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IGCSE Business (depi school@home)
Transcript of IGCSE Business (depi school@home)
Produce the product first and then try to find a market for it -
basic necessities required for living
may not have name or brand
- business will do market research to find out customer needs before producing products
better able to survive and successful
more prepare for changes
able to take advantage of new market opportunities
"All the activities which go into marketing a product or service.
"A plan to combine the right combination of the four elements of the marketing mix for a product or service to achieve a particular marketing objective(s)."
Marketing, competition and the customer
Most businesses have Marketing Department which has Marketing Director who will responsible for market research, promotion, pricing, distribution and sales.
The role of marketing
- Identify customer needs
what kind of products or service customers want, how the price, where and how they want to buy, after-sales service
- satisfy customer needs
right product, right place, at the right price
- maintain customer loyalty
keeping close links with customers, much cheaper to try to keep existing customers
- gain information about customers
market research helps to understand customer behaviors
- anticipate changes in customer needs
use demand or gaps to identify new trends
Def. to learn
market share, mass market, niche market, market segment
raise customer awareness
of a product or service of business
increase sales revenue and profitability
increase or maintain market share
maintain or improve the image of products
or a business
target a new market
or market segment
enter new markets
at home or abroad
develop new products
or improve existing product
Market Changes/ More competitive
The business is likely to fail if they cannot response to customer needs.
Why spending patterns changes?
Customer tastes and fashion change
Change in technology
- new product being developed
Change in incomes
- high unemployment, then consumers tend to buy cheaper products, but if economic grows, more expensive product will increase
- age structure such as Japan
How can business respond?
Maintain good customer relationships
- continuing to meet customer needs, maintain customer royalty
Keep improving its existing product
- different products than competitors such as Apple that tries to make more advanced products
Bring out new products to keep customers' interest
- maintain or increase market share such as Microsoft
Keep costs low to maintain competitiveness
- keep low price
Why markets become more competitive?
Globalization of markets
- sold all over the world
- easier and faster to get products
- search and buy from overseas markets
What is Market?
A group of buyers and sellers, where buyers determine the demand and sellers determine the supply. They exchange their goods or services.
It can be measured by the total number of sales or by the value of the sales for particular goods or services by all suppliers
Mass Market VS. Niche Market
All potential users of a good or service are not all the same.
What appeals to one may not appeal to others.
"A market will be broken down into sub-groups which share similar characteristics."
- Large number of sales
- Design to appeal to the whole market
- Ex. washing powder, soap, toothpaste
- Specialized products
- Sold to a very small number of people
Sold by small firms
- Ex. Rolex watches, designer clothes
- Sales are very large
- Benefits from economies of scale
- Risks can be spread
- Opportunities for growth
- high levels of competition
- high costs of advertising
- may not meet the specific needs of all customers (lost sales)
- Avoid competition from the larger business
- Needs of consumers can be focused
- A limited number of sales
- Specialize in just one product
- Not spread its risks
Benefits of market segmentation
- help to decide the best place to sales and type of advertisement
- make marketing expenditure cost effective
- higher sales and profits
- offer opportunities to increase sales
- help in aiming each brand at a different market segment
By socio-economic group
By use of the product
product-oriented, market oriented, marketing budget, market research, primary research, secondary research, questionnaire, sample, random sample, quota sample, focus group,
Why we need to do market research?
- Need to find out how many people would want to buy the product
- Planning to offer for sale more accurately
- Can identify customer needs in a changing and competitive international environment
- what feature of my product?
- would they be willing to buy?
- what price would they be prepared to pay?
- where they likely to buy?
- what type of customers?
- what type of promotion?
- who are competitors?
Type of Information
Quantitative information -
answer questions about the quantity of something (how many, what percentage)
Qualitative information -
answer questions where an opinion or judgement is necessary (what do you like, why do you)
"The collection and collation of
. It involves
direct contact with potential or existing customers
- been planned and carried out by the people who want to use the data
- specific purpose
"The use of information that
has already been collected
and is available for
use by others.
