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Cambridge (CIE) IGCSE Your notes

Business
3.3 The Marketing Mix
Contents
Product: Products & Brand Image
Product: The Product Life Cycle
Price: Types of Pricing Methods
Price: The Significance of Price Elasticity of Demand
Place: Types of Distribution Channels
Promotion
Technology & The Marketing Mix

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Product: Products & Brand Image

Your notes
Introduction to the Marketing Mix
The marketing mix provides a framework for businesses to create and implement successful
marketing strategies
Sometimes known as the 'Four P's', it represents the key elements of a marketing strategy:
product, price, place, and promotion
These four components work together to satisfy the needs and wants of a target market while
achieving the company's objectives
By understanding and manipulating the marketing mix, businesses can differentiate themselves from
competitors, maximise marketing impact and achieve long-term success

Diagram: the four P's of the marketing mix

Businesses combine the 4 P's of the marketing mix in appropriate and unique ways to maximise their
chances of success

Product
The product design mix refers to the combination of elements that make up a product's design

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These elements include function, aesthetics and cost

Balancing the elements of function, aesthetics and cost helps to ensure a product's design is both
functional and attractive while also being cost-effective for both the manufacturer and the consumer Your notes
Many manufacturers aim to balance all three elements
E.g. Fentimans ginger beer is relatively affordable and is packaged in eye catching bottles and
the product itself is very good quality
Other manufacturers may focus on one aspect more than the others
E.g. Asda's own brand of ginger beer is produced at the lowest possible cost and sold to
consumers at a very low price
Businesses must take care to balance customers' quality expectations with these elements
The target market may value quality less than price and will not be prepared to pay a high price
for goods, even if they are of the highest quality
Most companies are market-orientated when developing new products
They spend a lot of money researching consumers’ buying habits and their likes and dislikes
They then design and package a product, which this research suggests people will want to buy
New Product Development
One way to stay ahead of the competition is by developing new products and innovating existing
ones
The process of new product development involves a number of important stages
1. Generate ideas
New product concepts are discussed and brainstormed using customer suggestions, ideas from
competitors’ products, employees’ ideas and information collected through market and technical
research
2. Select the best idea
Ideas are weighed up with some dropped and others chosen for further research
This decision relates closely to costs and likely demand
Research includes looking into forecast sales, size of market share, and cost-benefit analysis for
each product idea
3. Develop a prototype
This allows the operations department to see how the product can be manufactured, any
problems or difficulties arising from its production and how to fix them

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Computer simulations are often used to produce 3D prototypes on screen

4. Test launch
Your notes
The developed product is sold to on a small scale to a limited market to see how well it sells before
its full launch
Changes may be needed prior to an expensive, large scale launch
Digital products like apps and software run beta versions, which is a method of test-launching
5. Full launch of the product
The finalised version of the product is launched to the entire target market

Costs and Benefits of New Product Development

Costs Benefits

Market research collection and analysis regarding the Sell more products/services to
new product is time-consuming existing customers
Making the most of existing
relationships is cheaper than
finding new customers

Investment in Research and Development and Developing new products spreads

design can be very expensive fixed costs like premises or salaries
across a wider range of products

The costs of producing trial products, including the Diversifying the products it offers
costs of wasted materials, can be significant means a business is less reliant on
especially if innovative materials/components are certain customers or markets
used

Low sales if the target market is wrong or if market or Can create a unique selling point by
technical research leads to the development of an developing a new innovative product
inappropriate product or service for the market for the first time in the market
This USP can be used to charge a
high price for the product as well
as be used in advertising

Damage to the brand if the new product fails to meet Charge higher prices for new products
customer needs

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Pricing strategies such as price

skimming can be used for
innovative new products Your notes

The Importance of Brand Image

Developing a strong brand involves creating a unique and identifiable name, design, symbol or other
feature that differentiates a product/service or company from its competitors
This can help a business to add value as customers are often willing to pay higher prices for
brands they recognise and trust
Branding is a strategic tool that helps businesses create awareness, develop strong customer
relationships, generate loyalty and sets them apart from competitors

Diagram: the 3 main types of branding

Building a brand using one of these three methods, or all of them, will help a business to develop a
strong and loyal customer base

Manufacturer/Corporate branding refers to the use of a company name or logo to promote all the
products or services offered by the company
This type of branding is used by companies like Nestlé, Nike, and Apple

