Marketing Decisions

Role of Packaging
Packaging: the physical container or wrapping for a
product. 2 functions - protect and promote product
Protects the product and makes it easier to transport
Eye catching
Carries information about the product
Promotes brand image

Product Life Cycle (PLC)

Product life cycle: describes the stages a product will pass
through from its introduction, through its growth until it is
mature, and then finally its decline.

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Introduction – The price chosen may not be related to the cost of

Product – newly launched product manufacturing but rather to what consumers are willing to
Price – price skimming or penetration pricing pay, the product's value, and the brand image.
Place – limited range of exclusive shops (if price The business must constantly monitor what its competitors
skimming is used) charge for their products to ensure its prices remain
Promotion – informative advertising constant.
Growth A business can adopt new pricing strategies for:
Product – remains the same To break into a new market
Price – raise prices if penetration pricing was used To increase market share
Place – increase the number of outlets, e-commerce To increase profits
Promotion – establish a strong brand identity through To make sure all costs are covered and a particular
promotional activities. profit is earned
Maturity/Saturation
Product – plans for product changes begin The Main Methods of Pricing
Price – prices are lowered to stay competitive
Place – full range of distribution channels used There are five main types of pricing methods:
Promotion – sales promotion techniques to encourage
Cost-plus Pricing: the cost of manufacturing the product
repeat purchases
Decline plus a profit mark-up. It involves:
Product – changes made to extend the life cycle Estimating how many of the products will be produced.
Calculating the total cost of producing this output.
Price – lower prices
Adding a percentage markup for profit.
Place – sell through low-cost outlets
Total cost /output + % markup.
Promotion – re-launch the product as an extension
strategy Benefits Limitations
The method is easy to apply. Businesses could lose sales if the selling price is
higher than competitors.
Extending Product Life Cycle: Different profit markups could be used in
different markets.
A total profit will only be made if sufficient
product units are sold.
Each product earns a profit for the business. There is no incentive to reduce costs.
Extension strategy: a way of keeping a product at the
maturity stage of the life cycle and extending the cycle. Competitive Pricing: When the product is priced in line
Introduce new variations into the original product with or just below competitors’ prices to try to capture
Sell into new markets more of the market.
Make small changes to the product’s design, cover, colour
Benefits Limitations
Sell through additional retail outlets Sales are likely to be high due to realistic level High-quality products must be sold at higher
Introduce a new, improved version of the old product prices. prices to give them a high-quality image.
If cost is high and sales are low, competitive
Use a new advertising campaign Avoids price competition prices can lead to loss.
Often used when it is difficult for consumers to Detailed research will be needed to determine
tell the difference between the products of these prices, which costs time and money.
1.8. Pricing
different businesses.

Price Skimming: setting a high price for a new product on

the market. A product is usually a new invention or a new
product development.
Benefits Limitations
It can help establish the product as good quality. High prices may discourage some customers
from buying it.
If production is unique, a high price may lead to High prices and profitability may encourage
profit, and the price may be reduced. competitors to enter.
High research and development costs can be
rapidly recovered from profit made.

Penetration Pricing: when the price is lower than the

competitors’ to enter a new market.

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Benefits Limitations
Often used for newly launched products to Sold at a low price; therefore, profit per unit may
create an impact on customers.
Ensure sales are made, and the new product
be low.
Customers may ‘get used‘ to low prices and reject
1.9. Place (Distribution Channels)
enters the market. the product if the price is raised.
It might not be appropriate for products that
Market share should build up quickly. have a reputation for quality. Products should be available when and where customers
need them
Promotional Pricing: when a product is sold at a low price Wrong place, low sales and profits
for a short period of time. To increase short-term sales. The place must be convenient for consumers
Benefits Limitations
Distribution Channel: is how a product is passed from the
Useful for getting rid of unwanted inventory that Revenue will be lowered because the price of place of production to the customer.
will not sell. each item is reduced.
Help renew interest in a product if sales are This might lead to price competition with
falling. competitors. There are four main distribution channels:

