Pearson LCCI Level 3 Certificate in Modern Marketing...2 LCCI LEVEL 3 CERTIFICATE IN MODERN...

Pearson LCCI Level 3 Certificate in

Modern Marketing Principles

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Pearson LCCI Level 3 Certificate in

Modern Marketing Principles

Lynne Williams

Pearson KAO Two KAO Park Harlow Essex CM17 9NA

And associated companies throughout the world

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Some Rights Reserved. This publication may be copied and distributed only by Pearson approved LCCI centres or students studying an LCCI course, as long as the Pearson logo remains, that Pearson is acknowledged as the originator of this work and that no alteration is made to the original material. Selling and making a profit on this publication is strictly prohibited. All other rights are reserved and will need the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Barnard’s Inn, 86 Fetter Lane, London, EC4A 1EN.

ISBN 978-0-9924261-7-0

CONTENTS

CHAPTER 1 UNDERSTANDING MARKETING 11.1 1.2 1.3

The nature of marketing 2 Marketing and the nature of business 4 How and why a business markets internationally 9

CHAPTER 2 THE MARKETING PLAN 13

2.1 2.2

Business and marketing objectives 14 Analysing the internal and external marketing environment 16

CHAPTER 3 MARKET RESEARCH, DATA COLLECTION AND SEGMENTATION 23

3.1 3.2 3.3

Conducting market research 24 Sampling techniques 27 Segmenting the market 30

CHAPTER 4 MARKETING MIX 35

4.1 The marketing mix 36

CHAPTER 5 MEASURING THE SUCCESS OF MARKETING ACTIVITIES 51

5.1 Measuring success 52

CHAPTER 6 LEGAL AND ETHICAL ISSUES 57

6.1 6.2 6.3

Legal issues 58 Ethical issues 60 Ethical business practices 61

APPENDIX 1 GLOSSARY OF BUSINESS TERMINOLOGY 67

APPENDIX 2 ANSWERS 73

Learning Objectives

CHAPTER 1UNDERSTANDING MARKETING

1.1 The nature of marketingUnderstand what marketing activities are and their importance to a business.

1.2 Marketing and the nature of businessUnderstand that marketing activities may be affected by the type of business, its aims and objectives, markets and stakeholder interests.

1.3 How and why a business markets internationallyUnderstand how and why marketing can take place in international markets and the impact this has on marketing activity.

2 LCCI LEVEL 3 CERTIFICATE IN MODERN MARKETING PRINCIPLES

1.1 The nature of marketing

The marketing of a business is thought to be a key factor in a business’s success strategy. Without marketing, who will know about the business or what it offers? Marketing is possibly the most important activity in a business because it has a direct effect on an organisation’s profitability and sales. Larger businesses will dedicate specific staff and departments to marketing activities.

Marketing attracts customers and manages the relationship between the customer and the business. It identifies consumer demand relative to a good or service and develops ways in which customers can purchase these in the optimum amounts to make a business profitable.

The elements of marketing activitiesMarketing activities incorporate a number of elements:

MARKETING

Identifying changing trends

in the market

Creating an advantage over

competition

Identifying opportunities in

the market

Attracting new customers

Satisfying and retaining existing

customers

Selecting appropriate parts of the

market to align with business

capabilities

Creating and maintaining a

brand and brand image

Creating a strategy and

plan to target markets

Figure 1.1 The elements of marketing activities

Attracting new customersTrying to win new customers in your local area, nationally or internationally. This can be done by:

• asking customers to recommend the business to their friends and colleagues• advertising in local media• using other forms of marketing, including online/digital methods.

3UNDERSTANDING MARKETING

Satisfying and retaining existing customersFocusing on customers who have already bought from you to ensure you are meeting their needs. Businesses can also increase sales by:

• selling more of the same goods or services to regular customers• persuading customers to become repeat customers• finding customers who have stopped buying from the business and trying to win them back• talking to potential customers who do not buy from the business at the moment to find out what it would

take for them to switch from the competition.

Creating an advantage over competitionA business can build an advantage over its competitors by making sure its products match its customer needs and are a better solution than those offered by its competitors. This can be done by:

• using customer service to ensure all customer concerns are dealt with promptly• having a person available to speak with customers directly, taking the time to get to know them as

individuals• finding out how the company can improve its good or service offering.

Identification of changing trends in the marketBusinesses need to keep on top of trends. They do this by identifying the most important trends they think are most likely to impact their market. This is often done through a STEEPLE analysis to identify the external factors impacting on a business.

Identification of opportunities in the marketTo be successful, businesses need to identify opportunities in the market. This is often done through a SWOT analysis where external opportunities (as well as threats) are analysed.

Businesses may also carry out market mapping. This allows them to identify where there are ‘gaps’ in the market and where customer needs are not being met.

Businesses may also carry out a competitor analysis to assess the strengths and weaknesses of its competitors, helping to identify new opportunities for the business.

Selecting appropriate parts of the market to align with business capabilitiesThis can be done using a SWOT analysis of the internal strengths and weaknesses of the business, as well as looking at the core competencies, production capacity, branding, product portfolio and staff skills of the business.

Creating a strategy and plan to target marketsBusinesses create target markets to use in its strategic planning. This means targeting specific customers who have similar needs and wants with the same message, products, pricing and through the same distribution channels.

To create a target market, businesses take their customers and segment (group) them. This creates groups of customers based on similarities, and each group becomes a target market.

Creating and maintaining a brand and brand imageBranding can be defined as a name, term, design, symbol or any other feature that identifies a seller’s goods or services as distinct from those offered by other sellers. It is what makes a business recognisable and memorable.


Branding and image affects the way a customer views a business and will influence their attitudes towards the business. All brands, no matter how big or small, need to maintain a consistent brand image

Examination TipYou need to be able to understand the marketing activities that make up marketing, their elements and why they are important to a business.

1.2 Marketing and the nature of business

Types of businessBusinesses operate in either the private or the public sector.

Businesses

Private sector(owned by private

individuals or groups)

Public sector (owned by local or

national government)

Figure 1.2 The public and private sectors

The private and public sectors include both profit and not-for-profit businesses. Not-for-profit business would include charities, social enterprises, voluntary and community organisations, public arts organisations and housing organisations.

Business aimsA business aim is a statement of what a business is trying to achieve; it is also known as a ‘goal’ or ‘target’. For example, a business can set itself aims such as:

• Survival• Growth• Social well-being• Increased profit• Increase in market share• Improved corporate image• Meeting government standards• Reduced impact on the environment• Corporate social responsibility (CSR)


Different types of business may have different aims and objectives. For example, businesses in the public sector are set up with the aim of providing a public service rather than to make a profit or increase sales.

Business objectivesBusiness objectives are stated, measurable targets of how a business achieves its aims. Having an objective is useful because it helps staff to focus on shared aims. An example of an aim could be to achieve a market share of its sales of 45% in 2018.

Businesses may have alternative objectives, for example, such as ethical and socially responsible objectives, that are based on their beliefs on how businesses should treat the environment and people who are less fortunate.

Types of marketThe place where buyers and sellers come together is called a ‘market’. Not all markets are the same; some are large, some are small, some are focused on one location, while others operate around the world. To measure a market, we talk about market size. This means the number of customers in the market (either current or potential buyers) and the amount (value or volume) that they buy.

Mass and niche marketsIn most markets, there is one main (mass) market made up of products with mass appeal (for example orange juice and soft drinks). A niche market is the opposite of this. It is a focused, targetable part of the market. In a niche market, goods or services focus on specific customer needs which cannot or are not being met by mainstream businesses.

Mass marketing is a marketing strategy that uses mass distribution and mass media. This means that businesses are trying to market across all demographics. Businesses and companies with products that cater to almost all age groups typically use mass marketing.

Niche marketing focuses on a smaller market segment with specific definitions. It focuses on a smaller group of people with easily identifiable preferences, wants and needs. Businesses with limited marketing budgets often employ niche marketing, although there are also large companies with established brands that use niche marketing successfully.

Consumer and capital goods marketsConsumer goods (sometimes called ‘final goods’) are goods that are used for final consumption. Consumer goods include food products, household appliances, electronic items, furniture and cleaning products. These can be classified into groups:

• Services – These are things done to you or for you (for example a car wash).• Fast-moving consumer goods (FMCGs) – These sell in high quantities but at a low unit price. They are

purchased frequently (for example loaves of bread).• Consumer durables – These have a high unit price but sell in lower quantities (for example games

consoles, microwaves and personal computers).

Capital goods are goods that are used for future production by manufacturers. These include plant and machinery, computing technology, software, furniture and vehicles. Businesses do not sell capital goods which means capital goods do not directly create revenue.

The difference between consumer goods and capital goods are based on how they are used. This is because a physical good could be classified as either a consumer good or a capital good. For example, an orange bought


at a supermarket and eaten is a consumer good. An identical orange bought by a company to make orange juice is a capital good.

Business-to-Business (B2B) and Business-to-Consumer (B2C)Business-to-Business (B2B) involves the sale of one company’s good or service to another company. B2B can offer the raw materials, parts or services businesses need for their production process. B2B also describes one business buying the services of another for operational reasons (for example a business employing an accountancy firm to audit their finances). B2B can also be a business reselling goods and services provided by others (for example a retailer buying the end product from a manufacturer).

Business-to-Consumer (B2C) involves selling goods or services directly to the consumer (for example, someone buying a computer from an electronics retailer).

For example, think about a television set. The purchase of components, screens and plastics by the manufacturer, and the sale of the television set from the manufacturer to the retailer would both be B2B transactions. Whereas, a customer buying the television set from an electronics retailer would be considered as a B2C transaction.

The difference between customers and consumersAlthough the terms are often used interchangeably, by strict definition customers purchase goods and services, whereas consumers use the goods and services; the consumer may not have paid for the good or service.

A customer can be a consumer but a consumer does not necessarily need to be a customer. For example, a child could be a consumer of breakfast cereal, whilst the child’s parent could be the customer and the consumer. Another example would be someone receiving a gift of a box of chocolates. The person who buys the chocolates is the customer and the person who eats them is the consumer.

Business stakeholdersStakeholders are the people who have an interest in a business and are affected by what it does and the way it operates. They may have a direct or indirect interest in the business and may be in contact with the business daily or only occasionally.

All businesses have stakeholders, although larger businesses are likely to have more stakeholders than small businesses. They can be split into two groups:

• Internal stakeholders – owners/shareholders, managers, directors, departments, employees• External stakeholders – shareholders, customers, creditors, suppliers, distributors, government, local

community, pressure groups.

Stakeholders have different interests in a business. These may or may not be financial.

Stakeholders Interests and influence

OWNERS / SHAREHOLDERS

• They have time and money invested in the business.• They want the best return on investment (ROI).• They want the business to survive.• They have a direct influence on a business (for example, they can

decide to expand the business).


MANAGERS / DIRECTORS • They seek a good salary and benefits, good working conditions, and future job opportunities and security.

• They can influence the pay, security and job prospects of employees whom they manage.

• They can influence the business by assisting the owners/shareholders in increasing the size/scale of the business.

EMPLOYEES • Employees work for the business.• They seek a good salary and benefits, good working conditions, and

future job opportunities and security.• They can influence the business (for example, on staff needs and

wants which can include working conditions).

LOCAL COMMUNITY • People that live in the local community often want jobs as well as minimum pollution and damage to the area. They want local jobs, a clean environment and support for local projects.

• They can influence the performance of the business (for example, they can bring positive or negative press coverage). They may try to influence where a business is located by petitioning for or against a business coming into their locality.

SUPPLIERS / DISTRIBUTORS

• They provide goods or services to a business.• They want to build long-lasting relationships with a business to

allow them to continue trading with them. They want large and regular repeat orders to ensure revenue coming into their own businesses.

• They want reliable and on time payment of invoices.• They can influence the performance of the business (for example,

they can stop supplying products to a business).

PRESSURE GROUPS • They are people who are interested in whether the business is acting appropriately.

• They attempt to influence the way in which a business operates through lobbying, picketing or boycotting products. They create publicity, circulate petitions and conduct research.

CUSTOMERS • They are people or businesses who purchase products (goods or services) from a business.

• They want choice and value for money.• They can influence the performance of the business (for example,

they can stop buying their products).