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Product branding refers to the use of a unique name, design, or symbol to promote a specific
product
Your notes
E.g. KitKat, Coca-Cola, and McDonald's Big Mac
Own brand or private label branding refers to the use of a retailer's name to promote a specific
product or service and is often used by supermarkets
E.g. ASDA chocolate, Tesco's Finest range, and Sainsbury's Basics range
Brands can be built using various methods, including
Developing unique selling points
Advertising
Sponsorship
Social media presence and activity
Emotional branding

Examples of the ways Brands have been Built

Method Explanation Example

Unique selling USPs are the features that make a Apple is known for its innovative and
points (USPs) product/service stand out from its sleek design and use of quality
competitors materials, which sets its products
apart from its competitors
Brands can build their reputation by
emphasising these unique qualities
in their marketing efforts The company has built its brand
around this USP and is recognised
worldwide for its premium design

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Advertising Brands can create compelling ads Coca-Cola has successfully built its
that resonate with their target brand through advertising
Your notes
audience, raise brand awareness,
and communicate their value
proposition Iconic ads over the years have
become synonymous with the brand

With the right advertising strategy,

brands create a strong emotional E.g. The "Share a Coke" campaign
connection with their audience and encouraged people to buy Coca-
inspire brand loyalty Cola bottles with their friends' names
on them and was a massive success

Sponsorship Partnering with events, Nike has sponsored many high-

organisations, or individuals can help profile athletes and sports events,
brands gain exposure and build such as the Olympics and the World
their reputation by aligning Cup
themselves with positive
associations or values
The business has built a reputation for
being a brand that champions
excellence and inspires people to be
their best

Social media With the right social media strategy, Glossier has a strong presence on
brands can build a loyal following platforms like Instagram and it
and create a community around engages with its audience and shares
their brand user-generated content

Glossier's social media strategy has

helped the brand build a loyal
following

Emotional A strategy where companies build Brands like Patagonia and TOMS have
branding strong emotional connections with built their entire brand identities
their customers by appealing to their around their commitments to
values, beliefs, and emotions environmental and social causes,
which resonates with customers who
prioritise these values

The benefits of branding to a business

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Business differentiation
Branding differentiates a business from its competitors Your notes
This supports marketing and advertising efforts to build memorable promotional materials and
campaigns

Reduces price elasticity of demand

Customers are less sensitive to price changes of products with strong and appealing branding
Customers who are loyal to a brand are more likely to continue purchasing the product even if the
price increases

Ability to charge premium prices

Customers may be willing to pay more for a product that is associated with a well-established brand
They often perceive products with strong branding to be of higher quality and therefore worth the
extra cost

Establishes recognition and identity

Strong branding helps to build trust and credibility
This can create an emotional connection with customers, which helps generate repeat purchases

The Role of Packaging

Packaging is the physical container or wrapping for a product. It is also used for promotion and selling
appeal
Packaging is normally designed to
Present products in the most practical yet attractive way
Communicate the quality of the product
Catch the customer's eye when they shop
Provide key information to customers
Establish the business brand image
To stand out from the competition and establish a long-lasting relationship with consumers brands are
investing more money than ever before in creative and environmentally friendly packaging designs
This is becoming increasingly important for businesses as they place a greater emphasis on
sustainability and their CSR policies

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EXAM TIP
Your notes
Brands are considered intangible assets on a company's balance sheet. A strong brand adds to the
overall value of these intangible assets, which may be an important part of a company's net worth
and make it more attractive to investors.

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Product: The Product Life Cycle

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The Product Life Cycle
The product life cycle describes the different stages a product goes through from its conception to
its eventual decline in sales
There are typically five stages in the product life cycle: development, introduction, growth, maturity,
and decline

Diagram: the product life cycle

The five stages a product goes through over its life span - from initial development to eventual decline

The implications for cash flow and marketing vary at each stage of the product life cycle
Companies should tailor their marketing strategies and manage their cash flow to ensure long-term
profitability and success

The Product Life Cycle, Cash flow and Marketing Strategy

Stage Explanation Implication

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Development The focus is on designing and Cash flow is usually negative during this
developing the product stage, as the company is investing heavily in
Your notes
the product without generating any revenue
The business usually incurs
high costs for research and
development, market The marketing strategy during this stage is
research, and product testing focused on creating awareness and
generating interest in the product

Introduction The stage begins when the Cash flow is usually negative as the business
product is launched usually incurs high costs for promotion,
advertising and distribution
Characterised by slow sales
growth as the product is still Marketing efforts are focused on creating
new and unknown to most awareness and generating interest in the
consumers product