The impact of psychology on price decisions Manufacturer sells products directly to consumers (i.e.
High prices for high-quality products can be purchased car components to car factories).
for status symbols. This channel is most common with business-to-business
When a price is lower than a whole number, it creates transactions.
the illusion of being cheaper.
Supermarkets may choose low prices for products
purchased regularly.
Repeat sales are often made to reinforce consumers’ Benefits Limitations
It is impractical because consumers don’t usually
Very simple
perceptions of the product. live near factories
Not suitable for products that can’t be sent
Using different pricing methods for the same product- Suitable for products that are sold straight out of quickly
factories by post, especially if they’re perishable or
easily breakable goods.
Dynamic pricing: When businesses change product There is a lower price for consumers (cuts It is not cost-effective, as sending products by
prices, usually when selling online, depending on the retailer)
Products can be sold by mail order catalogue or
post is expensive

level of demand, for example, Aeroplane tickets. via the internet.

There are ethical issues with some dynamic pricing;
using technology, businesses can track customers' Producers sell to retailers, who sell to consumers (i.e.,
buying history and charge accordingly. farms selling food to big supermarkets).
This channel is most common where retailers and large
Price Elasticity of Demand such as supermarkets or the product is expensive, Ex.
furniture or jewellery.
Price Elasticity of Demand: How responsive is a demand
for a product to a change in price?
PEDs are affected by the no of substitutes available
Price-Elastic Demand is when a product is very
responsive to a change in demand. The % change in Benefits Limitations
There is no direct contact with customers, which
demand is GREATER than the % change in price, i.e., prices Manufacturer sells lots of stock to retailer makes It hard to create customer loyalty.
increase by 5%, but sales decrease by 10%. Cheaper transportation costs because all
products go to one place
Price is often higher than ‘direct selling‘ as the
retailer has to cover its costs and make a profit
Therefore, the business's revenue would be falling with Lower storage costs for the manufacturer
a price increase. Businesses must find another way to
increase demand without using the product's price. Producers sell to wholesalers, who buy in bulk, divide
Price-Inelastic Demand is when the product is not very their stock into smaller quantities, and sell them to
responsive to changes in demand. The % change in retailers.
demand is LESS than the % change in price.
This means you can increase the price of the product a
lot without the demand changing (i.e., oil & petrol
because people have to buy it)

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Benefits Limitations
Reduces storage costs for small retailers because More expensive to buy from a wholesaler than
small quantities are sold from a manufacturer
Type of product
Small quantities, so transport costs are low A wholesaler might not have all the products a
retailer wants
Is it technical?
Wholesalers can give feedback on what sells well It takes longer to get to the consumer
How often is it purchased?
to producer
Huge gap between the manufacturer and the
How expensive is it?
customer How perishable is it?
Consumer prices may be higher than direct
selling, as retailers and wholesalers need profit. Where are customers located?
Where do competitors sell?
A manufacturer hires an agent (person or business) that will
sell products on behalf of the manufacturer.
Agent: an independent person or business appointed to 1.10. Promotion
deal with sales and distribution of a product or range of
Promotion: where marketing activities aim to raise
products.
awareness of a product or brand by generating sales and
helping create brand loyalty. Includes the following:
Advertisement: Involves ‘above-the-line‘ promotions.
Benefits Limitations
Ex. TV, Social media. Newspapers, etc.
Agents know the most profitable places & prices Manufacturers lose much control over how the Sales Promotion: Involves ‘below-the-line‘ promotions.
to sell in other markets that manufacturers may
not know.
product is sold to customers. Used for short periods of time to reinforce the above-
Agents will provide advice on the best ways to Higher costs for consumers, as agents will need
survive new markets. compensation for expenses. the-line promotions. Ex. Money-off coupons, gifts,
Gives the manufacturer some control over the
way product is sold.
product placements in programmes or newly released
films.
Methods of Distribution
Aims of Promotion
E-Commerce
Selling of goods and services through the internet To raise awareness about a firm’s products
Encourage customers to make a purchase
Benefits to the business Problems to business Increase sales
Cheaper Website must be maintained
Customers are encouraged to buy in bulk High distribution costs Introduce new products in the market
Business-2-Business e-commerce is cheaper No direct contact Create brand image
Wider options for customers, brand image and loyalty Returns – higher costs
A stock system will be needed. Improve the company’s image
Compete with competitors
Benefits to consumers Problems for consumers
No need to go out
Wide options
Internet needed
High chances of fraud and theft Above and Below-the-line Promotion
Easy Comparison Products can’t be physically examined
Payment through net banking
Easy access to imported goods
No direct contact
Above-the-line promotion: involves marketing
Low prices communication using mass advertising media, such as
television, radio, newspapers and mobile phones, to
Other methods include: increase sales
Department stores Below-the-line promotion: all other forms, including
Discount stores product placement and endorsements by famous
Chain stores celebrities, public relations (PR), direct mail, personal selling
Superstores and sales incentives such as free gifts and competitions.
Independent retailers
Direct sales Advertising
Supermarkets
Mail order