GOVERNMENT • These could be local or national.• They want businesses to provide jobs and tax revenue, and to help

the economy grow.• They can influence the performance of the business. For example,

through changing tax rates, interest rates and the amount the government spends (government expenditure), as well as how much financial support and advice they offer.

• They also implement and uphold laws and regulations, for example, employment laws.

FINANCIERS / BANKS • They provide loans to a business.• They want reliable and on time payment of invoices.


The impact of corporate social responsibility (CSR)Corporate social responsibility (CSR) aims to ensure that companies conduct their business in a way that is ethical. This means taking account of their social, economic and environmental impact, and consideration of human rights. CSR can refer to a wide range of actions that businesses may make from donating to charity to ethical trading. Businesses may work with its stakeholders in a number of ways.

Demonstrating commitment to the local community can impact on a business through improving its reputation and so make it easier for it to recruit and retain employees. For example, a business may choose to:

• volunteer in local schools or community projects• sponsor a local event• organise clean-up events• support a local charity.

For example, a builder may provide free materials and labour to community projects, and supermarkets and restaurants may provide food to local homeless groups.

Many businesses include their employees in decisions about CSR activities. For example, they work with employees to nominate and support charities, encourage them to volunteer for community activities and charitable activities and give them paid time off for this. They may also help employees to make tax-free donations to charity through ‘payroll giving’. This can impact on the business by improving the relationship it has with the community, and can help motivate employees.

Another way to demonstrate CSR is through ethical trading. This focuses on protecting workers’ rights throughout the supply chain by making sure that it treats its own employees, it suppliers and their workers fairly and ethically. This can impact on the business as customers of a business will want to know that it does not exploit the people who make and sell its products, and so this can improve the reputation of the business and customer loyalty.

A primary focus of CSR is the environment. Environmental CSR aims to reduce any damaging effects on the environment from the activities of a business. This can impact on the business as it can reduce business risk, improve reputation and provide opportunities for cost savings. Caring about the environment can also increase revenue as many customers prefer to buy from responsible businesses. For example, a business may focus on:

• reducing emissions• reducing energy and water use for example, switching off lights and equipment when not in use and

reducing the use of water• efficient recycling and waste management• reducing packaging• having eco-friendly office and business travel policies• buying locally to save fuel costs• working with environmentally-conscious suppliers and distributors• sourcing materials responsibly such as using recycled materials and sustainable timber.


Case Study 1.1 An example of corporate social responsibility (CSR) (Starbucks)

Starbucks is a well-known American coffee house chain that has a ‘Shared Planet’ slogan. It states that this is its commitment to do business in ways that are good for people and the planet. It publishes its commitment to purchasing only the highest quality, ethically sourced and responsibly grown coffee, to reduce its own environmental footprint and fight climate change, and to give back to the neighbourhoods and communities it is a part of.

Examination TipYou need to be able to link the type of business, its aims and objectives, markets and stakeholder interests to the marketing activities of different businesses. You will need to understand the different types of businesses (public, private and not-for-profit), markets, stakeholders and the difference between a customer and consumer. You will also need to understand corporate social responsibility (CSR) and its importance in meeting the needs and interests of stakeholders.

1.3 How and why a business markets internationally

Reasons for entering international marketsThe global economy brings many opportunities but also significant challenges for businesses.

OpportunitiesGlobalisation gives access to more consumers and customers. It can result in an increase in sales revenue as well as an increase in profits. It provides access to resources and raw materials that a business may not have been able to obtain in its own country, plus access to a greater supply of skilled labour through an increase in the international mobility of labour. It is now easier for people to work in different countries throughout the world. This increases the availability of skilled labour and provides greater opportunities for organisations to develop new products, create extension strategies for existing products and increase output.

ChallengesGlobalisation leads to a greater level of competition from businesses in other countries. Although it provides access to a bigger market, this market will contain businesses from other countries across the world, therefore increasing competition. Any business operating in the global economy must place a high priority on competitive prices, quality and service otherwise it will lose sales to its international competitors.

Factors to consider when selecting an international marketMany businesses expand their markets to give them additional security as well as increased sales revenue but there are many considerations to be made. Before a business decides on an international market, it is important to know that there is a clear and growing demand for the type of goods or services it offers and a base of potential clients with the interest and money to buy it.


It is important when selecting an international market to keep in mind the customers’ needs, cultural differences and different business etiquettes. For example, the preferences of a young customer in Singapore will differ from that of a young customer in Greece or Malta.

Market research is key to understanding differences between countries as different cultures respond differently to products and marketing. International customers may not have the same needs as they do in domestic markets and some markets may actually use products in a different way. A business needs to carry out research to know exactly how each market will respond to the product, the business and its marketing.

Marketing must be carefully considered to ensure that the business does not make any expensive mistakes because of a difference in language and/or culture when packaging and marketing a product. Businesses will need to consider adapting or customising its offering, including packaging, labelling and promotion, according to regulatory requirements, consumer tastes, tradition, religion, gender and cultural preferences. This will incur an additional cost to the business.

Businesses operating globally will need to decide whether to maintain an international (or global) marketing strategy, where they deliver a similar product and marketing message in each country or a targeted approach, where marketing is unique to each market.

They will also have to consider the political climate as this can affect the economic environment of the country. The economic environment, in turn, affects the performance of all organisations trading within it. The government of a country will decide on factors such as taxes and government spending, and these will have a direct impact on the country’s economy. For example, a higher level of government spending tends to stimulate an economy.

Methods of entering international marketsOnce a business decides to enter an international market it will need a plan for how it will reach this market; it needs a market entry strategy. There are number of strategies to choose from:

• Exporting• Agents and distributors• Licensing• Joint ventures• Strategic alliances

Exporting is selling into a chosen market.

Many businesses, once they have established a sales programme, turn to channel partners (agents and/or distributors) to represent them further in that market. Agents and distributors work closely with businesses to represent their interests. They become the face of the company and so choosing the right agent and/or distributor is very important.

Licensing is an arrangement where one business transfers the rights or the use of a good or service to another business. This is a particularly useful strategy if the purchaser of the licence has a relatively large market share in the same market that the business wants to enter.

Joint ventures are a form of partnership that involves the creation of a third independently managed business. Two businesses agree to work together in a particular market and form a third company to undertake this. Risks and profits are normally shared equally. This type of partnership usually offers great advantages, but it can also present certain risks, since this type of arrangement can be highly complex.


Strategic alliances are partnerships in which two or more businesses work together to achieve objectives that are mutually beneficial. The businesses may share resources, information, capabilities and risks to achieve this. Strategic alliances are often, but not always, in the form of a joint venture. A strategic alliance is less involved and less permanent than a joint venture. In a strategic alliance, each company maintains its independence while gaining a new opportunity.

The importance of ‘glocalisation’In a marketing context, glocalisation is the method of maintaining a global image and brand while adapting goods and services to local preferences and tastes. It can be described as ‘thinking globally and acting locally’.

Businesses do this because customers are more likely to respond to marketing messages which they feel are specifically speaking to them. By focusing on a local area, the business creates an impression of being more ‘personal’ to someone in that area.

On the other hand, the business will be competing with other local businesses in that area and so it is important that a business has an advantage that will help it to compete with these local businesses and make glocalisation worthwhile.

Examination TipYou will need to understand the different reasons why and how businesses enter international markets, the factors to consider when doing so and the importance of glocalisation. You also need to be able to relate marketing activities to a business’s decision to trade in international markets.

Chapter 1 Summary

What you have learned:

• What marketing activities are, their elements and why they are important to a business.

• How marketing activities may be affected by the type of business, its aims and objectives, markets and stakeholders.

• What corporate social responsibility (CSR) is, and its importance to a business, including how it meets the needs and interests of stakeholders.

• How and why marketing can take place in international markets and the impact this has on marketing activity, including the different methods of entry, the factors to consider when entering international markets and the impact of glocalisation.

Activities

1.1 Identify two kinds of customer that a marketing department has a relationship with.

1 ............................................................................................................................................................................

2 ............................................................................................................................................................................


1.2 What are business objectives?

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1.3 Circle the four mistakes in the following text:

Practice questions

1.1 Which one of these is an external stakeholder of a business?

(1)

□ A Employee

□ B Manager

□ C Director

□ D Supplier

1.2 Define the term ‘mass market’.

(1)

...............................................................................................................................................................................

...............................................................................................................................................................................

...............................................................................................................................................................................

1.3 Explain why market research is important to a business wanting to trade internationally.

(2)

...............................................................................................................................................................................

...............................................................................................................................................................................

...............................................................................................................................................................................

...............................................................................................................................................................................

...............................................................................................................................................................................

In a marketing context, glocalisation is maintaining a local image and brand while adapting goods and services to international preferences and tastes. Customers are less likely to respond to marketing messages which they feel are specifically speaking to them and focusing on a local area also creates an impression of being less personal to someone in that area.

Learning Objectives

CHAPTER 2THE MARKETING PLAN

2.1 Business and marketing objectivesUnderstand business objectives and how these impact on marketing plans, how different elements of the plan interrelate and be able to create elements of a marketing plan in given contexts.

2.2 Analysing the internal and external marketing environmentUnderstand analytical marketing tools, how and why they are used, how they impact on marketing activities and use these tools in given contexts.


2.1 Business and marketing objectives

Vision and mission statementsBefore a business can begin to create a marketing plan, it must consider its vision and mission, and the aims and objectives of the business. Businesses will have different missions and visions and will record these as vision and mission statements, which are used to set the business aims and objectives.

Vision statements focus on the goals and aspirations of a business – it is the ‘dream’ of the business. It defines the ideal of what the business wants to achieve over time which gives management and staff guidance and inspiration as to what it is focused on achieving. Some examples of business vision statements are:

• Oxfam – A just world without poverty. (2018)• Disney – To make people happy. (2016)• Ikea – To create a better everyday life for the many people. (2018)

Mission statements define the purpose and primary objectives of a business. It states who the business serves, what product is provided and how it is provided. Some examples of mission statements are:

• Microsoft – To empower every person and every organisation on the planet to achieve more. (2018)• Coca-Cola Company – To refresh the world in mind, body and spirit. (2018)• Nike – To bring inspiration and innovation to every athlete* in the world. (*If you have a body, you are

an athlete.) (2018)

Business objectives and SMART targetsBusiness aims and objectives are statements of purpose that outline the goals of the business and what the business wishes to achieve in the future. SMART business objectives are specific, measurable, achievable, relevant and time-bound targets of how a business achieves its aims and objectives.

• Specific and measurable objectives provide a definition of success by specifying an exact number or percentage of what they want to achieve.

• Achievable and relevant objectives can engage and motivate employees. They should be specific to the business and should be targets that are possible for the business to achieve.

• Time-bound objectives ensure that all stakeholders agree a deadline of when it is to be achieved to enable businesses to check whether the target has happened on time.

Setting smart objectives allows the business to monitor its progress and judge the effectiveness of their marketing plan when implemented. For example, a business may have a SMART target to increase international market share in Asia by 2% by 2020. Setting smart objectives allows the business to monitor its progress and judge the effectiveness of their plan when implemented. Examples of business objectives could be to:

• maximise profitability and shareholder return• maximise return on investment (ROI)• maximise revenue/sales• increase market share• improve reputation• increase brand awareness

15THE MARKETING PLAN

• increase customer satisfaction• be ethical and socially responsible by implementing a corporate social responsibility (CSR) approach• provide a service to the public.

Elements of the marketing planOnce a business has set their objectives, they will use these to inform their marketing plan. A marketing plan is a document that outlines the marketing strategies for a business and the aims, objectives and activities that will be done to meet these. It will form part of a wider business plan.

AnalysisFirst, the business will use analytical marketing tools (covered in more detail in section 2.2) to analyse the current situation and to understand how the business’ own capabilities fit with the internal and external marketing environment. The analysis will look at both the internal and the external factors.

StrategyThe business next creates a marketing strategy in which they segment markets into different types, target the most appropriate segments and position the business to be the most attractive option to the customer. This is referred to as segmentation, targeting and positioning (STP). The STP model is useful when creating marketing communications plans as it helps businesses to develop and deliver personalised and relevant messages to engage with different target audiences. (Segmentation is covered in detail in Chapter 3.) (Market/positioning maps are explained further in section 2.2.)