Growth The product enters this stage Cash flow usually turns positive during this
when sales begin to increase stage as sales revenue increases and costs
rapidly are spread out over a larger volume of
production
The business focus shifts to
building market share and The marketing strategy is to differentiate the
increasing production to meet product from its competitors and build
this growing demand brand loyalty

Maturity Characterised by high sales but Cash flow is usually positive during this
slowing sales growth stage as sales revenue continues to come in
and costs are reduced through economies
Market saturation is likely of scale and efficient production processes

The marketing strategy aims to maintain

market share and increase profitability by
cutting costs and finding new markets

Decline Starts when sales begin to Cash flow usually turns negative as sales
decline as the product revenue declines and costs associated with
becomes obsolete or is the product's decline increase
replaced by newer products

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The business focus shifts to The marketing strategy may involve

managing the product's discontinuing the product, reducing prices
decline and reducing costs to clear stock or finding new uses for the Your notes
product

Extension Strategies
Extension strategies refer to the techniques used by businesses to extend the life of a product
beyond its natural life cycle
These strategies are designed to boost sales and maintain profitability for a product that has reached
the late maturity or decline stage of its life cycle
There are two types of extension strategies which are often implemented at the same time
Product-related extension strategies
Promotion-related extension strategies

A Comparison of Product and Promotion-related Extension Strategies

Extension Explanation Examples

Strategy

Product- Changing or modifying the Product improvements e.g. Samsung releases

related product to make it more new versions of its Galaxy Smartphone every
appealing to customers year with upgraded features and improvements
to the previous model
This could involve improving
or adding features, Line extensions e.g. Coca-Cola introduced Diet
increasing capacity or Coke and Coke Zero as line extensions of its
redesigning its appearance original Coca-Col
Repositioning e.g. when IBM's personal
computer division started losing market share to
other brands, it repositioned its products as
high-end business machines and focused on the
enterprise market

Promotion- Changing promotional Changes to advertising e.g Kellogg's continues

related activity related to the to recreate adverts for its Corn Flakes cereal
product which has been around since 1906

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This could involve changes Price promotions e.g. Cyber Monday occurs on
to advertising, different the first Monday after Thanksgiving in the USA
pricing tactics or attractive and electronic firms discount prices significantly Your notes
sales promotions in order to boost sales of their products
Sales promotions e.g. many coffee shops offer a
loyalty program where customers can earn a
free drink for every six consumed

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Price: Types of Pricing Methods

Your notes
Types of Pricing Strategies
Choosing the right pricing strategy is essential for a business to be profitable, competitive, and
successful in the long run
By understanding their customers, competitors and costs businesses can set prices that maximise
sales revenue and profits
Pricing can play a significant role in the market positioning of the brand and help a firm to compete
with rivals

Diagram: the main pricing strategies

Different Types of Pricing Strategies

Pricing Explanation Advantages Disadvantages

Strategy

Cost plus The business calculates A simple and quick It does not consider
the cost of production methods of the needs of the
and then adds a markup to calculating a price for a market
determine the final price product

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The markup covers the It ensures that a profit The pricing

cost of production plus is made on each item approach of
the business's desired sold competitors is Your notes
profit margin ignored
This pricing strategy is
simple and is commonly
used by manufacturers
that produce standardised
goods e.g. washing
machines

Price The business sets a high This is effective when Only effective when
skimming price for a new an established brand is used by strong
product/service when it is introducing a new brands with an
first introduced to the product and there is a established and
market high demand for it e.g loyal customer base
successive models of
The business will then Apple's Macbook Air Loyal customers
gradually lower the price may become tired
to ensure sales continue The high price helps of paying high
the business to prices for new
recover its product versions
development and and look to see
marketing costs what competitors
quickly offer

Penetration The business sets a low Customers are Customers may

price for a new attracted to buy the perceive that the
product/service when it is product at a low price product is of low
first introduced leading to high sales quality if the
volume and market product is sold at a
This is effective when a share low price
business wants to quickly
capture market share and
attract price-sensitive Competitors unable Selling at a low price
customers e.g. many new to match or beat the limits the amount of
perfumes launch using low price are forced profit made
penetration pricing out the market leading
to less competition
Once they have enough
customers, the business
will start to raise the price

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Predatory The business sets prices This method allows a Use of this strategy
pricing so low that it drives its business to gain a may have a negative
Your notes
competitors out of the dominant position in impact on a
market the market businesses
reputation
This strategy is illegal in
many countries as it is It acts as a barrier to
considered anti- entry for firms It is an expensive
competitive and harms considering selling in strategy for which a
customers by reducing the market business needs
choice in the market sufficient finance to
fund