A set of questions
to be answered as a means of collecting data for market research."
Post on the internet
Online survey - email
Detailed qualitative information
Can be carried out online
Linked to prize draws
Not be very accurate
A lot of time and money
Time-consuming for collecting and analyzing
between two or more people where
questions are asked by the interviewer
to elicit fact or statements from interviewee. "
Able to explain any questions
Inaccurate results due to interviewer bias
Expensive way of gathering information
Deciding who to ask
to fill in a questionnaire or who to interview because it would be too expensive and impractical to try to include all."
A random sample
- every member of the population has an even chance of being selected. People are selected at random, but not everyone may be a consumer of the product.
A quota sample
- people are selected on the basis of certain characteristics such as age, gender, or income. (They ask a certain number of people with certain characteristics)
Group of people agree to provide information
about a specific product or general spending patterns over a period of time. Groups may also test new products and then discuss what they think of them."
Detail information about consumers' opinion
- monitor which television channels are being watched
- counting people, vehicles
- counting of stock to see which products have sold well
Inexpensive way of gathering data
Only gives basic figures
Not provide the business with reasons for consumer decisions
Internal source of information
"Information that is readily and cheaply
available from the firm's own records."
Sales department - sales records, pricing data, customer records, sales report
Opinion of distribution and public relation personnel
Customer Service department
External source of information
"Information which is
obtained from outside the company.
- general information
- useful articles
- information for the businesses in that industry
Market research agencies
- carry out research on behalf of companies or anyone who commissions them. Expensive to buy.
- easily access source, need to check information because it is not always accurate.
Presentation of data
A table or tally chart
marketing mix, USP, brand name, brand loyalty, brand image, packaging, product life cycle
The four Ps of the marketing mix
"It needs to make sure that it all fits together and not counteract each others"
"The most important element in the marketing mix - without the product, the rest of the marketing mix is pointless."
Types of product
- goods which are consumed by people
Ex. food, furniture, computers, etc.
- services that are produced for people
Ex. repairing cars, hairdressing, education, etc.
- goods that are produced for other businesses to use, help with the production process
Ex. truck, machinery, components, etc.
- services that are produced to help other business
Ex. accounting, insurance, advertising agencies
What makes a product successful?
satisfies existing needs and wants of consumers
not to expensive to produce
the first business to produce the new product or introduce new changed
has something very distinctive that makes it appear different
design, performance, reliability, quality should all be consistent with the product's brand image
capable of stimulating new wants from the consumer
Decide if the company will be able to sell enough
Develop a prototype
test the market
Costs and benefits of developing new products
USP (Unique Selling Point) - the business will the first into the market with the new product
Diversification, a broader range of products to sell
Expand into new markets
Expand into existing markets
Costs of carrying out market research and analyzing
Costs of producing trail products, costs of wasted material
Lack of sales if the target market is wrong
Company image can be losted
- the unique name of a product that distinguishes it from other brands.
- consumers keep buying the same brand of product instead of choosing competitor's product
- a whole image or identity of product which will be reinforced by advertising
Unique name (brand name)
Need advertising to reinforce the brand's qualities
Higher price than unbranded products
Higher quality than unbranded products
Always of the same standard (assured quality)
Creates a brand image
Encourages customers to keep buying it
The role of packaging
It has to be suitable for the product to be put in.
not allow the product to spoil
be used easily
suitable for transporting
It is also used for promoting the product.
color and shape is very important
catches the consumer's eyes
labels have to carry vital information
promotes the brand image
help in increasing price
The product life cycle
The product life cycle
The stages a product will pass
through from its introduction, through its growth until it is mature and then finally its decline."
Extending the product life cycle
Extending the product life cycle
Introducing new variations of the original product
Use a new advertising campaign
Introduce a new, improved version of the old product
Sell into new markets
Make small changes to the product's design, color or packaging
Sell through additional, different retail outlets
"Need to be careful to choose a price which will fit in with the rest of the marketing mix for the product."
