These comprehensive notes cover the whole of Theme 1 (Marketing and people) and are structured using the actual Pearson exam specification for ease of use. Themes 2, 3 and 4 also available for download.
Theme 1: Marketing and people
1.1 Meeting customer needs
1.1.1 The market
A) Mass markets and niche markets: characteristics, market size and market
share, brands
Marketing - Management process of identifying, anticipating and satisfying consumer demands for
profit.
Mass market - Aimed at the general population. Products of mass appeal are sold.
A product will be sold to all consumers in the same way.
Advantages:
Economies of scale due to large scale production = lower average unit costs.
Large sales volume = higher revenue.
Disadvantages:
Competition.
Homogenous products need differentiating through lots of expensive advertising.
Niche market - Subset of the main market that addresses specialist need.
Caters to a particular segment.
Advantages:
Can charge premium.
Less competition.
Disadvantages:
Risky - demand may not be constant.
No economies of scale.
Market size - The total size of the market in terms of sales value or volume (e.g. the total sales of the
crisp market).
Formula:
Total market size = sales value/volume of firm / market share of firm x 100
Market share - How much of the total market size the firm holds itself (e.g. how much of the crisp
market Walkers owns).
Formula:
Market share of business = sales of business / total sales in market x 100 (percentage)
Brand - Characteristic/name/symbol that differentiates/distinguishes a product from other suppliers.
B) Dynamic markets: online retailing, how markets change, innovation and
market growth, adapting to change
Dynamic market - A market that is subject to rapid and/or continuous change.
,Online retailing - Constantly changing, offering customers new products and new ways to shop. Involves
selling products on the internet.
Practical and easy to set up.
Cheap to start up because of lower fixed costs and lower overheads.
Flexible/can run a business from anywhere.
Opportunities for fast growth.
However, some entrepreneurs may not possess the IT skills necessary to set up an online business and it
is easy for competitors to stay aware of a business' model/products/prices. There are also technical
problems such as dealing with fraud, spam and viruses.
Innovation and market growth - Markets change in size and in nature. There is a state of flux, with
products being updated, modified and relaunched, giving consumers plenty of choice. As a result, new
markets form.
Why:
Economic growth (rising global standards = world has more money to spend so willing
consumers pay more and demand other goods).
Innovation.
Social changes.
Changes in legislation (e.g. green legislation helps growth in alternative energy markets).
Demographic changes.
Adapting to change - :
Have a culture of flexibility (e.g. flexible workforce) to make change easier.
Market research to see what needs changing.
Innovate and invest in R&D to reduce chances of failure.
Continuous improvement to keep customers interested.
Sell in a niche market.
C) How competition affects the market
Competition - Occurs when two or more businesses act independently to supply goods and/or services
to the same group of consumers. It can be direct or indirect:
Direct - Similar products that appeal to the same group.
Indirect - Different businesses make or sell products that are not in direct competition but compete for
the same group of consumers (e.g. DVD shop and the cinema).
Competition puts pressure on a business, which must become:
More efficient.
Market orientated.
Less wasteful.
Quality driven.
Persuasive through promotion of homogeneous goods to make customers switch.
D) The difference between risk and uncertainty
,Risk - Can be planned for. Probabilities of outcomes are at least understood/considered. Risk taking is a
conscious decision.
Uncertainty - Caused by unexpected (external) factors not in control of the business. Sometimes, they
can be predicted.
1.1.2 Market research
A) Product and market orientation
Product orientation - Approach to business which places emphasis on the production process and the
product itself.
Advantages:
Focus on quality - product is specific for its needs.
Outsourcing - one product is replicated.
Economies of scale - product is produced efficiently and in mass quantities.
Disadvantages:
Waste money marketing products that don't meet customer needs.
No competitive advantage - lose customers to competitors who offer more relevant products.
Narrow market focus - prevention of looking for new market opportunities.
Market orientation - Approach to business which places the needs of the customer at the centre of
decision making continually identifying, reviewing and analysing customer needs.
Advantages:
Continuous improvement.