Competitive The business sets its prices This is effective when a The business must
pricing based on its competitors' business is in a highly continually monitor
prices competitive market its competitors'
and wants to maintain prices and adjust its
its market share prices accordingly
to remain
competitive

Promotional This pricing strategy takes Generates higher

pricing into account the volumes of sales for
customer's emotions, and many products
compulsive behaviours in
responding to price
promotions
E.g. a business may have a
Bogof offer - buy one get
one free

Premium The business sets a high The high price helps Large numbers of
pricing price for its product which the business more price-
gives customers an differentiate its conscious
impression of high quality products from customers are
and luxury competitors ignored which limits
sales revenue
This is effective for It emphasises
designer brands such as exclusivity and Premium-priced
Chanel and Ritz Carlton improves the value of products require
Hotels a brand high quality raw
materials and
components so

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Premium pricing should Premium-priced variable production

not be confused with price goods often attract costs are usually
skimming, where a high attention from high Your notes
price is set for a short celebrities and the
period at a product's media which reduces
launch the need for
promotional activity

Recommending an Appropriate Pricing Strategy

A business needs to make informed decisions about its pricing and increase its chances of success
It should carefully consider a range of factors when deciding on an appropriate pricing strategy

Factors to Consider when Choosing a Pricing Strategy

Number of USPs/ Technology Level of Competition

Amount of Differentiation

Products with many USPs The use of online platforms In highly competitive markets
and high differentiation and development of new businesses may need to set
can command higher markets has created new their prices low to remain
prices pricing strategies competitive
E.g Dyson vacuum E.g. Candy Crush Saga E.g. The budget airline
cleaners have unique uses a freemium industry is highly
features which allow strategy where the competitive and airlines
the company to initial game is free of keep their prices low so as
charge a premium charge after which to increase demand
price users
have to pay for
additional features In less competitive markets,
businesses may be able to set
Charging for these higher prices
features generates a
very high
profit margin

Strength of the Brand Stage in the Product Life Cycle Costs and the Need to
Make a Profit

A strong brand with a loyal In the introduction stage, Prices must cover the cost of
customer base can prices may be set lower to production and provide a

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command higher prices attract customers and build reasonable profit margin
market share
E.g. Nike's strong E.g. A restaurant needs to Your notes
brand allows it to In the growth stage, prices consider the cost of
charge premium can increase as demand for ingredients, labour, rent,
prices for its athletic the product increases and other expenses when
shoes and apparel setting menu prices

In the maturity stage,

prices may need to be
lowered again

Retailers may need to adjust their pricing strategies to remain competitive in an online marketplace
where customers can easily compare prices e.g www.comparethemarket.com
Pricing has changed to reflect the rise of price comparison through the use of price matching policies
Retailers now offer to match the prices of their competitors in order to prevent customers from
switching to a competitor with a lower price

EXAM TIP
Exam questions frequently ask you to be be able to justify the most appropriate pricing strategy for
a product/service. When studying the case study provided, consider the points above and then
make a recommendation.
For example, in launching a new product with a strong brand identity, it may be appropriate to
initially use a price skimming strategy in order to recover research and development costs, and then
gradually lower prices over time asthe market becomes more saturated.

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Price: The Significance of Price Elasticity of Demand

Your notes
An Introduction to Price Elasticity of Demand
Price elasticity of demand (PED) measures how responsive demand for a product is to a change in
price
In most cases an increase in price leads to a fall in demand for a product
Similarly a fall in price leads to an increase in demand for a product
Price elasticity of demand answers the question of by how much demand changes?
Price elastic demand is where the volume of a product's sales changes by a greater percentage
than the change in price
E.g. A 10% increase in price leads to a 20% decrease in the volume of sales
Price inelastic demand is where the volume of a product's sales changes by a smaller percentage
than the change in price
E.g. A 10% increase in price leads to a 5% decrease in the volume of sales

Calculation of PED
Price elasticity of demand is calculated using the formula

% change in quantity demanded % △ in QD

PED = =
% change in price % △in P

PED will always be negative due to the inverse relationship between price and quantity
If the price goes up the quantity demanded goes down
If the price goes down the quantity demanded goes up
The numerical value of PED indicates the responsiveness of a change in quantity demanded to a
change in price

Interpretation of PED Values

Numerical Explanation Examples

Value

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>1 Demand is more responsive to a Luxury products such as cars, smart

change in price watches, foreign holidays, cinema visits,
ELASTIC Your notes
jewellery, and branded goods
The %∆ in QD is more than
proportional to the %∆ in P
An increase in selling price reduces
the total amount of revenue
generated from sales
A reduction in selling price
increases the total amount of
revenue generated from sales