- Not just be determined by demand and supply in the market
- Should monitor constantly to remain competitive
Reasons for new pricing strategies
break into the new market
increase its market share
increase its profit
make sure all its cost are covered, profit is earned
The main method of pricing
1. Cost-plus pricing
The cost of manufacturing the product plus a profit mark-up
easy to apply
could lose sales if selling price is a lot higher than competitors
2. Competitive pricing
Putting price in line with your competitors' price or just below their prices
a realistic pricing, sales tend to be high
have to do research which costs time and money
The main method of pricing
3. Penetration promotion
Be used when trying to enter a new market. Price will be set lower than competitors.
sales are made, new product enters
low profit per unit sold b/c of low price
4. Price skimming
A new invented product or a new development
Sold on the market at a high prices
High R&D cost that needs to be recouped
help to establish the product
might put off some potential customers because of high price
The main method of pricing
5. Promotional pricing
Set the price of product at low for a period of time
getting of unwanted stock
sales revenue will be lower
6. Psychological pricing
upon consumers' perception of the product
a very high price for a high quality product
charging just below the whole number, $0.99
charge low prices for a regular basis products
sales are made by reinforcing consumers' perception
little sales revenue is lost
competition may do the same
The main method of pricing
7. Dynamic pricing
Customers are split into 2 or more groups that they are charged at different price for the same product or service.
Different demand levels
Ex. airlines, football game tickets, concert tickets
increase sales revenue
ensure all seats are filled
high cost of constantly changing prices for business
high cost for customers - time spent
Price elasticity of demand
Many substitutes for product. If its price rises only a small percentage, consumers will buy the substitute product, so demand will fall by larger percentage
the percentage change in quantity demanded is greater than the percentage change in price
Not really any substitutes. Consumers will carry on buying the product at the higher price.
The percentage change in quantity demanded is less than the percentage change in price
size of the market
number and size of competitors
Need to know
1. Marketing objectives
2. Target market
3. Marketing budget
Marketing Objectives can be
Increasing sales of an existing product/service
Increasing sales of new product or service
Increasing market share
Maintaining market share
Increasing sales in a niche market
"If marketing strategy does not combine the four elements (Ps) correctly, then the marketing objectives will not be achieved."
Legal controls on marketing
"Consumers need protection against business which could take advantage of the consumers' lack of knowledge and lack of accurate product information."
Weights and Measures
- underweight goods or inaccurate equipment
- misleading impression about a product
Sale of Goods
- serious flaw or problems, not fit for the purpose intended
Supply of Goods and Services Act
- service has to be provide with reasonable skill and care
Misleading price claims
- $20 this week only, but last week also in this price
The Distance Selling Regulations
- can change their mind about purchasing the good or service (7 working days)
Entering new markets abroad
Growth potential of new markets in other countries
Chance of higher sales
Wider choice of location to produce products
More information about market
Better place to sell
Trade barriers have been lowered - easier and profitable
Entering new markets abroad
Lack of knowledge
- competitors and customers' habits
- religion or culture
Exchange rate changes
- not very stable
- tariffs or quotas
Increases risk of non-payment
- methods of payment may be different
Increased transport costs
- transported over long distances
Method to overcome the problems
- gain important local knowledge so culture and customs can be adapted
- produce the branded or patented product under license, so products do not have to be transported
- operate a business's franchise abroad, so the local knowledge is used
Localizing existing brands
- a common brand image for the business but it has adapted to local tastes and culture
Promotion and Technology in marketing
"To give the consumer information about the rest of the marketing mix - without it, consumers would not know about the product, the price it sells, or the place where the product is sold."
