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BUSINESS STUDIESBUSINESS STUDIES
Unit 1: Introduction to marketing
Photo: Morguefile.com
Pedro Fernández SánchezINSTITUT Milà i Fontanals
Pedro Fernández INSTITUT Milà i Fontanals2
1.1 Marketing
A. What’s marketing?
B. Importance of marketing.
C. Marketing mix.
Pedro Fernández INSTITUT Milà i Fontanals3
A. What’s marketing?
Detects customers’ needs and wants.
It is a management process.
Supplies customers with goods and services to make profit (mutually beneficial).
Pedro Fernández INSTITUT Milà i Fontanals4
B. Importance of marketing.
There is a need for customer satisfaction.
There is a need for business specialization.
Shows the development of an economy.
sa_ _ _ _ _ _ tion.
sp_ _ _ _ _ _ tion.
de_ _ _ _ _ ment
Pedro Fernández INSTITUT Milà i Fontanals5
C. Marketing mix.
It is a combination of elements that affects customers’ decision to buy.
The elements are the 4 Ps:– Product.– Price.– Promotion.– Place.
Pedro Fernández INSTITUT Milà i Fontanals7
Price
Quantity or amount of money a customer pays.
Photo: Morguefile.com
Pedro Fernández INSTITUT Milà i Fontanals8
Promotion
How customers are informed about the product.
Photo: morgefile.com
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Place
How the product will be distributed.
Photo: http://www.flickr.com/photos/grayconstruction
BUSINESS STUDIESBUSINESS STUDIES
Unit 2: Marketing mix
Photo: creativecommons.org/ author: Grochim
Pedro Fernández SánchezINTITUT Milà i Fontanals
Pedro Fernández INSTITUT Milà i Fontanals11
Unit 2. Marketing mix
2.1 Product
2.2 Price
2.3 Promotion
2.4 Place
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2.1 Product
A. Concept
B. Types of products
C. Product portfolio
D. Product life cycle
E. Packaging
F. Brand (or Trademark)
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A. Concept
Good or service that satisfies customer’s need and her desire to buy it.
Product differentiation is when a company chooses features to distinguish it from others
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B. Types of products
a) Consumption goods: they satisfy people’s needs directly. There are two types.– Non-durable goods: they disappear when we use
them.
Examples:________________________________Morguefile.com
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B. Types of products
– Durable goods: we can use them many times.
For example:___________________________Morguefile.com
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B. Types of products
b) Industrial goods: they are used to make other goods. They do not satisfy people’s needs directly.
For instance:___________________________Morguefile.com
Pedro Fernández INSTITUT Milà i Fontanals17
B. Types of products
c) Services: are non-physical products or economic activities.
Examples:_____________________________
Morguefile.com
Pedro Fernández INSTITUT Milà i Fontanals18
ACTIVITY 3 – Classifying products
GOODSConsumption Goods
Industrial goods
ServicesNon-durable
Durable
Wood
Toothpaste
Machine
Clock
Water
Education
Theatre ticket
Microwave
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ACTIVITY 3 – Classifying products
GOODSConsumption Goods
Industrial goods
ServicesNon-durable
Durable
Belt
Wash & Laundry
Sheets of paper
Tools
Lorry
Chalk
Restaurant Meal
Calculator
NESTLÉ
Baby Food Cereals Chocolate DairyCulinary & Frozen Food
Ice creams Coffee Drinks
Nestlé
Nativa
Nidina
Naturnes
Chocapic
Golden Grahams
Cheerios
Crunch Cereals
Kit Kat
Crunch
Caja Roja
Nestlé Noir
Dolca
After Eight
La Lechera
Sveltesse
Ideal
Buitoni
Litoral
Solís
La Cocinera
Extreme
Nestlé Gold
Maxibon
Nestlé
Nestcafe
Pirulo
Nestlé Gold
Bonka
Dolce Gusto
Ricoré
Nestea
Nesquick
Eko
Viladrau
Aquarel
San Narciso
Vittel
Perrier
S.Pellegrino
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NESTLÉ
Baby Foods Cereals Chocolate DairyCulinary &
Frozen FoodsIce creams Coffee Drinks
Nestle
Nativa
Nidina
Naturnes
Chocapic
GoldenGrahams
Cheerios
CrunchCereales
Kit Kat
Crunch
Caja Roja
Nestlé Noir
Dolca
After Eights
La Lechera
Sveltesse
Ideal
Buitoni
Litoral
Solís
La Cocinera
Extreme
Nestle Gold
Maxibon
Nestlé
Pirulo
Nescafe
Nestlé Gold
Bonka
Dolce Gusto
Ricoré
Nestea
Nesquick
Eko
Viladrau
Aquarel
San Narciso
Vittel
Perrier
S.Pellegrino
Length = Width =
Product line
8 products lines 40 products
Line depth =
5 products
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C. Product portfolio
a) Length (of product mix): the total quantity of goods that the company sells. It is the group or set of product lines.
b) Width (of product mix): the number of different products line.
c) Product line: is a set of goods with similar characteristic.
d) Line depth: number of products in a line.