Between Demand is less responsive to a Necessities such as bread, milk, eggs,

change in price and potatoes; fuel; rent; toothpaste, etc.
0&1
The %∆ in QD is more than Addictive products such as cigarettes
INELASTIC proportional to the %∆ in P and sugary foods
An increase in selling price
increases the total amount of
revenue generated from sales
A reduction in selling price reduces
the total amount of revenue
generated from sales

The Significance of Price Elasticity of Demand

If businesses can determine the price elasticity of demand for their products, they can adjust their
pricing strategy to maximise their revenue

If the demand for their products is relatively price inelastic (PED < -1), raising the price will lead to an
increase in total revenue. However, lowering the price will lead to a fall in total revenue
Price skimming strategies are best employed for products that are price inelastic in demand
If demand for their products is relatively price elastic (PED > -1), raising the price will lead to a fall in
total revenue. However, lowering the price will lead to a rise in total revenue
Competitive pricing strategies are best employed for products that are price inelastic in demand
The Relationship Between Price Elasticity of Demand and Total Revenue

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PED Diagram Result Price Increase Impact on

or Decrease total Revenue
Your notes
Elastic Greater than Increase Decrease
1
(Between 1
and ∞)

Decrease Increase

Inelastic Between Increase Increase

0 and 1

Decrease Decrease

Factors Influencing the Price Elasticity of Demand

Diagram: PED influencers

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Your notes

The factors which determine if a product is more price elastic or price inelastic in demand

Brand loyalty
The aim of advertising and marketing expenditure by a business is to shift the demand curve to the right
and make the demand more price inelastic
E.g. Coke consumers tend to remain brand loyal to Coke and are unlikely to buy Pepsi even though
their taste and selling price are very similar

Availability of substitutes
Demand for goods that have fewer substitutes is likely to be price inelastic
E.g. Petrol has fewer substitutes and is more price inelastic whereas chocolate bars have more
substitutes and are more price elastic

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The proportion of income taken up by the product

The smaller the proportion of income we spend on a product the more price inelastic the demand will Your notes
be
E.g. A small amount of income is spent on salt and so demand for salt is more price inelastic
whereas buying a new car takes up a bigger proportion of consumer income and so demand is
more price elastic

Luxury or necessity
Necessities are required as part of consumers' daily needs and are therefore more price inelastic in
demand
E.g. Bread, milk, petrol, gas and electricity might be considered to be necessities
Luxuries are not essential and are therefore more price elastic in demand
E.g. Smoked salmon, Nike Air Jordans, and foreign holidays might be considered to be luxuries

Time
The longer the time period under consideration the more price elastic the demand for a good or
service is likely to be (consumers have more time to search for substitutes)
The shorter the time period under consideration the more price inelastic the demand for a good or
service is likely to be
For example, if the price of petrol increases, making driving more expensive, there is little that
consumers can do in the short term but pay the price required to keep their vehicle running
Over time they may switch to alternatives such as public transport or bicycles so demand for petrol
could be more price elastic in the long-term

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Place: Types of Distribution Channels

Your notes
The Role of Place in the Marketing Mix
Place in the marketing mix refers to where customers purchase a businesses products and the
distribution channels used to move the product from producer to consumer
In a competitive environment, location and distribution decisions can give a company a competitive
advantage
Businesses could locate themselves in areas with high foot traffic to achieve high sales volumes
They may use innovative online channels to reach customers who prefer to shop online
Changing consumer needs can impact the way businesses distribute their products
E-commerce makes it easier for consumers to shop online and have products delivered to their
doorstep
Many businesses have therefore invested in their online presence, offering convenience and
fast delivery to meet customer needs

Types of distribution channels

Distribution channels refer to the intermediaries through which products move from the business to
the end customer

Diagram: different distribution channels

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There are three different types of distribution channels businesses can use to move products from the
manufacturer to the end consumer
Your notes

Explanation of the Different Distribution Channels

Channel Explanation Example

Four Producer → Wholesaler → Retailer → The Coca-Cola Company produces

Stage Consumer soft drinks, which are sold in bulk to a
wholesaler
This channel is commonly used by The wholesaler sells smaller
smaller retail business that lack space or quantities to a convenience store
sufficient cash flow to hold large
amounts of stock The convenience store then sells
individual soft drinks to the
Wholesalers 'break the bulk' of stock customer
they receive from producers and sell
smaller quantities to small retailers