ProgrammeFinally, businesses create a marketing programme by creating and arranging the elements of the marketing mix (discussed in detail in Chapter 4) to achieve their marketing objectives. SMART marketing objectives are targets of what a business wants to achieve from its marketing based on market research, sales or profit forecasts. It is important for a business to set marketing objectives as these set targets. Businesses can then measure the success or failure of their marketing programme in achieving these objectives.

Marketing objectivesMarketing objectives are linked to business objectives. For example, if the business aims to increase sales, its tactics could be to develop and launch new products, start selling its products overseas or open more stores. If its aim is to increase profits, it could cut marketing costs by reducing the amount it spends on advertising or could increase its selling prices in the hope that it will make the same amount of sales but at a higher price. Examples of marketing objectives could be to:

• grow sales revenue• increase brand awareness• enter new markets• differentiate products• develop new products• attract new customers• develop relationships with existing customers.


Examination TipYou need to be able to understand how having a vision and mission allows the business to set business objectives and how these will inform the marketing plans of the business. You will also need to understand how the different elements of the marketing plan relate to one another and be able to create elements of a marketing plan in given real life scenarios/contexts.

2.2 Analysing the internal and external marketing environment

Both large and small business owners need to conduct various analyses on their businesses to allow them to make informed decisions such as whether it should launch a new product or expand its operations. There are many methods that help to conclude a business’ current state before taking a decision and conducting marketing analysis allows a business to looks at both the internal and external factors influencing it. SWOT analysis is perhaps the most commonly used technique; STEEPLE is another.

SWOT analysisA SWOT analysis looks at the strengths, weaknesses, opportunities and threats of a business. For example, are staff skills one of the strengths of the business or are they a weakness? Is the amount of competition in the market an opportunity or a threat for the business? The table below includes examples of areas to consider when using a SWOT analysis.

INTERNAL ANALYSIS EXTERNAL ANALYSIS

STRENGTHS and WEAKNESSES OPPORTUNITIES and THREATS

• Core competencies• Production capacity• Branding• Product portfolio• Staff skills

• Market demand• International expansion• Changing technology• Strength of competitors

Strengths and weaknesses are part of the internal analysis. It asks questions about the strengths and weaknesses of the business, such as:

• What does the business do better or worse than others?• What advantages or disadvantages does it have?• What factors help or hinder the business when selling products?• What could the business improve on?• What should the business start doing or stop/avoid doing?

Opportunities and threats are part of the external analysis. It asks questions about the opportunities the business could profit from and the threats that could adversely affect business such as:

• What opportunities or threats are there?• What are some interesting trends in the market?


• What are competitors doing?• Are advancements in technology threatening or strengthening the position of the business and/or

product?

STEEPLE analysisA STEEPLE analysis looks at external factors and their impact on a business. It can enable a business to predict future business threats and take action to avoid or minimise their impact, and can enable it to identify business opportunities and take advantage of them. It looks at the social, technological, economic, political, legal and ethical factors that are external to a business. See table below for more detail.

STEEPLE analysis of external factors

What does it include?

SOCIAL Social factors include demographics, lifestyle, age distribution, education levels and the composition of families. Changes in the structure and attitudes of society can have major implications in markets and for businesses. For example, behavioural change such as an increase in health consciousness.

TECHNOLOGICAL Technological factors include automation, the rate of the technological advancement and trends in technology. Technology has an impact on manufacturing costs, on the type of goods and services available, on distribution channels and on the promotion of products.

ECONOMIC Economic factors include inflation rates, interest rates, currency fluctuations and exchange rates. Economic factors are key in determining demand. For example, a recession would affect the amount customers have to spend on the products of a business, and currency fluctuations would also impact the international trading of a business.

POLITICAL Political factors include the impact of pressure groups, pressure from government and the impact of lobbying. Alternatively, financial support from the government could also benefit a business.

LEGAL Legal factors include legal restraints and regulations, and environmental regulations. Businesses must comply with legal restraints and regulations in the markets within which they operate or face legal issues.

ENVIRONMENTAL Environmental factors include pollution, resource depletion, appropriate disposal of waste materials and emissions from transportation. Businesses will try to minimise their environmental impact. For example, through monitoring and eliminating hazardous substances from production, instead choosing to use natural materials in their products.

ETHICAL Ethical factors are about social values which govern the behaviour of a business. Many business have implemented corporate social responsibility (CSR) policies outlining their commitment to society and the environment. This impacts on marketing activity as more businesses use marketing to emphasise their ethical behaviour and membership of ethical associations (such as Fairtrade).


Market mappingAnother tool used to identify market opportunities is a market map or positioning map. These maps show where existing goods and services are positioned in the market so that the business can decide where they would like to place (position) their product. It can identify where there are ‘gaps’ in the market and/or where there are customer needs that are not being met, and where the market is overcrowded.

The market map is shown as a grid that measures different aspect of products within the market. It shows the range of positions that a product can take in the market using two variables on the x and y axis. Examples of these could be:

• price• perception• location• quality• design.

For example, a business could map using high-quality versus low-quality and high price versus low price. Think about bars of chocolate. Some are intended to fill you up, others are a lighter snack; some chocolate is bought as a luxury, other chocolates are bought for every day consumption. Once the two variables are drawn, the chocolates are then plotted onto the map as shown in figure 2.1.

Figure 2.1 An example of market mapping

The grid above shows that lighter chocolates are more popular and that these are mostly everyday chocolates. A gap can therefore be seen in the market for more everyday filling chocolate, and more luxury lighter chocolate.

The advantages of a market map is that it clearly displays the whole of the market and that the x and y axis are adaptable. It is a simple visual that is easy to understand and allows a business to make a quick and easy analysis (for example, on how its competitors are doing), so that it can position its products accordingly. The disadvantages are that a market map is based on two variables only, it is neither accurate nor specific and is often based on opinion rather than actual figures or statistics. This means it can be biased. It also easy to misinterpret.

Everyday chocolate

Luxury chocolate

Fillingchocolate

Lighter chocolate


Competitor analysisCompetitor analysis is an assessment of the strengths and weaknesses of competitors, helping businesses to identify opportunities. The number of competitors researched will depend on the competitiveness of the market. A business in a competitive market may need to consider many competitors, whereas one in a less competitive market can look at fewer. Any business marketing a product similar to, or as a substitute for, its product is a direct competitor. Businesses offering different or substitute products are considered indirect competitors.

For example, imagine you work in the personal-computer market for Microsoft with its Windows operating system software. One of your indirect competitors would be Apple. Apple’s operating system for its Macintosh computers may be better in many ways than Windows but will only run on Macintosh computers and will not run many of the popular business applications that are available to Windows. This gives Microsoft an advantage over Apple in this market.

Competitor analysis is important to a business because it can help an organisation to understand the strategies of its competitors, as well as any advantages or disadvantages it has. It provides information for the business to develop strategies to achieve competitive advantage in the future and helps to forecast how competitors may respond to a new product or pricing strategy. When undertaking a competitor analysis, the business will ask a number of questions about their competitors. For example:

• Who are they?• What are their strengths and weaknesses?• How do they threaten the business?• Are they profitable?• Are they expanding?• What are their objectives?• What strategies are they following to achieve these objectives, and how successful are these (for

example price, place, promotion)?• How are these competitors likely to respond to any changes a rival business makes?• How can the business separate itself from these competitors?

Competitor Location Price Facilities Strengths Weaknesses How can we compete?

KING CAR WASH Fair $5 Good Low price Slow service Service

CITY CENTRE CAR WASH

Excellent $7 Good Excellent location

Customer service poor

Service

WASH AND GO Good $8 Excellent Excellent facilities

High price Price

Figure 2.2 An example of a competitor analysis for a car wash

Examination TipYou need to be able to understand how and why marketing uses SWOT, STEEPLE, market mapping and competitor analyses as tools to analyse the market and how they use the information gathered using these tools to inform the marketing activities of the business. You may need to apply your knowledge and use these tools in given real life contexts.


Activities

2.1 Think of a ‘gap’ in a market in your town for a shop. Identify what shop you would open in the town, what you would sell and give your shop a name.

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2.2 Draw a market map showing at least two other businesses that sell similar products to your shop. Mark where you would position your shop on the market map.

Chapter 2 Summary


• What business and marketing objectives are including vision and mission statements.

• What marketing plans are and the elements which makes up a marketing plan.

• What business and marketing SMART objectives are and how these should be applied in relation to aims and objectives.

• How to analyse the internal and external marketing environment using STEEPLE, SWOT, market mapping (and its variables) and competitor analyses.

• Why analysing the marketing environment is important in informing marketing activities.


2.3 Will identifying this market gap guarantee you success?

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Practice questions

2.1 Which one of these is a marketing objective?

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□ A Provide a public service

□ B Pay employee wages

□ C Attract new customers

□ D Recruit employees

2.2 Define the term ‘market map’.

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2.3 Analyse why a business may operate in an environmentally-friendly way.

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Learning Objectives

CHAPTER 3MARKET RESEARCH, DATA COLLECTION AND SEGMENTATION

3.1 Conducting market researchUnderstand the purpose of market research, the main types of data that are collected, the different methods of collecting research data and the advantages and disadvantages of each.

3.2 Sampling techniquesUnderstand how and why different sampling techniques are used and the advantages and disadvantages of each.

3.3 Segmenting the marketUnderstand how and why market segmentation and customer profiling are used to meet the needs and wants of different customer/consumer groups.


3.1 Conducting market research

Using market researchMarket research is used to guide business decisions by giving a business insight into market size, structure and trends; its competitors and their activities; products, marketing and customers. Market research will tell the business if there is a gap in the market, the possible market segments and the type of good or service these customers want, as well as whether the planned good or service matches what the customer wants. By enabling a business to make informed choices, market research helps a business to develop a successful marketing strategy.

For all research methods, a business needs to consider whether the data it collects is measurable and if the size of the data set is appropriate. It should not be biased and should be objective rather than subjective, not based on or influenced by personal feelings, tastes or opinions. It may be analysed using statistical techniques or represented in graphs and charts but for it to be useful, it needs to be easy to understand.

Sometimes a business will carry out research on an ‘ad hoc’ basis (as and when required) but for a business to be able to inform and shape its strategies, it needs to carry out research over time. This is called ‘continuous research’. This means that the business carries out regular and frequent research over a long period of time. Continuous research is undertaken repeatedly and continually as opposed to ad hoc surveys or surveys carried out at specific times or for a specific campaign.

Quantitative research focuses on numbers (for example, what percentage of the population buys a particular product). It is gathered using surveys and questionnaires. Whereas qualitative research focuses on opinions and feelings (for example a favourite colour).

Market research may be carried out internally by the business or externally by a market research agency or independent marketing consultant. There are many ways to gather market research and the method chosen may be determined by the type of data required by the business and by the amount of money they have to spend. Most businesses will use a mixture of primary and secondary research methods.

Primary research methods (sources)Primary research, also known as ‘field research’, is information gathered first hand (for example, through customer questionnaires and surveys). Primary research is more expensive and difficult to organise than secondary research. The usefulness of primary research depends on the sample, the researcher’s skill and the interpretation of the data that is collected.

Surveys, questionnaires and pollsSurveys and questionnaires are used to measure the opinions or experiences of a group of people by asking a structured set of questions. Businesses usually use written questions to gather information on the customers’ views of a product. A survey may be left in a hotel room to obtain qualitative feedback (such as how many times they have stayed) and quantitative feedback (such as their opinions on their experiences at the hotel) or it may be sent to customers for them to complete digitally after they have purchased a product online to find out how they feel (likes/dislikes) about it. They may also be posted or emailed to previous customers who have not made a purchase from the business for some time in order to find out why. Unfortunately customers who have not enjoyed the product will be unlikely to want to make positive comments or to complete the survey. Incentives (such as entry in a free draw to win a prize) are often used to encourage people to complete and return the survey.