Selecting Which Distribution Channel to Use

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Advertising: paid-for communication with potential Newspaper

customers about a product to encourage them to buy it. Examples of suitable products or services: Local
There are two types of advertisements: products and events in the local newspaper.
Informative Advertisement: where advertising or
Advantages Disadvantages
sales promotion emphasises giving complete Often, it is black and white; therefore, it is not
Can be selected to target a particular group
information about the product. (i.e. the benefits of the A large number of people buy/read national
attractive to the eye.
Many young People do not read/purchase
product) newspapers. traditional newspapers.
Local newspapers are cheap and, therefore, cost-
Persuasive Advertisement: advertising or promotion effective.
trying to persuade consumers that they need the Adverts are permanent and can be cut and kept.
A lot of information can be put in the advert.
product and should buy it.
The advertising process: Magazines
1. Set objectives of advertising to capture new Ex of suitable products/services: Feature in specialist
market and increase market share magazines, gold equipment, medical equipment.
2. Decide the advertising budget-predict how
much sales will be in the future, and spread a Advantages Disadvantages
An effective way to reach the target population is if Published once a month or week.
certain percentage (between 2% to 10%), or there are specialist magazines.
Magazine adverts are in colour, thus attractive. They are more expensive than newspapers.
set by how competitors are spending, or
simply what the business can afford to Posters
spend. Ex of suitable products/services: Local events, products
3. Create an advertising campaign- the target purchased by a large population.
audience and objective must be considered.
4. Selecting the media to use the target Advantages Disadvantages
Permanent It can be easily missed.
audience will decide the media, how often AD Relatively cheap No detailed information can be included
appears, and should be cost-effective. Potentially seen by everyone passing
5. Evaluate the effectiveness of the
campaign- if sales or brand image improved. Cinemas, DVDs, Blu-ray discs:-
Examples of suitable products/services: Coca-Cola
Types of Advertising Media (make sure to boycott ;) ).
Advantages Disadvantages
Television Shows visual image of product positively. Scene by only a limited number of people.
Examples of suitable products/services are food Relatively low cost.
It can be effective if the target audience goes to see
products/drinks, cars, and household products. a particular film.

Advantages
It will go out to millions of people.
Disadvantages
Very expensive
Leaflets
It can be shown in a favourable way (Attractive).
Young consumers often download films/movies Examples of suitable products/services: local events and
and don’t watch many television programmes.
Reaches the most significant number of
retail outlets (can contain vouchers).
consumers and reaches the target audience by
showing AD after specific programmes. Advantages Disadvantages
Cheap It may not be read
Radio Give out on the street to a wide range of people. Direct mail, also called ‘junk mail,’ can be
annoying and prevent customers from buying.
Examples of suitable products or services: Local services Direct mail (delivered door to door)
Sometimes contains money-off-vouchers.
or events, e.g., local shops or car showrooms.
Advantages Disadvantages Internet
It's cheaper than TV. It cannot be put across as a visual message.
It is pretty expensive compared to other
For example, suitable products/services are familiar,
Reaches a large audience. methods. e.g., books, clothes, electronics—services such as train
Often, it uses memorable songs or tunes so that The advert needs to be remembered because
the AD can be remembered. there is no hard copy. information, ticketing, insurance, etc.
It's not as broad an audience as television.
Advantages Disadvantages
A large amount of information can be placed. Internet searches may not highlight the website,
and it could be missed.
Some countries have limited access to the
A vast number of people can see it internet.
Orders can be made instantly via the website. A lot of competition.
Direct mail via email is cheap. Security issues can discourage customers.