- 'above-the-line' promotions such as TV, radio, newspaper, or internet
- 'below-the-line' promotion which is used for short period of time in order to reinforce the above-the-line promotions such as coupons, or free gifts
The aims of promotion
To inform people about particular issues, often used by government
To create a brand image
To increase sales
To introduce new products on to the market
To improve the company image
To compete with competitors' product
Different types of advertising
- the emphasis of advertising or sales promotion is to give a full information about the product such as how to use, what it will do, or give technical information
- advertising or promotion which is trying to persuade the consumer that they really need the product and should buy it
Newspaper - national or local
Cinemas, DVD and blu-ray discs
Leaflets or flyers
Bag, T-shirt, vehicles
"Used to support advertising and encourage new or existing consumers to buy the product. That will be short term to give a boost to sales."
Point-of-sale display and demonstrations
The advantages of sales promotion
can promote sales at times in the year when sales are traditionally low
encourage new customers to try an existing product
encourage consumers to try a new product
encourage existing customers to buy a product more often
encourage customers to buy your product instead of a competing brand
"A financial plan for the marketing of a product or product range for a specified period of time."
"How much money is available to market the product or range."
The most important factor in making promotion decision.
Low marketing budget -> TV advertising might not be suitable
A business will need to compare the cost of advertising with the increase in expected sales.
Small increase in sales -> should not spend large amount of money on an advertising
How to choose your promotion
The stage of the product life cycle
that has been reached
The nature of the product itself
- consumer goods will be promoting different than producer goods
The cultural issues involved in international marketing
- need to be acceptable from people in the countries where the product is being sold
The nature of target market
- local, national, or international, specialist product or general product
Public Relations/ Sponsorship
Used to promote a good image for the company and/or its product.
sponsoring events such as football matches
publicity stunts - employee or owner take part for a good cause or to raise awareness
donation their product to charity - a natural disaster
Technology with marketing mix
New opportunities for business to market their product and service in which all four elements need to change frequently.
(new technology - product, search engine - promotion, searching for purchasing habits - price, online purchasing or e-commerce - place)
specific demographic group
information can be updated regularly
cheap to use
reaches groups that are difficult
some might find it annoying
might have to pay for advertising
lack of control
can use it a bad way
no extra cost
control of advertising
change advert quickly
customers may not see the website
relies on customers finding the website
design costs may be high
The product or service has to be available where and when customers want to buy.
The way to get the product to the consumers or a product is passed from the place of production to the customer or retailer.
Can be directly to the consumer or being via intermediary channels
Distribution Channel 1
direct to consumers
agriculture product which sold straight from the farm
sold by mail order, catalogue or internet
Not all consumers live near factory or farm
not be suitable to some product
very expensive to send by post
Distribution Channel 2
Distribution Channel 3
Distribution Channel 4
producer sells large quantities
reduced distribution costs
no direct contact with customers
save storage space for retailer
reduce storage cost
short shelf life
may give credit
save on transporting cost
wholesaler can give advice to retailers and manufacturer
manufacturer has less paperwork
more expensive for small shop
wholesaler may not have the full range of products
take longer for fresh product
may not be as good quality
may be a long way from the small shop
When products are exported, the manufacturer will use an agent in the other countries which will put additional amount or receive a commission on sales.
manufacture may not be the best way to sell products in other markets
agents will be aware of local conditions
less control over the product
"The buying and selling of goods and services using computer system linked to the internet."
able to access many consumers
shop might not be need
business-to-business (B2B) easier
setting up/updating website costs
no direct consumer contact
competition from other websites
need warehouse and stock system
not suitable for personal service
no need to leave the house
easy to compare price and products
payment is very easy
easily access products and service
buy some products for prices much lower
need internet access
stable computer system
products cannot be seen, touched or tried
no face-to-face contact
concerning about identity theft or fraudulent use of credit card
Selecting distribution channel
Factors affecting distribution channel
sold to producer or consumer?
location of customers?
where are competitors' products sold?
cost-plus pricing, competitive pricing, penetration pricing, price skimming, promotional pricing, price-elastic demand, price-inelastic demand
informative advertising, persuasive advertising, target audience, sales promotion, marketing budget
agent, distribution channel, e-commerce
"The management process through which goods and services move from concept to the customers."
"The activities of a company associated with buying and selling a product or service. It includes advertising, selling and delivering products to people. "