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PRODUCT LIFE CYCLE (PLC) Concept: It is the period of time from the introduction until the withdrawal of a product.
TIME (Years)
SALES (€)
Product Life Cycle Curve
STAGES PLC
Introduction Growth Maturity Decline
The product is new; there are low sales and slow growth.There are high costs of developing, making and advertising the product.Usually the product makes a loss.Adverts objective: Inform customer
Sales increase when more customers buy the product.The production increases and costs fall (economies of scale).Competitors enter the market when the product starts to make a profit.Adverts objective: Differentiate from other products.
The product reaches maximum sales and profits.There is more competition until the market reaches saturation.Adverts objective: Maintain or increase market share
Sales and profit fall until the product makes a loss.Adverts objective: Remind customers
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E. Packaging
a) Importance. It is important because it helps to sell and to
distinguish the product (differentiates) More so for Fast Moving Consumer
Goods (FMCG) Examples of FMCG: chocolates, soft
drinks…
PRODUCTS THAT WE CAN SELL QUICKLY AT
RELATIVELY LOW COST.
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E. Packaging
a) Characteristics:
BEFORE BUYING Easy to identify (e.g.______________) Attractive (encourages buying our product) e.g._______________
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Packaging characteristics
Inform about its content for non transparent packaging (e.g. _________________)
AFTER BUYING Easy to open (e.g. _________________) Convenient to use (especially if we use
often) e.g. _________________________ Ease of transportation and storage
e.g._______________)
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F. Brand (trademark)
a) Concept: is a name (pronounced), symbol, logo (image), slogan or design that distinguishes a seller’s goods or services in the market.
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F. Brand (trademark)
b) Characteristics: Short Easy to remember Associated with product (e.g.___________) Sometimes we use brand to talk about
product (e.g._____________________)
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Brand Strategies
I. Global brands.
II. Multibrands. Individual brands Product line brand Second brand
III. Own-brands.
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I. Global brands
When the company uses the same name for all the products. E.g. __________________
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II. Multi-brands
Individual brands: we use a different brand for each product. E.g. Procter & Gamble, Henkel, Uniliver, Sara Lee
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II. Multi-brands
Product line brand: we use the same brand for similar products. E.g. Pascual - Zumosol
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II. Multi-brand
Second brand: Companies with an exclusive / luxury brand; they want to find another market segment (low price) to sell another brand. E.g. Rolex - Tudor
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III. Own-brands
When big supermarkets sell their own products, made by other companies, at a lower price. E.g. Dia, Mercadona, Carrefour
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2.1 Price
A. Concept
B. Fixing prices- Market based pricing
- Cost based pricing
- Competition based pricing
C. Price strategies- Price skimming or creaming.
- Penetration pricing
- Psychological pricing
B. Fixing prices
MARKET BASED PRICING It uses the market demand to calculate price. Demand is the quantity of goods a consumer
wants to buy. Supply is the quantity of goods that a
company wants to produce and sell.
Demand & Supply Law
The basic law of demand and supply says:- If price goes up, then demand falls and
supply increases.- If price falls, then demand goes up and
supply decreases.- At the equilibrium, demand equals supply
and we have a market price.
GRAPH: Demand - Supply Law & Equilibrium
QUANTITY (units)
Pric
e (€
- E
uros
)
Demand (curve)
Supply (curve)
Equilibrium
40 units (Qe)
€10
Pe
m
(40 units,€10 )As price falls
Quantity of demand goes up
As price falls
Quantity of demand falls
B. Fixing prices
COST BASED PRICING
It uses production costs to work out price.
It takes fixed costs and variable cost, and adds a fixed percentage of the cost of making the product, called mark-up.
Selling price = unitary production cost + mark-up;
production cost = fixed cost + variable cost
COST BASED PRICING: A Practical Example
A manufacturer business has a production unitary cost of €20/unit. Find the selling price if the company wants to get a 15% mark-up.
DATA:
Cu = €20/unit
Mark-up = 15% o/Cu
SOLUTION:
Selling price = Cu + Mark-up
Sell. price = €20/unit + 0.15 (€20/unit)
Sell. price = €20/unit + €3/unit = €23/unit
COST BASED PRICING: Exercise
A small firm has a unitary: fixed cost of €10/unit and a variable cost of €5/ unit. Find the selling price if the company wants to get a 30% mark-up.