Three Producer → Retailer → Consumer Toshiba produces laptops and sells

Stage them directly to retailers such as
This channel is often used for products Walmart or Currys
with high demand or where the cost of
distribution is high Currys employs knowledgeable
sales staff who sell them to end
This method is also common where customers
customers require support or advice in
selecting the product

Two Producer → Consumer GermanWings sells its service (airline

Stage passenger tickets) directly to the end
This channel is commonly used customer on their website
for products that are sold online or
through direct sales channels

E-Commerce
Distribution channels have been impacted by social trends such as the growth of e-commerce and
the shift from product-based businesses to service-based businesses
Businesses have adjusted their distribution strategies to better meet the needs of customers and stay
competitive

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The Growth of E-commerce

Explanation Example Your notes

Online distribution has become Amazon is known as a third-party logistics

increasingly popular due to the provider (3PLs)
convenience and accessibility it offers to
consumers
They provide small businesses with the
infrastructure and a well-known online
Drop-shipping allows businesses to sell marketplace, which allows them to reach a
products without holding stock wider audience
When products are ordered they are
shipped directly from the producer to This allows even the smallest of businesses to
the customer increase sales without having to invest in their
own warehouses
This reduces the cost and complexity of
distribution, making it easier for
businesses to sell online

Recommending an Appropriate Distribution Channel

The choice of distribution channel chosen by a business depends on a variety of factors
The following questions are worth considering when establishing a distribution channel
Do consumers want to speak to a salesperson?
Will customers want to handle the product before they make a purchase?
Would they prefer to purchase it conveniently online?
Does the product require special handling, such as protective packaging or quick delivery?

Diagram: factors affecting the choice of distribution channel

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Your notes

Getting the distribution channel right will increase sales revenue and profit

Factors affecting the choice of channel

Type of product
If sold to producers of other goods, distribution is likely to be direct or via a specialist wholesaler
E.g. JCB sells excavators directly to construction companies
Specialist wholesalers such as France's Bricoman sell consumable building supplies such as nuts,
bolts and cement to builders

Frequency of purchase
If the product is bought on a daily basis, retail stores provide convenience for consumers
E.g. Milka chocolate is sold in most EU-based supermarkets

The price of the product

If the products is an expensive luxury good, it would be best sold through a few specialist high-end
outlets
E.g. Rolex watches are sold in high-end jewellery stores

The durability of the product

Perishable product like fruit and vegetables are distributed through retailers, sometimes via
wholesalers, to be sold quickly

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Proximity of customers
If customers are located over the world, e-commerce is likely to be a suitable distribution channel Your notes
Competitors distribution channels
Products need to be sold where competitors are selling so that a business can compete effectively
E.g. Nestlé cereals are sold alongside Kelloggs cereals in a wide range of retail outlets

Technicality specifications
If technical information needs to be passed to the customer, direct selling or a retailer is usually
preferred
E.g. Apple Store staff provide focused advice to customers purchasing its range of phones,
computers and entertainment devices

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Promotion
Your notes
The Aims of Promotion
Promotion plays a crucial role in generating customer awareness, interest and desire for a product
It communicates a businesses value proposition to potential customers and helps to differentiate
the product or business from competitors

Diagram: main aims of promotion

Promotion aims to support sales of new and existing products, inform customers and improve brand
and business image

Above-the-line promotion refers to advertising aimed at reaching a wide audience through

traditional mass media channels
Advertising may use media such as television, radio, newspapers, magazines and outdoor
sites such as billboards
Below-the-line promotion includes marketing communications over which a business has direct
control and which do not make use of mass media
These channels include direct marketing, sales promotions, personal selling and public relations
(PR)

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Types of Promotion
Businesses have a wide choice of promotional tools and techniques Your notes

They must select the most appropriate methods for their product, target audience and budget

Diagram: types of promotion

Businesses may choose to use several of these methods to promote their products

Evaluating the Different Promotional Methods

Method Explanation Advantage Disadvantage

Advertising Promotion through Can reach large Memorable

paid channels such audiences and advertising
as television, radio, increase brand campaigns can be
print media, online awareness very expensive
advertising and
outdoor advertising
Can create a specific The effectiveness of
brand image or advertising is often

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message, e.g. the difficult to measure

advertising campaign
run by Compare the Many customers Your notes
Market (Meerkat) tune out or
ignore advertising

Direct Communicating Targets specific Can be intrusive as

Marketing directly with audiences and allows customers may
customers through personalisation of the perceive it as spam
email, text message, message to individual
social media or post customers
Can also be costly,
Businesses can track especially if
results (for example, businesses need to
online advert clicks) purchase customer
and adjust their databases
strategy accordingly