25MARKET RESEARCH, DATA COLLECTION AND SEGMENTATION

SurveysSurveys ask questions to a sample group of customers that have been chosen to represent the target market. The larger the sample group, the more reliable the results will be. In-person surveys are one-to-one interviews often conducted in busy locations (such as shopping centres) and usually using a script. They allow businesses to present samples of products, packaging or advertising to customers and gather feedback immediately. Because of the labour and time it takes to obtain feedback, in-person surveys are expensive. Telephone surveys (telemarketing) are less expensive than in-person surveys and allow the business to ask scripted questions directly to the customer to gain instant feedback but over the years, this method has become more difficult to conduct as customers have become unwilling to participate in telemarketing. Postal (mail) surveys are a relatively cheap way to reach a broad audience. They are much cheaper than in-person and telephone surveys but they usually generate small response rates. Despite the low return, postal surveys remain a cost-effective choice for small businesses. Online surveys allow businesses to ask a wide range of questions across a variety of different question types (for example they can ask for a comment, an email address or other customer information, as well as asking multiple choice questions or obtaining feedback on images). Online surveys are a simple, inexpensive way to gather customer opinions and preferences but can generate unreliable data because the enterprise has no control over who responds.

As well as gathering feedback about the business and its products, surveys and questionnaires can also provide useful information about customers by gathering information on things such as age, gender and salary. However, many people may not fill in this part as they do not want to give out their personal information.

PollsWhere a survey is generally used to ask a range of questions, a poll will typically ask one multiple choice/response question. Participants can choose from a set of answers on a given subject and vote according to their preferences. Polls are commonly used on social media and voters may be asked to select just one answer to the question by clicking the radio button or they may be allowed to choose multiple answers. Social media polls are a quick and easy way to gather data. They reach a wide audience, are easy to set up and can gain an immediate response. However, they can be highly susceptible to selection bias and influences beyond the control of the researcher unless they are targeted to make them more likely to be answered by respondents who are interested in a product. Whilst they are quick and easy to set up and for customers to answer, they provide limited information.

PollWhat is your favourite flavour for a muffin?

Chocolate chip

Raisin

Blueberry

Lemon

Other

Vote

Figure 3.1 An example of an online poll on social media

QuestionnairesMany businesses send out regular online questionnaires to a representative customer group to check their views on a wide range of topics (such as advertising and promotion, pricing, speed of delivery, staff attitude, returning goods or the quality of the product).


Businesses may give questionnaires to their employees in order to gain their feedback on what they have received from customers. As many staff deal directly with customers, this allows the business to gather positive and negative comments made to employees and act on them to improve customer service. They may also ask the employees their opinions on working for the business, in order to check that they are happy and are not planning to leave.

Businesses may also send questionnaires to people they think might be interested in the products it offers (for example, a hotel may obtain the mailing list from a travel company to email those customers about their own products). These questionnaires can be designed to find out specific information and are cost effective and easy to use for both participants and researchers.

If a sizable sample group is chosen, questionnaires can gather large amounts of data that can be used to make charts and graphs but, having a large amount of responses, could give a huge amount of data to analyse. They could also produce ‘dirty data’ (data that contains inaccurate information) as the respondents may not be potential or actual customers of the business. Another problem is that completion rates may be low as they may be seen by recipients as junk mail and are therefore discarded and not returned.

InterviewsInterviews may be conducted via telephone or face-to-face. They use unstructured, open-ended questions and usually last for around an hour. They are typically recorded so that responses can be referred back to at a later stage. Interviews are expensive as they take up the researchers’ time, and the results may be biased if the questions asked are unfair or lead the respondent to answer in a particular way.

Focus groupA focus group is a method of research involving a small group of people, usually around eight participants. The chosen target group is guided through a discussion by a moderator who reads a series of scripted questions or topics to lead the discussion amongst the group. The questions and responses are usually recorded in a transcript. A focus group usually lasts one to two hours and usually requires a minimum of three focus groups to get reliable results. Focus groups can be used by a business to gather qualitative data (what the group thinks about a business or a product) and to find out personal opinions and attitudes. It can provide immediate suggestions and ideas. Although focus groups can be useful in gaining an understanding of the needs, preferences or main concerns of a group, they are not ideal for gathering the views of a wide range of individuals since the sample size remains very small and selective.

Omnibus studiesAn omnibus study or omnibus survey involves a research agency conducting a number of interviews with a specific target group on a regular basis. This research can be face-to-face, online or by telephone. The survey is conducted on behalf of a number of different businesses, who each pay to join the survey and add their own questions. This enables all of the participating businesses to share the cost of the research.

Direct observation, visits and mystery shoppingSome businesses employ customers to visit businesses such as shops, restaurants and hotels as mystery shoppers to compare the service the business offers to that of their competitors. Mystery shoppers may phone a business with queries or to make a booking, and/or make a visit in person. Afterwards they complete and return a questionnaire to the business with their comments. They check, for example, the speed of service, the quality of the goods or service, the attitude of the staff and the cleanliness of the business. Mystery shoppers should not be known to the employees. This is so that the feedback report received is as close to the everyday customer experience as possible. Mystery shoppers are usually recruited online and are reimbursed for their purchases and may also be paid a fee.


Responses given to surveys and focus groups are sometimes different to people’s actual behaviour. Businesses may directly observe its customers under real-life conditions (such as when visiting a physical store) to see how they buy a product or how they act. This gives a more accurate picture of customers’ habits and behaviours and can help businesses to identify product popularity, customer purchase time or changes that might need to occur (such as product modifications, improvements to packaging or price adjustments).

Social media platformsAs more and more people use the internet, online reviews have gained in popularity. Customers can comment on their experiences by posting a review on the business’s website, an online review site or a social media platform. Many customers actively check online reviews for products before purchasing. Whilst online reviews can help to sell a product, it can also have the opposite effect, with some online reviews being too honest and appearing negative. Businesses have also reported concerns over ‘fake’ negative reviews being posted onto review sites by competitors to decrease the popularity of the business. There are also concerns from customers that some businesses are not actively publishing negative reviews, whilst others are paying for product endorsements without making this clear to the public.

Secondary research methods (sources)Secondary research, also known as ‘desk research’, is the process of collecting and analysing information that already exists and has already been collected, compiled and published by others (for example from newspapers, journals, government reports and official statistics). There is a great deal of information readily available online such as company accounts, industry, sector and market reports, trade associations and professional bodies. Some of this information is free but there is a great deal that require subscriptions or one-off purchase, which are usually expensive. This information provides data on market size, sales trends, customer profiles and competitor activity. A business can also purchase market reports and research on their industry or potential customers from specialist data companies. The customer records of a business can also provide a great deal of information (such as purchasing trends, or records of queries or complaints). Secondary research can also be used for forecasting how the market may change.

Examination TipYou need to be able to understand the purpose of market research and the difference between qualitative and quantitative data. You also need to know the difference between primary and secondary data, the different methods of collecting research data and the advantages and disadvantages of each.

3.2 Sampling techniques

If a business is trying to find out specific information (such as what products customers would like them to sell, how happy customers are with their internet orders or the number of customers waiting at any one time to be served in their store), they may carry out primary research. To do this the business needs to pick a list of people or businesses to interview. It cannot interview the whole population as that would be expensive and likely to be impossible. Instead it would conduct research that involves selecting a targeted group of people to interview. If data is collected for a sample of the population, this means that costs are lower and it takes less time.


Sampling is the process of selecting and using data collected from a small targeted group to inform a business by providing assumptions about a larger population. This process can save business resources of time and money and reduce workload. Sampling is beneficial because it can give accurate results that can be mathematically calculated. The sampling process comprises of several stages that would be outlined in a sampling plan:

• Defining the target population• Specifying a sampling frame• Specifying a sampling method• Determining the sample size/number of participants• Implementing the sampling plan• Sampling and data collecting• Reviewing the sampling process

The total group of individuals from which the sample might be drawn, is called the ‘target population’. The target population can be defined by the geographic area, the market or industry sector the demographic profile or the size of the organisation, for example. A group of people taken from the total target population is referred to as the ‘representative sample’. The sampling frame is the list from which the potential participants are chosen (for example lists of companies, the pay-roll of a business or government registers).

Data errors can occur if the business does not understand who it should survey. For example, if a business wants to conduct a survey about breakfast cereal consumption, does it include the whole family, the parents or just the children? The parents might buy the cereal but the children influence their choice. Errors can also occur if some of the population is omitted in the sample or there are too many of one type of the population in the sample.

Random samplingThere are a number of methods for selecting a sample. One method is probability sampling, which includes simple random sampling, systematic sampling, stratified sampling and convenience sampling. Here, each individual is chosen at random or entirely by chance.

Simple random samplingRandom sampling means that every person has an equal chance of being selected. It can be easily done by pulling names out of a hat or by using a computer to generate random numbers. The advantage of using random numbers is that no human is involved in the selection process and it needs only a minimum knowledge of the study group in advance. It is widely accepted that since each person has the same probability of being selected, there is a reasonable chance of achieving a representative sample but if there are minority groups within the target population, this may distort results. Also it may not be possible to use a completely random technique if the target population is too large to assign numbers to.

Systematic samplingSystematic sampling takes a starting point then selects every person/unit at a fixed interval (for example, a spread of every 10th or every 100th person or unit). Again, minimum knowledge of the study group is needed. If the order of the list has been randomised, this method is easy to use and offers an unbiased chance of gaining a representative sample but, if the list has been assembled in any other way, bias may be present (for example, if every tenth person on the list was female, you would have only females in the sample).


Stratified samplingStratified sampling divides or classifies the total population into sub-groups (also called ‘layers’ or ‘strata’). From each sub-group, the required sample size is chosen. Gathering this type of sample is time consuming and difficult to do but the advantage of stratified sampling is that the sample should be highly representative of the target population. Stratified sampling is not as easy as simple random sampling as it takes more time and resource to plan and more knowledge of the study group is required. Also, unless the key characteristic present in the population is selected across the sub-group, the sample will be biased.

Random sampling

Population

Population

Sample Sample

Stratified sampling

21 3 4

2 5

8 10

65 7 8

109 11 12

1 10 12

2 10

8 5

2 4 6

7 8 11

3 5 9

Figure 3.2 A diagrammatic comparison between random and stratified sampling

Convenience samplingIn convenience sampling, the subjects are selected because of their accessibility/proximity to the researcher. The first available primary data source will be used for the research without additional requirements and so involves getting participants wherever they can be found and typically wherever is convenient. Convenience sampling is random and no inclusion criteria are identified prior to the selection of participants. Social media polls or questions are an example of convenience sampling.

Quota samplingOn the other hand, quota sampling is a non-random sampling method based on the judgement of the researcher. The target group selected represents certain characteristics of the population chosen by the researcher and the researcher will interview a set number of people who fit the requirements of characteristics (quota). Like a stratified sample, this method involves dividing the population into sub-sets with quotas attached that are an equal representation of different parts of the population (such as age and sex distribution, income, occupation, for example). Unlike stratified sampling the interviewer makes a non-random choice. It is relatively quick and easy to use but there are problems of control and checking which could lead to sampling bias and the researcher needs to understand the population to be able to identify and classify the sub-sets.

The people who take part in the research are referred to as participants. The number of participants in a sample depends on the size of the population. There must be enough participants to make the sample representative of the population and so if the population is very large (for example, all 16 – 18 year olds in country A, or everyone born in 2001), then a large sample is needed in order for the sampling to be representative. If the


population is much smaller, the sample can be smaller whilst still being representative. It is important that the sample is not so large that the study takes too long or is too expensive to conduct.

Measure of spread of data is used to describe the variability in a sample or population. It gives an idea of how well the mean represents the data, for example. If the spread of values in the data set is large, the mean is not as representative of the data as it would be if the spread of the data is small. This is because a large spread indicates that there are probably large differences between individual scores.

Bias in samplingBias means to influence, usually in an unfair direction. Sampling bias means that the sample is collected in such a way that some members of the intended population are less likely to be included than others. This then limits the extent to which the findings of the study can be trusted. Potential sources of bias that should be considered when selecting a sample are:

• changing the pre-agreed sampling rules• leaving people in hard to reach groups out of the sample• replacing selected individuals with others (for example if they are difficult to contact)• low response rates• using incomplete or out-of-date lists as the sample frame (for example not including people who have

recently moved to an area).

Examination TipYou need to be able to understand random, stratified and quota sampling techniques, how and why they are used, and the advantages and disadvantages of each.

3.3 Segmenting the market

Market segmentation means dividing an overall market into groups of consumers that have similar needs or similar characteristics. Each of these groups of consumers is referred to as a ‘market segment’. Grouping customers into segments enables businesses to more effectively focus tailored marketing communications to specific types of customers. Most businesses will focus on the needs of particular market segments rather than the overall market. Once a business selects specific market segments for its marketing, these chosen market segments are then referred to as ‘target markets’. Businesses will select the most promising segments from these target markets and focus on serving and satisfying the customers within these segments. A business may identify several target markets and will therefore adapt its marketing activities according to the different segments identified.