DATA:
CFu = €10/unit
CVu = €5/unit
Cu = (€10 + €5)/unit
Mark-up = 30% o/Cu
SOLUTION:
Selling price = Cu + Mark-up
Selling price = (CFu + CVu) + Mark-up
Sell. price = €15/unit + 0.3 (€15/unit)
Sell. price = €15/unit + €3.5/unit = €18.5/unit
B. Fixing prices
COMPETITION BASED PRICINGSets price based on competitors’ prices. Thereare three possibilities: Similar price (for similar products’ features). Lower price (we earn more selling big
quantities). Higher price (we have a famous product or
better quality).
COMPETITION BASED PRICING
If the market has a leader (e.g. Telefónica),
Then other businesses can: Follow the leader (similar prices) Set independent price (it can provoke a price
war)
C. Price strategies
Price skimming or creaming: company starts with a high price (market segment) and reduces it later (to increase the market).It is used for:
- products with no competitors- new products (e.g. latest Channel)- fashionable products (e.g. New Diesel jean)- technological products(e.g. Iphone4)____________)
______________)
______________)
C. Price strategies
Penetration pricing: when a product has a low initial price to enter the market.
When sales go up, the price is increased.
E.g. New Airplane Company.___________________)
C. Price strategies
Psychological pricing: It is based on how customers associate a price with a feature of a product.
TYPES:- Regular price- Premium prices- Price on customers’ expectation- Critical price point
C. Psychological pricing (TYPES)
TYPES: Regular price (daily used product such as
milk, tea, sugar…) Premium prices (or prestige pricing, for
luxury products; e.g. Ferrari limited edition) Price on customers’ expectation (depending
on customer satisfaction) Critical price point (e.g. €99.99 or €4.95)
e.g.___________________)
(e.g.______________)
(e.g.__________________)
GRAPH: Demand - Supply Law & Equilibrium
QUANTITY (units)
Pric
e (€
- E
uros
)
Demand (curve)
Supply (curve)
Equilibrium
40 units (Qe)
€10
Pe
m
(40 units,€10)
3. Promotion (or promotion-mix)
A. ADVERTISING
B. SALES PROMOTION
C. PERSONAL SELLING
D. PUBLIC RELATIONS
A. Advertisement
a) Concept.
b) Basic objectives (AIDA Model).
c) Principles.
d) Advertising media.
e) Stages to design an advertisement message.
Concept of Advertisement
It is a message that companies (firms) send to inform customers and/or to persuade them to buy a product.
It uses a channel of communication or media so you need to pay (cost).
Basic objectives of Advertising(AIDA Model)
A – Attention (attract customers’ attention). I – Interest (raise customers’ interest
demonstrating advantages). D – Desire (convince customers that our
product will satisfy their needs). A – Action (convince customers to buy, most
important and difficult).
Principles of Advertising
Be simple (don’t make them think too much). Be creative (your product will be different
from others). Be repetitive (to remember the message:
slogans, songs…). Be honest (you cannot cheat a customer
twice).
Advertising Media (I)
TYPES PROS CONS
TV -Can reach a lot of people and target customers-Good for mass-market products-It is profitable
-It is very expensive
Radio -It is short, dynamic & very repetitive-Low cost
-Can target listeners (only sound)-Small audience
Advertising Media (II)
TYPES PROS CONS
The Press -It is easy to target effectively.
-It is silent and static.
Poster & Billboards
-Have high visual impact.-Many people see them
-Only see them for a few seconds.-Limited information
Internet -Global coverage-Low costs
-Security problems-Great competition
Stages to design an advertisement message
1. Market research. The business needs to know:
- If the product has a market.
- If the product raises interest for futures sales.
2. Advertisement strategies.
- Define the market segment (customers we target).
- How much the firm wants to earn.
- Show Special qualities that the company has to offer.
Stages to design an advertisement message
3. Advertisement message.
- Media (the ads depend on the media we choose), e.g. magazines play with colour.
e.g. TV plays with sound, voice, music.
- Target audience (it depends on the market segment).
e.g. small car, low price.
B. Sales Promotion
a) Concept. Businesses use it to produce a short-term increase in sales.
b) Reasons:
- Increase market share - Cash needs
- New product or new use - Stock surplus
B. Sales Promotion
c) Examples:
- Special offers (buy one get one free)
- Free gifts
- Sales (in January / July, 50% off)
- Discount vouchers (€5 off the next book you buy)
- Free samples of the product.
C. Personal Selling
a) Concept.
– There is direct contact between the sales person and the customer.