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Other forms of publicity: It can be used at the times of year when sales are low.
Ex of suitable products/services: shops can use bags as Encourages new customers to try an existing product.
a form of advertising, such as billboards on the street. Encourages customers to try a new product.
Increase customer loyalty by encouraging existing
Advantages Disadvantages
Very cheap methods of advertising, e.g. T. Shirt customers to buy in greater quantities.
delivery vehicles and bags can be worn, and by
walking around, it can be an advertisement itself.
Customers may not see it in the target market.
Encourages customers to buy their product instead of
competitors.
Sales Promotion
Marketing Budget
Sales Promotions: when incentives (i.e. special
offers/sales) are aimed at consumers to achieve a short- The marketing budget is the financial plan for marketing a
term increase in sales. product/brand for a period of time.
When deciding which type of promotion to use, marketing
Types of Sales Promotion budget is an essential factor
Businesses will need to compare the cost of advertising and
Price Reductions the increase in expected sales. Cost-effectiveness is
Includes coupons important.
Linked to loyalty cards This is where small businesses struggle compared to big
Reduced prices of products at certain times of the year. businesses because their budget is much smaller.
Gifts
Small gifts to encourage purchases Factors Influencing Type of Promotion
The main aim is to get customers to buy at regular
intervals Stage of PLC
BOGOF (Buy One, Give One Free) Nature of product
Multiple purchases are encouraged Cultural issues involved in international marketing
Competitions The media used must depend on the following:
Packaging can allow customers to enter competitions Literacy rate
Encourages sales Poverty rate
High prices Availability of radio and cinema
Point of sale display and demonstrations Nature of target market
Place where the product is sold
Special display Public Relations and Sponsorship
After-sales services
For expensive products, good after services encourage It is concerned with promoting a good image of the brand
consumers to buy their products. Ways to increase public awareness:
Free samples Sponsor events linked with good causes
Can be handed out to shops to encourage sales Donate to charities.
Maybe delivered at home All these activities are used to raise the public’s awareness
Product placement of the company and its product and increase their chance
Featured in television programmes, movies or music of choosing their product over competitors.
videos.
It is expensive to pay for placement and can have a 1.11. Technology and Marketing Mix
negative effect if the image is unattractive to customers.
E-Commerce
Advantages of Sales Promotion
It is the ‘online’ buying and selling of goods and services
using computer systems linked to the internet and apps.

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CAIE IGCSE BUSINESS STUDIES
Benefits to the business Problems to business
Cheaper Website must be maintained
Customers are encouraged to buy in bulk
Business-2-Business e-commerce is cheaper
High distribution costs
No direct contact
1.12. Marketing Strategy
Wider options for customers, brand image and loyalty Returns – higher costs
A stock system will be needed. Marketing Strategy: a plan to combine the right
combination of the four elements of the marketing mix for
Benefits to consumers Problems for consumers
No need to go out Internet needed a product or service to achieve a particular marketing
Wide options High chances of fraud and theft objective
Easy Comparison Products can’t be physically examined
Payment through net banking No direct contact The Marketing Strategy developed depends on the
Easy access to imported goods following:
Low prices
Size of market
How technology influences the marketing mix: Number and size of competitors
Marketing objectives
Social Media Marketing: a form of internet marketing that Target market
involves creating and sharing content on social media Finance available
networks to achieve marketing goals. Marketing objectives may include:
Viral Marketing: when consumers are encouraged to Increasing sales
share information online about a business's product. Improve the existing product
Product: may change to respond to new technology. Increasing sales of a new product
Promotion: social media marketing and viral marketing can Maintaining/ increasing market share
be used to promote. Increasing sales in a niche market
Price: the internet allows businesses to gather information Increase market share/retain market share
about customer purchasing habits, which means dynamic For example, A product is made, priced reasonably, and
pricing can be used to increase revenue. meets the consumer's needs, but no promotional element
Place: The widespread spread of online purchasing and e- exists. No one will buy it because people don’t know about
commerce. Can create new opportunities. its existence.
Or if a product is made that doesn’t meet consumer needs,
Use of the Internet and Social Media Network for it won’t sell regardless of the price set.
Promotion It is crucial to have all elements working together to
influence consumer decisions (buying the product)
Social media for promotion:
Recommending and justifying a marketing strategy
Opportunities for Advertising on Social Media Threats of advertising on social media
Target specific demographic group It can alienate customers if they find the adverts in a given circumstance:-
annoying.
Businesses have to pay for advertising if using
Guarantee it reaches customers pop-ups. Important points to include in your answer:
Speed in response to market changes: Lack of control of advertising if used by others.
Information can be uploaded regularly.
Cheap to use-low cost if placing advertisements. Messages may be altered or used badly and Marketing objective
forwarded to another user, giving bad publicity.
It reaches groups that are difficult to reach any Marketing budget
other way. Target market
Balanced marketing mix
Create your own website for promotion:
Opportunities of advertising on the business’s
own website
Threats of advertising on the business’s
own website
1.13. Legal Controls in Marketing
No extra cost after setting up a website. Potential customers may not see the website,
as the page may appear in a long results list.
Control of advertising as the website is owned. Relies on customers finding the website.
Can change adverts quickly and update pictures, The website's design costs can be high.
prices, and so on.
Interactive adverts can be more attractive than It would need to be constantly updated, and a
team would need to be nearby for any bugs or
magazines or posters. issues. Which is costly.
Can provide more information in adverts and link to
other pages with further information and pictures.
Attracts funds and payment from companies who
want to advertise their product on the business’s
site