For example, if a business is selling electrical goods, those consumers who want TVs with the largest screens and the highest definition regardless of price will collectively form one market segment. Whereas consumers who care mainly about the price of the TV and its running costs will make up a different segment. It would be difficult for the business to make one TV model that was the first choice of consumers in both market segments.

A business can use external secondary research in order to identify demographic, geographic and psychographic information of its consumers (for example using government data, official statistics and information from professional bodies). The customer records of a business is a source of internal secondary research data and can provide a great deal of behavioural information (such as purchasing trends, records of query or complaints). The business can also track customer activity through its loyalty cards. See the table on the following page


Segment Characteristics

DEMOGRAPHIC Age, gender, nationality, marital status and education.

A sample target market profile focusing on demographics might be:

• Female teenagers with parents who are college educated and have incomes above $55,000.

• Married men with children who live in households with an income of less than $40,000.

GEOGRAPHIC Location and proximity to point of sale.

A sample target market profile focusing on geography might be:

• People who live in rural areas.• Residents in cities.

PSYCHOGRAPHIC Personality traits, attitudes, interests and lifestyle values.

A sample target market profile focusing on psychographics might be:

• People who like to play tennis and who tend to participate in political causes.

• Motorcycle enthusiasts who like to go to road rallies.

BEHAVIOURAL Based on their relationship with the product or the company such as creditworthiness, purchase history and buying behaviour.

A sample target market profile focusing on behaviour might be:

• Customers that tend to make impulse buys to satisfy their desire not to be left out of a good deal.

• Customers that are thoughtful and carefully weighs the benefits of a purchase before buying.

Customer profilingA customer profile (also known as a ‘persona’) is the description of a typical or ideal customer for a business. Customer profiles are created from an understanding of the typical audience produced by customer research. They focus on the different goals and scenarios the customers might find themselves in when interacting with the business. The information a business needs to collect depends on the business. If it sells to individual consumers (B2C) it will need to know their age, gender, location, spending habits and income. If it sells to other businesses (B2B) it will need to find out what sector they are in, how big they are, how much they spend and what other suppliers they use.

A complete customer profile will use all the information gathered to create a broad description of each ideal customer. For example, a profile for B2C customers could be:

• Women between the ages of 45 and 55 who live in rural areas, enjoy going to the gym and want to look fashionable.

• Teenage boys living in the inner city who tend to admire football stars and buy items that boost their status among their peers.

• Young, well-educated professionals that enjoy living in the city, like eating out and visiting nightclubs.

Customer profiling allows a business to find out what type of customers it has and divides them up by their different characteristics. It helps a business to understand its customers, highlighting who they are, what they look like, their interests and wants. Having a better understanding of its customers means that a business will


understand what they are interested in and will be able to communicate with them more effectively. Having accurate customer profiles allows a business to focus its marketing resources where they are likely to be most effective.

If a business does not know who it is targeting, it may try to hit multiple customer targets and the effectiveness of its marketing activities may be limited by the fact that it is spreading its resources too thinly. It is better for a business to adapt its marketing activities and ensure that campaigns are effective. If the target and segment is not clear, money and time will be wasted on marketing activities that are inappropriate.

Large retail clothing businesses provide good examples of segmenting and targeting audiences. Many have a number of brands that target a different audience (such as affordable everyday wear, classic basic clothing or reasonably priced luxury wear). The business will then adapt its marketing activities for the segment (for example advertising in top-end magazines, on television or on billboards as appropriate). Another good example is restaurants. These may adapt their marketing activities by offering food at a low price for office workers for example, who may eat out regularly but can’t afford to pay a great deal of money each day for lunch. The restaurants may offer fewer menu items, smaller portions and a speedy service as they are targeting a large market segment that wants to eat a good meal without paying high prices and with limited time available to them. On the other hand, some restaurants will offer high-priced menus as they are targeting wealthy diners who want a complete experience without any time pressures.

Case Study 3.1 An example of customer profiles (Boots)

Boots is part of the Walgreens Boots Alliance. It is a pharmacy chain that trades in 11 countries. The company has invested in understanding its customers and as such, tracks their behaviour and targets them to build their loyalty and trust in Boots. Using data from its loyalty card, Boots has identified three main customer profiles, which they have named ‘Betty’, ‘Tina’ and ‘Charlotte’.

Betty is an older customer, who is concerned about her health. Over 70 per cent of what she spends in stores is on health care products. Tina is a mother who buys for the family. Toiletries account for almost 50 per cent of what she spends. Charlotte is a young customer who loves to shop. A third of what she spends is on beauty products alone.

Boots uses this information to develop its customer service and adapt its marketing activities for each persona. For example, it launched Healthclub, a service aimed at Bettys, and Parenting Club, a service aimed at Tinas.

Examination TipYou need to be able to understand demographic, geographic, psychographic and behavioural segmentation, where this data can be sourced from and how this data can be used to meet the needs and wants of different customer groups.


Activities

3.1 Identify the target market for the following two products:

Product 1 Product 2

Simply Smooth Bath OilRelax and drift away in a luxurious bath with the relaxing scents of lavender and summer flowers. Take away the stress of the day with Simply Smooth.

Smash Shower ScrubGet your senses tingling with Smash. Jump into the shower and wake up to the masculine smells of sandalwood and patchouli, invigorate your body and hit the day running!

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3.2 Markos wants to take a random sample of people in his college to find out their opinion of the lunches in the canteen. How could he choose a random sample for his research?

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Chapter 3 Summary


• The purpose of market research, including what market research can help businesses to identify.

• The main types of primary and secondary data that are collected, methods of collecting this data and the advantages and disadvantages of each.

• Random and non-random sampling techniques, how and why different sampling techniques are used and the advantages and disadvantages of each.

• The purpose of market segmentation, including demographic, geographic, psychographic and behavioural segmentation, and how and why it is used.

• How and why customer profiling is used by businesses to meet the needs and wants of different groups.


Practice questions

3.1 Define the term ‘omnibus study’.

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3.3 Analyse the impact of market segmentation on a business.

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Learning Objectives

CHAPTER 4MARKETING MIX

4.1 The marketing mixUnderstand how and why the marketing mix is used, the interrelationship between the elements and be able to apply the marketing mix to given contexts.


4.1 The marketing mix

The marketing mix is a marketing tool that combines a number of components in order to strengthen a product’s brand and to help sell the good or service. Originally the 4Ps/4Cs, these have been extended in modern marketing to the 7Ps/7Cs to account for the marketing of services.

The 7Ps are a set of actions that a business uses to promote its brand or product in the market. The 7Ps are product, price, promotion, place, people, process and physical evidence.

The 7Cs is a method of understanding the 7Ps from a customer’s point of view. The 7Cs are customer value, cost, convenience, communication, coordination, caring and confirmation.

Product – customer valueProduct is the most important aspect of the marketing mix. Goods and services must match the needs and wants of people they are aimed at and provide value to customers. As customers are the people who will purchase the products, it is essential that businesses find ways to cater to their desires and needs. The key to customer value is to put the needs of the customer before the product and see things from their point of view.

A business must first identify who will be interested in buying their products by using the results of their market research. The market research data will allow them look more closely at what the markets want and then look at the products to see if they are satisfying their customer’s needs. It is also important that the product is changed as necessary to bring it up to date and prevent it from being overtaken by competitors.

Augmented product

Actual product

Core product

Figure 4.1 The three levels of a product

37MARKETING MIX

Products have both tangible and intangible benefits.

The core product (also called ‘core value’) is not the tangible physical product that can be touched and felt, it is the benefits of the product that makes it valuable to the customer, which provides them with a solution to their need. For example, the benefit/value of a car could be convenience and/or transportation as it allows you to go wherever you like, whenever you want. The core benefit/value of a smartphone might be communication and/or connectivity.

The actual product is the core product plus the additional physical features and characteristics offered by the business (such as quality and durability, design and styling, branding and image and packaging). For example, if buying a car, the actual product would be the vehicle itself. It is tangible, meaning you can touch it.

The augmented product is the core and actual product plus any additional support/elements offered by the business. For example, when you buy a car, part of the augmented product would be the warranty, the customer service support offered by the car’s manufacturer and any after-sales service. The augmented product is an important way to tailor the core or actual product to the needs of an individual customer.

The features of augmented products can be converted into benefits for individuals. As such, businesses may offer:

• warranties – This is a written guarantee, issued to the purchaser of a good by its manufacturer. It promises to repair or replace the good if necessary within a specified period of time.

• delivery – The transporting of the goods to the customer.• customer service – The provision of a service to customers before, during and after a purchase.• installation – For example, the service of fitting a kitchen or installing and setting up a heating system.• after-sales support – The service that is provided after goods or services have been sold. Most after-

sales support involves a warranty or guarantee, upgrade or repair service.

The product life cycle (PLC)The product life cycle (PLC) can be compared to the biological life cycle. For example, a seed is planted (introduction), it begins to sprout (growth), it grows leaves and puts down roots as it becomes an adult (maturity), but after a long period as an adult the plant begins to shrink and die (decline).

Launchintroduction

Growth Maturity Decline

Time

Sale

s

Figure 4.2 The stages of the product life cycle (PLC)


In theory it is the same for a product. After a period of development, the product is introduced or launched into the market (although many products fail in the introduction phase), it gains more and more customers as it grows, until eventually the market stabilises and the product becomes mature. After a period of time, the product is overtaken by new developments and the introduction of superior products from competitors. At this point it goes into decline and is eventually withdrawn.

In reality very few products follow such a rigid cycle, and the length of each stage varies enormously. Not all products go through each stage – some go from introduction straight to decline – and so it is not always easy to tell which stage the product is in. The decisions made by marketers (such as increasing or decreasing the price or level of promotion) can also affect the stage of the lifecycle the product is in. For example, if an enterprise is launching a new product into a market, the amount of time spent on promotion will be high as the enterprise will focus on building a brand. As the product goes into decline, the enterprise may decide to increase promotion to extend the life of the product and regain customers or to reduce spending to cut costs and so increase profits. On the other hand, a business can make changes or modifications to its current products and create new versions to keep up with changing trends in the market.

Product life cycle management is an essential part of all effective marketing strategies. A marketing strategy should take into account what stage of the life cycle the product is at so that the business can market it in such a way that will maximise its sales. The maturity stage of the product life cycle presents businesses with a wide range of challenges. With sales reaching their peak and the market becoming saturated, it can be very difficult for businesses to maintain profits, let alone continue trying to increase them, this is because mature products may suffer from increased competition as similar products enter the market. During this stage, businesses look for innovative ways to make their product more appealing to the consumer in order to maintain and perhaps even increase, their market share.

Product portfoliosA product portfolio comprises of all products of a business. It is a good idea for a business to have a range of products at different stages of the life cycle to ensure that they can always maximise sales and profits without waiting for a new product to be developed. Businesses will tend to have large product portfolios for a number of reasons.

The business may want to attract new customers and target new markets (for example, an electrical store might start to sell computer games and game consoles to attract younger consumers who would not normally buy lights and plugs).

Some businesses will offer a wide range of products to support the original product and so help maximise sales and profits. For example, a florist may offer a selection of vases and pots for the flowers and plants they sell to encourage customers to spend more.

A business may diversify so that if sales of the original product decline, increasing sales of new products might replace it. For example, a café selling milkshakes and smoothies that sell better in good weather, could start to offer homemade hot soup for the colder months. By having products that sell well at different times of the year, the café can meet differing customers’ needs and spreading the risk.

Brand extensionsBrand extension means taking a familiar brand and adding new products to it. Successful brand extensions are usually into similar markets (such a soft drink manufacturer launching a diet version), but it may be a new category (for example, a sports shoe manufacturer that extends its brand to sunglasses, soccer balls, basketballs and golf equipment). An example of a successful brand extension is Duracell, a business famous for its batteries that brought out a wireless charging mat for mobile devices. There have also been some brand extensions that have failed such as Zippo, a lighter manufacturer that brought out a perfume for women in

39MARKETING MIX

bottles designed to look like lighters; Harley Davidson, a motor cycle business that launched cake decorating kits; and Cosmopolitan, a women’s magazine that launched yoghurt. Some brand extensions that one may not have thought would have worked but did, are Michelin, a tyre company that publishes restaurant reviews with a star guide, and Guinness, a brewer that publishes books on world records.