– The sales person can satisfy customers’ needs better.
C. Personal Selling
b) Characteristics:– Transmits the image of the company.– Informs, persuades the customer to
buy.– It has a quick response.– Sales person needs to know the
product very well.
D. Public Relations
a) Purpose. It is to improve and keep good relations between company and the public.
b) How?• In charity events, sponsorships,
concerts, conferences…
D. Public Relations
c) When?• Change the company’s image• Update the company’s image• The company is in a new market• The company has been discredited
A. Place concept
The product needs to be at the right time, in the right amount and in the right market.
The product usually passes through intermediaries before arriving at the customer (e.g. wholesalers, retailers…).
B. Place Functions
a) Transport. We need to decide lot size and frequency to choose one. It depends on type and price of the product. E.g. FMCG (see packaging).
b) Store. Intermediaries buy goods in large quantities (bulk), and then divide them into smaller quantities breaking bulk process.
B. Place Functions
c) Customers’ information & advice: important to introduce a product into a new market.
C. Intermediaries
a) Types: Wholesalers. Buy goods from
manufacturers and sell to other wholesalers or retailers. Types: specialised (e.g. PLATAFORMA) and general (e.g. MAKRO)
Retailer. They only sell to final customers
C. Intermediaries
b) Functions: (they justify their added value) Physical Distribution. It cuts down the
number of transactions between manufacturers and retailers. It makes distribution simpler.
Financing. Wholesalers pay the total amount for the products to the manufacturer. This way manufacturer does not have to wait to charge.
D. Place Channels
a) Concept: It is the route a product takes from the producer to the consumer.
b) Types: Channel 1. Producer Customer
(e.g. jewellery, it is important to give customer’s advice)
__________ __________
_______ _______(e.g.______,
(________ ______)
D. Place Channels
b) Types: Channel 2. Producer Retailer
Customer (e.g. Supermarkets)
Channel 3. Producer Wholesaler Retailer Customer (e.g. FMCG –traditional distribution)
_______ _______
_______ ______________ _______(e.g. _______
(e.g.____________)_______
D. Place Channels
c) Alternative channels: E-commerce. It is becoming a more and
more important way to distribute your products.
Franchising. It is when a firm (franchisee) uses the business model of another company (franchisor). The franchisee has to pay the franchisor (e.g. Pan’s & Company)
___________
__________.
____
__________________
____ _____________________
D. Place Channels
c) Alternative channels: Teleshopping. Goods are bought on the
phone with credit card.
Vending machines. E.g. tobacco,soft-drinks, cinema, theatre…
_______ _____________.
_____________,
_____________, _________, _________...
E. Place Strategies
a) Intensive distribution.
b) Exclusive distribution.
c) Selective distribution.
A. Intensive distribution
B. Exclusive distribution
C. Selective distribution
Concept Distribution of low priced or impulse purchase products
Limits the distribution to a single retailer
Small number of retailers chosen with large geographical distribution
Channel Channel 3 Channel 2 Channel 2
Product FMCG or impulsive purchase product
Important to give customers’ advise
Computers, TVs,…
Examples Chocolates, soft drinks,…
Bang & Olufsen, iPod,…
Computers: Media Markt, PC City,…
E. Place Strategies
a) Intensive distribution.
c) Selective distribution.
Strategies a) and c) require selecting an
intermediary which has experience, credibility
and is known by the target audience.
_________, _________,
_________.
BUSINESS STUDIESBUSINESS STUDIES
Unit 3: Merchandising
Photo: Morguefile.com
Pedro Fernández SánchezINTITUT Milà i Fontanals
1. Elements of merchandising.
A. CONCEPT
It is a way of attracting consumers to a product and persuading them to buy it.
B. POINT-OF-SALE (POS) material
It is the most important form of merchandising.
_____________
________.
___________
___________________.
Examples of POS
Display stands and cases Moving or illuminated in-store displays Pavement models, such as palm tree in
summer Wire racks, like those that store packets of
crisps Show cards, posters…
_______ _______
________ ____________
____________
_____________,
_______, ______________...
Examples of POS
High quantity of products (especially for dairy products to show they are fresh)
Pile presentation (no need to have a perfect look, untidiness)
Hypermarket displays (height levels 1-2-3, impulse purchase products, well known brands…)
(_______________________________________________________)
___________________________________)
(_________________________
_________________________,
_________,
_________________
_________________________,
POS Hypermarket displays (examples)
Height levels 3-2-1Level 3 (eyes): to level 1 –32%; to level 2 –20%
Level 2 (hands): to level 1 –40%; to level 3 +63%
Level 1 (feet): to level 2 +34%; to level 3 +78%