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CAIE IGCSE BUSINESS STUDIES
Opportunities Problems
There are many laws in different countries to protect Growth potential in other countries: countries
are developing, and population incomes are
Lack of knowledge of competitors or consumer
habits
consumers from businesses taking advantage of their lack increasing
Markets in the original region might be saturated Cultural differences: for example, alcohol won’t
of knowledge or lack of product information (sales are low) sell well in the Middle East
These legal controls include (in the U.K.): Can produce products abroad and learn about its Exchange
isn’t
rates: in some countries, their currency
stable, so the price of imported goods
market to increase sales
increase
Weights and Measures Trade barriers are lowered in most countries, so Transport costs are more expensive
Selling underweight items or using inaccurate it is cheaper to enter markets
Import restrictions - causes price of goods to
equipment to weigh goods is illegal. increase and sales decrease.
Increased risk of non-payment
Sale of Goods
Supplying flawed goods (not up to quality standard). However, there are many methods to reduce and overcome
Product not fit for its intended purpose. the problems of entering a new market:
Products which do not perform as described in label
or by retailer. Problem Method to Overcome
Joint-Ventures: by working together/merging with
Supply of Goods and Services Act local businesses in the same market, a business will
Service must be provided with skill and care. Lack of knowledge (and cultural Differences) gain a lot of necessary knowledge about the culture
& market \n Franchising: letting people from the
market abroad who have local knowledge to
Consumer contracts Regulations choose the location of the shop
A consumer should have a minimum of 7 days Transport costs are expensive.
Licensing: the business permits a local business to
sell goods under its name, so they do not have to
cooling period (a consumer should have seven days import all the products physically
Localising Existing Brands: where a business still
to change their mind about the purchase they made) Cultural Differences has the same brand image but adapts it to the
market it is in (i.e. McDonald’s cooking vegetarian
Trade Descriptions meals in India)
Supplying a good/ service which is unsafe/ not fit for
the purpose is illegal. Limitations to the methods listed above:
Giving false info or misleading claims is illegal Method Limitation
Misleading consumers about the actual price is illegal Joint venture Management conflict between the two businesses. Profit shared.
Quality problems caused by an inexperienced licensee could
Making false claims about special deals and offers is Licensing damage brand reputation. Licensee now had access to
information about how the product is made - could develop a
illegal better version and become a competitor.
Offensive or indecent ads are illegal International franchising
Quality problems or poor service offered by franchisees could
damage brand image. Training and support will need to be
Complying with all legal controls can raise the total provided by the franchisor.
May be less successful than a new product made to meet local
costs of a business by: Localising existing brands cultures and market conditions. Expensive to change packaging,
promotion, and so on for each market the product is sold.
Goods/ services may have to be redesigned to ensure
quality and safety
Ads may have to be altered
Some promotion techniques may have to be changed
May have to change the packaging
Prices may have to be controlled and altered
Increase employment

1.14. Entering New Markets Abroad

The globalisation of businesses has been increasing over
the years; there are opportunities & problems with this:

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CAIE IGCSE
BUSINESS STUDIES (0450)
THEORY

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