Brand extensions makes the acceptance of new product easy for customers, increasing consumer interest and willingness to try the product. It also saves the business the cost of developing a new brand. On the other hand, there is a risk that if the product fails, it may damage the reputation of the brand as a whole.

Multi-brandingMulti-branding is the marketing of more than two competing and almost identical products belonging to a single business. The purpose of a multi-brand strategy is to increase the overall market share. These brands are mostly substitutes of each other (for example, a business may have a number of soaps, deodorants and washing-up liquids). By having a number of brands, a business will leave less shelf space for competitors but there is a risk of cannibalisation, which is a reduction in sales volume, sales revenue or market share of one product as a result of the introduction of a new product by the same company.

Product differentiationProduct differentiation is important because it can make businesses become more competitive by making products that stand out from the competition in terms of quality, price or service. Methods of creating product differentiation include having a unique selling point (USP) and making this clear to the customer through its promotion. To differentiate its product, a business will establish a strong brand image and incorporate other competing factors (such as having a better design, appearance, location or price than competitors).

Product modificationBusinesses may make modifications (changes) to its existing products to give them greater appeal or improve functionality. This is most likely to be carried out in the maturity stage of the product life cycle to give a brand a competitive advantage. A modification may include a change to a product’s shape, adding a feature or improving its performance. This can been seen in the changes to mobile phones where the screen, camera and battery life are modified with each new model. Often a product modification is accompanied by a change in packaging.

Mass customisationWith mass customisation, changes are made to a good or service to satisfy a given consumer group. The changes could be as small as a variety of different flavours or colours, or as complex as developing a completely new product for a particular customer who design the products to their exact needs and tastes. A common way to carry out mass customisation is to offer a basic product and then offer customers a range of features they can add or subtract. For example, some well-known manufacturers of sportswear allow customers to participate in the design of their products (such as configuring their sports shoes with a wide choice of colours and materials for customers to choose from).

Examination TipYou need to be able to understand the three levels of products (core, actual and augmented). You will also need to know the product life cycle and how it affects perceptions of customer value, including the reasons for maintaining a portfolio of products, brand extensions versus multi-branding, the importance of product differentiation and product modification in keeping up with changing trends in the market.


Price – cost to the customerPrice is the amount of money paid by customers to purchase the product. From the customer’s point of view, the cost is the amount of money they will pay for the product. This means a business needs to consider how much its customers are willing to pay for its products when deciding on its price. Businesses think very carefully about the price to charge for their products as there are a number of factors that need to be taken into account when reaching a pricing decision. A business can make a profit only if the price charged eventually covers the costs of making the item.

Pricing strategiesThere are a number of pricing strategies that a business can choose based on the product itself, the competitive environment, the customer demand and the other products on offer.

• Penetration pricing – This is where the product’s price is set significantly lower than a competitors’ price. This pricing strategy is used where the objective is to enter or capture a larger share of the market but the business may have low profits or even a loss in the short run. The price is usually raised later. This strategy is often used when a new product is launched or if the main objective of the business is growth.

• Price skimming – If a new product is likely to generate a high volume of sales (for example, because it is new) a high price is charged in order to maximise profits. The price will be reduced when the initial high demand has gone down. This is often used by well-known businesses launching new, high-quality premium products.

• Competitor-based pricing – This is where the amount of competition in the market is strong giving customers a wide choice of suppliers to buy from. As such, businesses must set their prices close to the prices of competitors (sometimes called ‘going rate’ pricing) in order to stay competitive. Setting a price above that which is charged by the market leader can only work if the product has better features and appearance.

• Cost-plus pricing – This is the simplest pricing strategy and is aimed at ensuring the business covers its costs and makes an acceptable profit. The total costs of producing one unit of the product are calculated and the required profit margin is added. This gives the selling price. For example, adding a 50% mark-up to a sandwich that costs $2 to make, means setting the price at $3. The drawback of cost-plus pricing is that it may not be competitive.

• Premium pricing – This is where the price is set higher for certain goods in the hope that the higher price will give the impression the product is of a higher quality. For example, Apple products (such as iPhones) are generally more expensive than similar competitors’ products; and Stella Artois refers to its lager as being ‘reassuringly expensive’.

• Psychological pricing – This is where pricing is decided based on what looks more attractive to customers in the market. For example, $5.99 looks more attractive than $6.00. Although the customer is only saving a single cent, it is used to entice people to buy. Research shows that customers are especially attracted to prices with the number 9 in them, which is why many prices often finish with 99.

Perceived valueCustomer perceived value is important when it comes to making product and marketing decisions. Price positively influences perceptions of quality, it inversely influences the perceptions of value and must fall within a window expectation. This means that if a product is priced too highly it is thought of as a ‘rip-off’, but if it is priced too low it is thought to be cheap and of poor quality. For example, if the same dress is priced at $34, $39 and $44, the greatest sale will be at $39. This is sometimes called ‘charm pricing’.

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Businesses will use perceived value pricing with products that have developed high levels of buyer faith, reputation, perceived quality and value. An example of perceived value is bottled water. Bottled water is convenient and businesses have discovered that customers are willing to pay different prices for different brands. Some brands have created a perceived value of their water as being more wholesome, better for your skin and healthier than other waters, therefore charging more. In reality, most water whether straight from the tap or in a bottle, is in fact the same. Your body does not differentiate between sources of water but you may like the idea that it comes in a certain bottle and has a brand name and so will pay more.

Case Study 4.1 An example of perceived value of wine

In a taste test, volunteers were told they were testing wine costing from $4 to $22 a bottle. In fact, they were actually drinking the same wine costing $14. During the test, their brains were scanned. At the end of the test, the results showed that they experienced more pleasure when drinking the allegedly more expensive wine and as such, rated the more expensive wine better tasting.

The test proved that when we see a higher price our brain links the price to a greater expectation of reward, which in turn, changes our perception – in this case, our perception of taste.

Price elasticity of demand (PED)Price elasticity of demand (PED) measures the responsiveness of consumer demand after a change in a product price. It looks at what happens if the business raises the price of a product in relation to the demand.

An elastic product is more responsive to a change in price. This means that an increase in price may mean a large fall in the demand of the product. If demand is elastic, then an increase in price results in a decrease in revenue. Examples of these products are luxury goods (such as cars, holidays, televisions and dishwashers).

An inelastic product is less responsive to a change in price. This means that an increase in price results in only a small fall in the demand. If demand is inelastic then an increase in price results in an increase in revenue. Examples of these products are everyday products (such as bread and milk) and habit-forming goods (such as alcohol and tobacco).

If a business knows the price elasticity of demand for a product, it can decide on the best price to achieve its revenue targets. This can help a business to decide how much price reduction is needed to increase revenue to a certain target or what level of price increase it should make because extra revenue from an increase in price may be wiped out by a decrease in demand.

Examination TipYou need to be able to understand the relationship between cost, price and perceived value, the price elasticity of demand and its impact on pricing decisions. You will also need to know the reasons for choosing different pricing strategies from those outlined above.


Place – conveniencePlace is the way in which goods and services are moved from the manufacturer/service provider to be purchased by the customer. Place is also known as the channel, distribution or intermediary. It is important that customers are able to find out and buy products at their convenience.

Place can be critical as it must reflect the needs and types of customers and their shopping preferences (for example, for short travel journeys, easy access, parking and so on). A business will need to decide whether the cost of a physical location is worth it, as prime spots on the high street can be very expensive. Businesses will often compete with other businesses on physical location. A business wants to be as close to as many customers as possible and, since every business wants the same thing, they will compete with one another. This eventually causes similar businesses to end up in a cluster focused in a specific area and can often be seen with fast food chains in the high street or in shopping centres.

Being close to their competitors is an advantage to a business as it enables them to have a better idea of the strategies of their rivals and to see if it can adopt a similar approach with minor improvements. For example, if a fast food restaurant offers a new breakfast that includes a burger, an orange juice and a hot drink for $10 and it increases trade, a competitor may see this and use a similar approach by introducing a breakfast of their own. An advantage of clustering for the customer is that it offers more options. When customers see the different variations of similar products that competitors provide, it might cause them to change their initial decision. The chance of customers changing their mind are higher when there are several competing businesses gathered in a particular area.

If a business decides to trade away from the high street (for example, in an out-of-town/rural location), it will need to consider if it will be close enough to its customers and if being out-of-town will affect its brand image. Another consideration for location will be the types of product sold by the business (for example, a large supermarket or a do-it-yourself store may need to be located out-of-town in order for it to have a large customer car park where customers can take their purchases direct to their cars).

Although a business may decide on a physical location (such as the high street), it could decide to trade online. Many goods and services are now sold through the internet as it has a huge geographical reach. Trading online can be less costly than from a physical location. The business will make savings in operational costs because there is no need to rent expensive premises. Trading online also increases sales opportunities because the business can reach a global audience. It is more convenient for customers who can place orders 24 hours a day/seven days a week and allows business to compete.

Today, many retailers have both physical stores and online locations. There are many advantages to this, for example:

• Customers can see goods in person to assess quality, fit (such as with clothing), get advice from knowledgeable staff and enjoy the shopping experience.

• Customers may feel safer buying online from businesses with physical stores they have visited personally.

• Orders can be picked up at the store or delivered to customers’ homes according to their preference and schedule.

• Orders can be placed from mobile devices and desktop computers.• Customers can bring returns back to a store, reducing the business’ shipping costs.• Stores can use their existing distribution networks to deliver to online shoppers.

B2C and B2B distribution channelsSome businesses sell their products direct to consumers (B2C) and others sell direct to businesses (B2B) (this is discussed further in Chapter 1). In B2C distribution, sometimes a business will make goods and sell them

43MARKETING MIX

directly to the consumer with no intermediary (or middleman) such as a wholesaler, agent or retailer. For example, a farmer may sell vegetables directly to customers through a farm shop, or a bakery may sell bread and cakes. However, sometimes intermediaries are used. For example, a wholesaler who buy in bulk from producers will resell in smaller packages to retailers, who will then sell on to the consumer. In B2B distribution, industrial distributors buy from producers and sell to industrial buyers.

Sometimes there are more intermediaries in the chain. In this case, an agent acts as the middleman and helps with the sale of the goods. An agent receives a commission from the producer. Agents are useful when goods need to move quickly into the market soon after the order is placed. For example, if a fishery makes a large catch of fish, it must be sold quickly as the fish is perishable. It is time consuming for the fishery to contact wholesalers all over the country and so it contacts an agent instead. The agent distributes the fish to the wholesalers, the wholesalers resell it to retailers and the retailers sell it to the customers.

Promotion – communicationPromotion is the way in which a business will make its products known to both existing and potential customers. Communication involves trying to listen to how the initial message is received by the audience. Successful communication reaches out to the audience through one-way promotion and then listens to feedback and tips on how to improve the product.

The main objectives of promotion are to communicate with prospective customers and inform them of both the product and the business, show them the benefits of the product, persuade them to buy the product and present a good corporate image. Other objectives of promotion may be to increase market share, enter a new market or market segment. The success of a promotional campaign will be measured against these objectives.

As discussed in product differentiation, the business will identify a unique selling point (USP) to differentiate its product from its competitors. For example the USP of a product may be that it is the highest quality, the lowest cost or the first-ever onto the market. The business will use this in its promotion to inform prospective customers of what this product has to offer that its competitors’ product does not have.

Promotion may use media (such as television, newspaper and magazine advertising) to raise awareness; brochures and catalogues to inform customers about a product and present an image of the business; point of sale promotion (such as in-store displays) to encourage impulse buying; promote the business and/or product on the internet through websites and email and offer after-sales support to provide service backup and information, as well as warranties and guarantees.

Promotion is traditionally split into ‘above the line’ and ‘below the line’ promotion. Above the line promotion is paid for communication (for example, advertising in the newspapers or on the television). Advertising is the main method of above-the-line promotion and can be seen by anyone. Below the line promotion consists of promotional activities where the business has direct control over who sees it (for example, by direct mailing and using money-off coupons). It is aimed directly at the target audience. The promotional method used by a business will depend on factors such as the product life cycle stage the product is in.