Gain competitive advantage through market research.
Respond to changes when needed.
Disadvantages:
Expensive market research may be required.
Hard to respond quickly to market changes.
Ineffective data collection could lead to wrong decisions being made (e.g. could underestimate the
consumer).
B) Primary and secondary market research data (quantitative and
qualitative) used to: identify and anticipate customer needs and wants,
quantify likely demand, gain insight into consumer behaviour
Uses:
Gain feedback on quality, cleanliness, ease, value for money etc.
Enables business to plan to provide the services their customers require in their new projects.
Advantages Disadvantages Examples
Primary Research Gain a competitive Time consuming Survey
(Collecting data first advantage Generally more Questionnaire
hand) Relevant, up to date expensive Focus group
data Observation
Secondary Research* Less time consuming Over reliance can lead Internet
, (Collecting data that Generally cheaper to poor decisions Magazines
already exists) Irrelevant/dated data Newspapers
Competitors'
Quantitative Data Easy analysis Not as rich a source of Survey
(Collect data that can Objective/factual data Questionnaire
be quantified) Larger scale No expansion Structured interview
Very limited Gov. publications
Qualitative Data Detailed data about Difficult analysis Focus groups
(Collect data about behaviour Subjective/fiction Observation
attitudes, beliefs and Allows for expansion Often done on a Unstructured interview
intentions) Can ask anything smaller scale Test marketing
*Can be split into two different types:
Internal - Collected from existing business documents or other publications (e.g. reports, sales figures,
stock patterns).
External - Sources outside the business collected by other organisations for their own purposes (e.g.
competitor information, government publications, newspapers).
C) Limitations of market research, sample size and bias
Human behaviour changes - Responses to questions may differ at different times, linked to social
desirability.
Biased market research sample - A particular statistic (e.g. age) does not reflect the true value of the
whole population. This is known as sampling discrepancy.
D) Use of ICT to support market research: websites, social networking,
databases
Websites - To conduct surveys on (e.g. SurveyMonkey).
Social networking - To attract volunteers to take part in your research.
Databases - To collate and store the research easily.
E) Market segmentation
Market segments - An identifiable group of individuals/a part of the market where consumers share one
or more characteristic or need.
Advantages:
Differentiation means that higher prices can be charged.
Understand who you are targeting.
Disadvantages:
Approximation - there could be different behaviours.
Identifying your intended target market segment could be difficult.
Geographic - Region, urban, rural, suburban, Acorn (A classification of residential neighbourhoods).
Demographic - Age, gender, social class (socioeconomic group), ethnicity, religion.
Psychographic - Attitudes, opinions, lifestyles.
Behavioural - Usage rate, loyalty.
, 1.1.3 Market positioning
A) Market mapping
Market map - A 2D diagram that shows two attributes of a brand and its rivals (commonly quality and
price).
Advantages:
Understand how customers view their product in relation to the market.
Demonstrate market research.
Disadvantages:
Only two attributes are analysed.
Expensive finding data w/ primary research required.
B) Competitive advantage of a product or service
Competitive advantage - Advantage over competitors gained through offering greater value. This could
be selling your product at low prices or by providing greater benefits that justify a higher price, like
quality customer service or having a good marketing mix.
C) The purpose of product differentiation
Product differentiation - The act of distinguishing a product/service from competitors to make it more
attractive to particular target markets. This is done in order to gain a larger customer base.
D) Adding value to products/services
Adding value - Increasing worth of resources by investing in them (e.g. having a USP or an attractive
design mix).
1.2 Market
1.2.1 Demand
A) Factors leading to a change in demand
Changes in the prices of substitutes and complementary goods.
Changes in consumer incomes (e.g. if the unemployment rate drops and more people have a
greater disposable income, the general population may be more likely to spend on discretionary
items such as holidays and vice versa).
Fashions, tastes and preferences (e.g. if more companies use videoconferencing than face-to-
face meetings, bookings will fall).
Advertising and branding.
Demographics (e.g. a rise or fall in size/composition of customer base).
External shocks.
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