Sales Temporary incentives Can quickly boost Heavy discounting

Promotions or discounts such as sales or customer reduces revenue
free samples, buy engagement significantly
one get one free through impulse
(bogof), discount purchases
coupons, loyalty Attract deal-seeking
cards,] and rebates customers who may
(customers have to Can help to clear out not be loyal to the
mail in to receive stock or promote a brand
money back) new product
May reduce sales of
Can be targeted at full-priced products
specific groups of
customers

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Personal A salesperson Builds relationships Hiring and training

Selling interacts with with customers and sales staff increases
Your notes
potential customers helps to understand costs
one-on-one either in their specific needs
person or through
digital channels Difficult to scale the
Can provide approach to larger
personalised advice audiences
and guidance to
customers

Sponsorship Agreement where a Builds brand Sponsoring high-

business provides awareness and profile events or
financial or other credibility properties can be
support to an event, expensive
team, or organisation
in exchange for Creates emotional
marketing exposure connections with the May not directly drive
target audience sales

Can take many Negative publicity is

forms, such as logo May support specific a risk
placement or business objectives
such as entering new E.g. In 2022
naming rights (For Kanye West was
example, Arsenal's markets or reaching
new customers dropped by
Emirates Stadium) sponsor Adidas
when he made a
series of
offensive
statements

Public Building relationships Can enhance a Can be time-

Relations (PR) with the public and business's reputation consuming
manage business and credibility
reputation
For example, a Difficult to measure
brilliant PR the direct impact of
Include media strategy helped PR activities on
relations, product KFC to profits
launches, crisis communicate with
management and customers in 2018
community when supply chain
outreach issues causes UK
and Ireland KFC

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outlets to run out

of chicken
Cost-effective when Your notes
compared with
advertising or personal
selling

Digital Promotions or Can be highly targeted Easily ignored or

Communications communication to specific customer filtered out by
delivered segments customers
electronically, such
as social media,
search engine Can provide real-time May require
optimisation (SEO) or engagement and significant
social media apps feedback from investment in
such as Instagram customers technology or data
and Twitter infrastructure

Can be used for May not be effective

building brand for reaching older or
awareness, less tech-savvy
generating leads or customer segments
driving sales

Spending the Marketing Budget Effectively

A marketing budget is the plan for marketing spending over a specific time period
A budget helps the business to determine how much can be spent on advertising, sales
promotions and other promotional activity
It allows the effectiveness of the marketing department to be assessed
The size of the marketing budget can be calculated in several ways
Using market and competitor averages
E.g. using a proportion of sales revenues
Using the businesses marketing objectives
E.g. How much needs to be spent to increase market share by 5%
Using figures from the the previous year and adjusted for known changes in the marketing
activities this year

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E.g. the budget may have increased this year due to the development of a new product
A small budget limits the media a business can use for advertising or the techniques it can use
Your notes
Smaller businesses often find it difficult to use promotion to compete with larger businesses
Online promotional activity may be the most cost-effective way to reach large or targeted
audiences
A business will need to compare the cost of promotional activity with increases in sales it generates
Over time businesses will determine the most effective methods for their specific circumstances

EXAM TIP
Make sure you can select suitable promotional strategies for particular products and explain why
they are suitable
Remember that advertising does not necessarily increase sales and profits. More subtle
promotional efforts can achieve outstanding results too
Advertising may increase sales but if prices have been reduced and advertising expenditure
increased then profits may not increase

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Technology & The Marketing Mix

Your notes
Introduction to E-Commerce
E-Commerce is the trade of goods and services over the internet
Businesses can trade through their own websites
Alternatively, platforms such as Amazon, Ebay and Etsy offer the chance for small businesses to
sell their products online
The rise of e-commerce means customers increasingly pay online using credit/debit cards with the
result that contactless payment systems (such as Apple Pay and Paypal) are growing in popularity

Opportunities & Threats of E-Commerce

E-commerce can make life more convenient for customers and is a source of competitive advantage
It also provides the potential for small businesses to reach large audiences
However, setting up an e-store can be costly and some consumers may be concerned about security
risks of purchasing online
The opportunities and threats of e-commerce can be considered for both the business and the
consumer

Opportunities and Threats of E-commerce to Business

Opportunities of E-Commerce for Business Threats of E-Commerce for Business

Websites offer a direct and cheap Competition comes from many businesses
promotional method for businesses around the world, allowing customers to easily
switch brands