Examination TipYou need to know and understand the B2B and B2C distribution channels including producers, agents/brokers, wholesalers, retailers, consumers, industrial distributors and industrial buyers. You will also need to be able to understand the reasons for choosing place and the different choices for placement options and the impact this can have on a business.


Multichannel marketingMultichannel marketing means using a variety of channels to communicate with customers. Marketing activities are carried out over a range of traditional and/or digital channels, and provide customers with more than one way to complete a sales transaction (such as through a retail store, a web page on the internet or through an app on a smartphone). Businesses in retail, finance, computing, travel, fashion and many other industries, use multiple channels to engage customers. Different types of businesses tend to use different methods (for example, catalogues are often used for home furnishings, clothes and computer products, whereas financial businesses often use call centres). If selling online, many customers will prefer a multichannel approach where they can browse on the web and buy instore, or buy on the web and return to the store for a refund.

Customising marketing campaignsAs businesses now use a variety of channels such as flyers, direct mail, emails, blogging or social media they will need to customise their marketing campaigns to fit these different channels. Certain channels lend themselves to certain messages. For example, if the promotional message is long or detailed, the marketing campaign may use print or the internet. If it is to use television, the content would have to be customised to fit a 30-second advert using this channel. If the campaign is to include radio, the promotional content would have to be further customised as this cannot include images. A business will need to integrate these different channels to ensure that prospective customers receive the whole message and that a consistent brand message is maintained.

Promotional mixThe promotional mix is made up of a number of elements which comprise of both traditional and digital advertising that includes:

• TV, radio, newspapers, magazines, posters and channels available through the internet• using public relations (PR) to communicate with the public, promote the business and build a positive

reputation or repair public image• direct marketing through direct mail, email marketing, telemarketing and SMS or text messaging• personal selling (most common in the B2B sector) using individuals to promote the message to the

target market• trade shows and exhibitions that can showcase and demonstrate their latest products and services• sales promotions that focus on a specific window of time (such as buy one, get one free for a limited

period, early bird meals in restaurants for customers who eat at specific times and end of season sales).

A promotional mix should be designed in a way that informs the target audience about the values, and benefits of the good or service offered. There are a number of external factors that may impact on promotional activities, including the activity of competitors (increased/decreased spending) and the production costs of promotional materials. Seasonal events (such as national holidays, religious festivals and school holidays) also give opportunities for businesses to increase customer interest and revenue. For example, businesses may promote seasonal products or back-to-school offers. Many businesses will build a promotional calendar for the year that shows relevant annual holidays and events that are appropriate for their product portfolio.

AIDA modelThe AIDA model is an advertising effect model and describes the effect of advertising media. It stands for awareness, interest, desire and action. In order to communicate the message effectively, the promotional materials must be designed to promote a response from the customer. See figure 4.3 for further explanation.

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An example of AIDA is a movie poster. The sole purpose of a movie poster is to get your attention, draw your interest, give you a desire to want to watch the movie and action you to go and buy a ticket.

A Get ATTENTION of potential customers

by using adverts (for example on buses,

billboards or in unexpected places).

I Hold on to their INTEREST

by keeping away from large sections of text, making it

brief and informative.

D Create a DESIRE for the product being

promoted

for example, by focusing on the

taste of a soft drink that is sugar free.

A Stimulate ACTIONto buy the product

by closing the sale (for example,

through limited time offers such as

free delivery).

Figure 4.3 The AIDA model explained

Examination TipYou need to be able to understand multichannel marketing, customising marketing campaigns to fit different channels, the promotional mix and how this may change depending on the stage of product adoption (AIDA), as well as the different factors that need to be considered and which may impact on promotional activities.

Process – coordinationThe customer experience starts from the moment a customer discovers a business and lasts through to purchase and beyond. This means the process of delivering the product and the behaviour and efficiency of the staff who deliver it, are vital to customer satisfaction. To keep customers happy, a business needs bookings and transactions to be easy, to have a user-friendly internet experience, short waiting times, provide good information flow to customers and have helpful of staff. As more and more people use technology, businesses must take into account operational considerations and make sure that their websites are fast enough and available on the right devices (such a mobile phones and tablets). An example of a poor process is when customers are trying to reach a business by phone but are left on hold. These customers may give up, go elsewhere and tell their friends to go elsewhere, causing loss of revenue for the business.

Direct and indirect processesProcesses include direct activities and indirect activities. Direct processes add value at the customer interface as the consumer experiences the service. Many processes are supported by indirect processes, often known as ‘back office activities’, which support the service.


Process Activity

Direct processes add value at the customer interface

• customer service• interactive websites• electronic point of sale (EPOS) systems

Indirect processes support the service • back-office systems• managing and training staff• manufacturing goods• managing quality.

People – caringEveryone who comes into contact with customers will make an impression and so the people within a business are very important. Many customers cannot separate the product from the member of staff who provides it, so the people in a business have a positive or negative effect on customer satisfaction. The reputation of a brand rests in the hands of staff. If they are not selected to be well-suited to the role, empowered, motivated, trained and developed appropriately, and do not have the right attitude, the reputation of the business could be damaged. For example, a retailer having poor sales assistants may result in dissatisfied customers, which could lead to a reduction in sales as customers have the option of purchasing from competitors. Listening to and acting on customer feedback, caring about customers by giving excellent sales support and advice adds value, and can give businesses a competitive edge. Staff should therefore be well suited and well trained. This includes having good product knowledge and being willing to assist customers.

Physical environment/evidence – confirmationThe physical evidence of a business should give a good impression and be in line with the expectations of the customer. This may be a clean, tidy and well-decorated reception area, uniformed staff, clear signage and displays or clean company vehicles. If the physical or digital premises are poor, the customer is likely to think the product is also poor. For example, a customer at a bank would expect a professional and formal setting, and customers of a high-quality restaurant with excellent food, a strong positive brand image and high prices, would expect the restaurant premises to be high quality also. Poor use of language in digital communications from a business or an unprofessional web landing page can harm the reputation of a business. Tangible products are also used to complement and reinforce services (for example, gifts, souvenirs and mementos such as pens engraved with the business’ name).

Examination TipYou need to be able to understand indirect and direct process, the effective delivery of services to customers and how the physical environment/evidence can complement and reinforce services.

You need to be able to understand the elements of the marketing mix to include the 7Ps and 7Cs, and how each of these would be used by businesses in different situations. You will need to apply your understanding of the 7Ps and 7Cs to real life marketing and business contexts/scenarios.

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Activities

4.1 Below you can see the life cycle for a product.

Chapter 4 Summary


• How and why the marketing mix (7Ps and 7Cs) is used and the interrelationship between each of the elements.

• The three levels of product (core, actual and augmented), the product life cycle (PLC) and how it affects perceptions of customer value, product portfolios, brand extensions, multi-branding, product differentiation and product modification.

• Price elasticity of demand and the different pricing strategies.

• B2B and B2C distribution channels, intermediaries and placement options.

• Multichannel marketing, the promotional mix and AIDA.

• Direct and indirect processes.

• How to delivering effective services to customers.

• How to compliment services through the physical environment and evidence (tangible products).

A

Time

Sales

($)

(a) What position has the product reached in its life cycle at point A?

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(b) What might a business do when a product reaches this stage?

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4.2 In order to communicate a message effectively, promotional materials must be designed to promote a response from the customer.

Choose an advertisement for a movie of your choice. How does it use the AIDA model?

ATTENTION

INTEREST

DESIRE

ACTION

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Practice questions

4.1 Explain one benefit to a business of using multichannel marketing.

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4.2 Explain two advantages for a business of trading online only.

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4.3 The manager of Max View Vision is happy with his 4P marketing mix strategy for his new high street store selling digital, LCD and plasma screen televisions, but he is concerned about his 7P marketing mix. He knows that it is not just the products customers buy but also the other service elements. He plans to have a showroom so consumers can see the TV’s they want to purchase working. He also plans to offer a telephone enquiry line.

Write a report to the manager on how Max View Vision could use the people, process and physical evidence/environment to improve the marketing mix.

Use the headings to structure your answer. You should justify each recommendation.

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Physical evidence/environment

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Learning Objectives

5.1 Measuring successUnderstand how and why the success of marketing activities is measured, and select and use quantitative and qualitative measures in given contexts to interpret the success of marketing activities.

CHAPTER 5MEASURING THE SUCCESS OF MARKETING ACTIVITIES


5.1 Measuring success

Marketing activities can cost a business a great deal of money and so it not enough for the business to guess what is and is not working in its marketing campaigns. Results should be measured to determine the effectiveness of marketing activities. By collecting and analysing data from campaigns a business can determine the effectiveness of its marketing activities in comparison to its previous results for the last quarter or the last year, determine their effectiveness in comparison to industry benchmarks or use these metrics to inform its future marketing activities.

Measuring the success of marketing activities means that a business can:

• look at the impact the activities had on the business (for example did they help it to sell more?)• decide which activities worked well (for example which were the activities that generated positive

results?)• decide on what did not work so well, taking the opportunity to ask why not and decide which activities

should be avoided in the future and what could be done instead.

Businesses spend money on marketing activities to get more customers to buy more of their product, more frequently and for more money. Marketing is therefore an investment and a business will need to know the impact of the marketing activity compared to what it expected. A business will want to know not only if the marketing activity had the desired results in increasing/maintaining sales but it will also want to know how it impacted on a variety of other factors such as the number of sales leads and brand awareness, explained further below. To do this, it will use both qualitative and quantitative measures (the difference between qualitative and quantitative data is discussed in Chapter 3).

Quantitative measures involve statistics or figures (for example, the number of sales made for a product). Qualitative measures are more difficult as they involve less tangible data (for example, the customer’s attitude to a brand). A prospective customer may not have purchased anything this time but as a result of the marketing activities, they may be more likely to buy in the future.

The measurements that a business will carry out depends on the objectives of the marketing activities. For example, if a business runs a marketing campaign to increase sales it is likely to rely more heavily on quantitative measures, whereas a marketing campaign designed to influence customer opinion is likely to rely more heavily on qualitative measures.

Quantitative measuresTotal sales are one of the easiest things for a business to measure and compare. For example, a business may have set a target of a fixed number of sales over a specific period. By measuring the total sales a business can compare sales before, during and after marketing activities take place and compare against targets or previous figures. Market share is the percentage of total sales in a market held by a brand, product or business and can be obtained by increasing existing customers, retaining customers and finding new customers. Knowing which marketing activities were the most successful allows the businesses to continue with these activities and maintain or increase their market share. Revenue growth shows sales increases/decreases over time. It is used to measure how fast a business is expanding. A business will need to know what percentage of this growth can be attributed to the marketing activities; the higher the revenue growth, the more effective the marketing activities. A retailer will measure the number of sales per square metre. Retail sales per square metre is the store’s average revenue for every metre of sales space. This measurement can be used to show how well a physical store is performing and whether it is doing better because of the marketing activities of the business.

53MEASURING THE SUCCESS OF MARKETING ACTIVITIES

A business will need to consider the cost of all marketing activities. If these are extremely high, the business will need to consider how effective the marketing activities are in achieving their objectives and if the business is marketing in the most effective way. A business will need to measure how the amount spent on marketing the product affects product profitability. A business will have previously conducted market research in order to bring a product to the development stage, plus there are also the ongoing costs of marketing activities such as advertising, PR, direct marketing and in-store and online promotions. These activities have to be taken into account when calculating the product profitability and activities need to be assessed to see if they are worthwhile. A business will also want to generate new sales leads and convert these into sales. For example, a business could do this through speaking at a trade show, conference or industry event. The business will need to consider if these marketing activities generated leads and the cost of doing so.

Qualitative measuresCustomer satisfaction is important if they are to become a loyal repeat customer of a business. A business may use surveys (as discussed in Chapter 3) to get feedback from its customers. For example, a business can measure satisfaction by asking a customer how likely they would be to use the business again or if they would refer a friend to buy from the business. Achieving brand awareness (as discussed in Chapter 1) can be a long-term result of marketing activities and so businesses may not expect an immediate return. To measure brand awareness, a business might look at how many customer queries they have had for a product since it was promoted on the website or the reach and engagement of any social media posts. The business will also want to improve a customer’s attitude to a brand. A business may measure this by searching the brand name in a search engine and checking for positive or negative comments and reviews in order to see how the brand is perceived externally. They may also look at comments on the business’ website, or other communications from customers (such as customer complaints). All businesses want customer loyalty and this can be measured through repeat purchasing which may be logged through a loyalty card or by looking at the customer’s purchase history, for example. They also want to gain new customers. This can be measured through the number of customers who used a promotional code or a money-off voucher supplied as part of a marketing activity, for example.