Businesses can easily make online purchases Large warehouses and efficient stock control
of supplies and materials from other systems are essential to fulfilling online orders
businesses

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An easy-to-use and well thought out website E-commerce is not suitable for businesses
can encourage customers to buy more selling personal services such as beauty
Your notes
services or home improvements
E.g. Automation suggests complimentary
products often purchased at the same
time

Dynamic pricing techniques can easily be The lack of face-to-face contact with
implemented so profit can be maximised consumers means businesses miss out on
during periods of high demand instant and useful market research feedback

Opportunities and Threats of E-commerce to Customers

Opportunities of E-Commerce for Threats of E-Commerce for Customers

Customers

Competition drives prices down and Poor connections or technical difficulties can
allows customers to easily 'shop around' sometimes deter or stop customers from using the
and compare prices website to make purchases

Electronic payment using credit and Customers in low income countries may not be able
debit cards is relatively easy to access the products due to poor infrastructure
limiting potential market size
E.g. Using 'one-click' platforms such
as Apple Pay

E-commerce is convenient as it allows Many consumers are concerned about identity

customers to shop from anywhere in the theft or fraudulent use of credit cards if they buy
world goods online
E.g. when travelling, 24 hours, on
many different devices

Customers can buy from worldwide Products cannot be handled or tried out before
retailers so have increased choice purchase which means customers frequently return
them because they are unsuitable
Chinese e-tailers Shein and Temu are
increasingly popular in the UK

Using the Internet and Social Media for Promotion

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Social media marketing targets promotional activity at users of online communities such as
Facebook, Twitter Instagram and YouTube
Your notes
Businesses share interactive posts containing images, sound and video at very low cost
Viral marketing Is a strategy where businesses use online platforms to promote their products
by creating content at specific times, which can easily be shared and commented on by social media
users
E.g. During the COVID-19 pandemic, Coca-Cola and McDonald's ran campaigns that emphasised
community which aligned with the public's need for social support

Diagram: examples of social media communities

Examples of social media platforms

Interacting with customers on social media builds relationships, drives repeat business from existing
customers and attracts new customers as content is shared with other users

An Evaluation of Social Media Promotion

Advantages Disadvantages

Billions of active users on platforms allows Effort and time is needed to create
businesses to reach a vast audience quality content, manage multiple
platforms and engage with the
Deliver promotional content to specific groups audience
based on demographics, interests and behaviours
which increases the chances of reaching the target Public feedback and reviews, which can
audience include negative comments or
complaints, can be viewed by all social
Regularly and easily create and share content media users
which increases brand visibility and exposure
Social media platforms frequently
Social media marketing does not generally require update their algorithms which may
a large budget affect the visibility and reach of content

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Capturing users' attention amidst the

large volume of competing content is
challenging Your notes

As social media platforms evolve, businesses must also adapt their social media strategies to keep up
with the latest trends
E.g. Instagram has been a popular platform for businesses to promote their products through
influencer partnerships.
More recently many businesses have shifted their focus to promoting their brands through short-
form video content on platforms like TikTok
The Influence of Technology on Sales, Costs and the Marketing Mix

Type of Influence on Sales Influence on Costs Influence on The Marketing

Technology Mix

E-commerce A powerful tool for Has helped businesses Offers businesses new
expanding the reduce overhead channels for
customer base costs by eliminating advertising and
and increasing the need for physical promotion
sales storefronts
Shopify has
Amazon has Zappos saved $10 customisable
enabled many million in operating storefronts, email
businesses to sell expenses by closing its marketing tools, and
their products call centre and search engine
online and reach a focusing on online optimisation (SEO)
global market customer service capabilities

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Social Media Powerful tool to Cost-effective New channels for

increase sales by alternative to building brand
Your notes
building traditional advertising awareness and
relationships with channels engaging with
customers and customers has
generating leads Fast-food chain transformed
Wendy's has promotion for many
Glossier has increased advertising businesses
leveraged social on their Twitter
media to build a account, while Instagram allows
loyal customer reducing advertising businesses to share
base on Instagram expenditure in the and live
with 1.5 million national press stream content
monthly visitors

Digital New channels for A cost-effective The product element of

communications reaching alternative to the marketing mix has
customers and traditional been enhanced as
closing deals communication product information
include the use of channels and customer service
email marketing can be communicated
Increasingly online
WhatsApp is used to
support customer Mailchimp provides
service allowing businesses with
employees to work customisable email
from anywhere templates and sales
reducing the need for tools
call centres

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