Examination TipAs well as understanding how and why the success of marketing activities is measured, you will need to be able to use data given in graphs or charts showing the outcome of marketing activities, state what the data shows, interpret this data and come to conclusions and/or recommendations.

Chapter 5 Summary


• How and why the success of marketing activities is measured by a business.

• How to select and use quantitative and qualitative measures to interpret success.


Activities

5.1 Complete the table below to give four qualitative and/or quantitative measures that a business could use to measure the success of a marketing activity.

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5.2 Circle the three mistakes in the following text:

The measurements that a business will carry out depends on the objectives of the marketing activities. For example, if a business runs a marketing campaign to decrease sales it is likely to rely more heavily on qualitative measures, whereas a marketing campaign designed to influence customer opinion is likely to rely more heavily on quantitative measures.

Practice questions

5.1 Give one quantitative measurement that can be used to show how well a physical store is performing.

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55MEASURING THE SUCCESS OF MARKETING ACTIVITIES

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5.3 Each year a retailer has two different marketing activities:

• In Q1 it runs a promotional activity offering a price reduction on all seasonal items in-store and online.

• In Q3 it runs a campaign in magazines and online with coupons to use in-store and codes to use when shopping online to get a free gift with each purchase.

Analyse the success of these promotional activities in increasing sales for both in-store and online customers.

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Total Sales by Quarter 2015 – 2017 ($000)

2015 2016 2017

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

In-store sales 40 40 80 45 50 52 68 40 43 46

Online sales 20 50 90 30 31 40 89 35 45 53

What the data shows

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Learning Objectives

CHAPTER 6LEGAL AND ETHICAL ISSUES

6.1 Legal issuesUnderstand relevant legislation, regulations, codes of practice and their impact on marketing activities.

6.2 Ethical issuesUnderstanding ethical issues and their impact on marketing activities.

6.3 Ethical business practicesUnderstand how and why businesses use ethical marketing activities and the impact of these on a business.


6.1 Legal issues

There are a number of legal issues that have to be considered by businesses when marketing as they can impact on marketing activities. Businesses must be sure to adhere to legislation, regulations and codes of practice when marketing and advertising their goods as an advertisement can be banned if it breaks the law or may have to be changed or replaced if consumers complain, for example.

AdvertisingAn advertisement is a message that promotes a good or a service, or gives information to the public. Advertisements may take many forms (for example signs in shops, press advertisements in newspapers or magazines, or television and radio advertisements). Advertisements can also be transmitted directly to the customer by mail, email or text message. Advertisements are usually made to encourage customers to buy goods or services. When advertising, there are regulations that restrict what an advertiser can and cannot do.

Be harmful or offensiveAll adverts should be prepared with a sense of responsibility to consumers and society. They must not cause serious or widespread harm or use methods that are likely to encourage socially irresponsible behaviour (for example, encouraging unhealthy diets or lifestyle; encouraging motorists to drive at high speeds or encouraging excessive drinking). Businesses must take care if the adverts are addressed to or include children or young people. These adverts should not contain anything that is likely to result in a child’s physical, mental or moral harm and they should not exploit a child’s loyalty, vulnerability, innocence or lack of experience.

Give inaccurate descriptions, be dishonest or misleadingBusinesses should not give customers inaccurate descriptions of goods and services, or be dishonest or misleading. For example, if a business advertises a product at $50 without stating that the price does not include sales tax, or says that a product weighs 1kg when it weighs 900g, then the advert is inaccurate and misleading to customers.

Make claims that cannot be verifiedThis means if a business makes a claim about a product, it must be able to prove what it says. For example, if a business states that the product is ‘scientifically proven’, the business should have the data to back up the claim.

Contain libellous or defamatory contentA statement is defamatory if it is likely to make people think less of that person or cause serious harm to the person’s reputation. Defamation can be a written (referred to as ‘libel’) or verbal (referred to as ‘slander’) statement. For example, a business cannot accuse a competitor of being ‘untrustworthy’ in its adverts.

Potential issues when marketingBusinesses must also be aware of potential issues when marketing certain types of goods. For example they must take care when advertising goods that cannot be exported/imported, considered dangerous and/or are age-restricted (such as alcohol, cigarettes and tobacco products, fireworks, knives blades and axes, petrol and spray paints, videos, DVDs or games that have a certificate such as 12, 15 or 18). Businesses also rely on using customer information to target individual customers and a business must ensure that it complies with the most up-to-date data protection legislation.

59LEGAL AND ETHICAL ISSUES

The impact of legislation designed to protect consumersThere are also restrictions on the timing of adverts. This means that adverts that are thought to have unsuitable content for children cannot be shown at certain times (for example before 9pm or after 5.30am). This is referred to in many countries as the ‘watershed’. Unsuitable content can include everything from sexual content to violence, graphic or distressing imagery and swearing. For example, the most offensive language must not be broadcast before the watershed both on TV and radio when children are most likely to be listening.

If the advertising for a product does not match the description given, for example, or the advert breaks the law, the business could be prosecuted and may have to give refunds or exchanges to customers. The reputation and brand image of the business can also be damaged. The business may be required to change promotional activity if it is unsuitable or it may be banned altogether.

Actions businesses must takeTo ensure that its adverts are suitable, businesses take a number of actions, including the pre-testing (also known as ‘copy testing’) of adverts before running them to predict their performance, identify weak spots and improve performance and proofreading of promotional materials to make sure that they are free from error. A business also needs to ensure that it has clear procedures in place to ensure that marketing staff are fully trained and are aware of the policies in place for advertising restricted goods and can make sure that the personal data of customers is protected.

Case Study 6.1 An example of legal issues for businesses

Two fast food chains received a large number of complaints in 2017 for their choice of adverts.

An advert for KFC featuring a chicken dancing to a rap soundtrack attracted 755 complaints. Consumers complained that the advert was disrespectful to chickens and distressing for vegetarians, vegans and children.

An advert for McDonald’s featured a mother and son talking about his dead father, and how both father and son loved a McDonald’s Filet-O-Fish burger attracted 100 complaints. The advert was widely criticised on social media for trivialising grief. Consumers felt that the advert was likely to cause distress to those who had experienced the death of a close family member.

Case Study 6.2 An example of the impact of legislation on a business (Aldi)

German supermarket chain Aldi ran a series of adverts featuring Kevin the Carrot. The animated carrot, which was also sold as a children’s soft toy, was used to promote a range of goods at Christmas. One of these adverts promoted Aldi’s range of wines and spirits. The advert was banned as it was felt that using a carrot that had a childlike high-pitched voice similar to that of a young child to advertise wines and spirits would increase the appeal of alcohol to young children.


Examination TipYou will need to understand the potential issues when marketing, the impact legislation has on marketing activities and the actions a business must take to adhere to legislation, regulations and codes of practice. You will be asked to apply this understanding to given real life marketing scenarios/contexts.

6.2 Ethical issues

Ethics refers to the moral rights and wrongs of any decision a business makes. Ethical issues arise as a result of conflict or lack of agreement on certain issues. Although unethical and controversial practices may be used to increase demand and sales, they can lead to a loss of customer confidence and a decrease in brand image and reputation.

Known unethical or controversial marketing strategies

Anti-competitive practicesAnti-competitive practices are unfair business practices that are likely to reduce competition and lead to higher prices, reduced quality or levels of service, or less innovation. Examples of anti-competitive practices include price fixing and price discrimination between customers (charging different prices or imposing different terms where there is no difference in what is being supplied).

Planned obsolescencePlanned obsolescence are purposefully implemented strategies to guarantee the current version of a given product becomes out-of-date or useless within a known time period. This guarantees that consumers will demand replacements in the future, thus naturally supporting demand. Technology is known for planned obsolescence with personal electronic devices (such as smartphones) being replaced every two to three years.

Pyramid schemesPyramid schemes start with one ‘recruiter’. They recruit a second person who is required to pay a fee to join or ‘invest’ in the scheme. In order to make their money back, the new recruit will also recruit others in order to get paid.

People at the top of the pyramid therefore often make money from the investment of people lower down, rather from selling a legitimate product. The business model is unsustainable and those at the bottom of the pyramid are at risk of losing their fees with no prospect of recovering the money. As such, pyramid schemes are illegal in many countries.

Vendor lock-inVendor lock-in ensures customer dependence on the vendor services. For example, a mobile phone manufacturer may have a SIM lock (network lock) which means that the phone can only be used with that manufacturer.

Viral marketingViral marketing refers to a direct marketing technique that uses the internet and existing social networks to promote a product. Its name refers to how consumers spread information about a product with other people in their social networks. ‘Going viral’ has become very desirable for marketers.


Subliminal advertisingSubliminal advertising is placing brief or hidden images in adverts in the hopes that viewers will process them unconsciously. Promotional messages are played at very low volume or flashed on a screen for less than a second. Its effectiveness is not supported by scientific evidence and its use is considered a deceptive business practice in some areas.

Advertising to children (pester power)Pester power is usually associated with manipulative marketing tactics to influence children to ‘hassle’ their parents to buy the products. It is based on the idea that children have the power to persuade their parents (often referred to as ‘kidfluence’) to buy them something they do not really need. The strategy is often linked to junk food advertising (for example for foods such as biscuits, crisps, sweets and chocolates aimed at children, supermarkets that have checkout areas stacked with unhealthy snacks and treats, and foods that contain a free toy).

Case Study 6.3An example of ethical issues for a business (Proctor & Gamble and the Tide Pod Challenge controversy)

The beginning of 2018 saw a viral trend related to Tide laundry detergent. The Tide Pod Challenge was popular with teenagers and featured people making videos of eating (or pretending to eat) the detergent pods.

Proctor & Gamble had nothing to do with this trend but needed to take action to avoid problems with its brand. Its media team took matters into its own hands, firstly telling the challengers to ‘call your local poison control centre’ and then by sharing a ‘public service announcement’ video on Twitter featuring US football player Robert ‘Gronk’ Gronkowski with the slogan ‘Do not eat’.

Examination TipYou will need to understand the ethical issues facing businesses when marketing and be able to apply these in real life marketing contexts. You will also need to be able to talk about the likely effect of using unethical or controversial strategies in a business and the impact it can have on brand image and reputation.

6.3 Ethical business practices

Ethical factors are about social values which govern the behaviour of a business. Many businesses have implemented a corporate social responsibility (CSR) policy, which includes their ethical business practices and publicly states their commitment to society and the environment. CSR impacts on marketing activity as more businesses use marketing to emphasise their ethical behaviour and membership of ethical associations (such as Fairtrade). CSR aims to ensure that companies conduct their business in a way that is ethical. This means taking account of their social, economic and environmental impact and consideration of human rights. CSR can refer to a wide range of actions that businesses may make from donating to charity to ethical trading.


One ethical business practice is to demonstrate commitment to the local community. This can impact on a business through improving its reputation. A business may choose for example to:

• volunteer in local schools or community projects• sponsor a local event• organise clean-up events• support a local charity.

For example, a builder may provide free materials and labour to community projects; supermarkets and restaurants may provide food to local homeless groups or a bank may ask its customers to make a small charitable donation each time they withdraw cash.

A business may focus on the wider community and aim to support wealth distribution or poverty alleviation and education through programmes targeted at communities and often involving sponsorship. Businesses may also support local charities with financial and non-financial donations (such as offering professional skills). Another way to demonstrate CSR is through ethical trading. This focuses on protecting workers’ rights throughout the supply chain by making sure that it treats its own employees, its suppliers and their workers fairly and ethically. This can impact on the business as customers of a business will want to know that it does not exploit the people who make and sell its products and so this can improve the reputation of the business and increase brand trust and customer loyalty.

A primary focus of CSR is the environment. Environmental CSR focuses on being environmentally friendly (eco-friendly) or ‘green’, and aims to reduce any damaging effects on the environment from the activities of a business. This can impact on the business as it can reduce business risk, improve reputation with its consumers and provide opportunities for cost savings. Caring about the environment can have a positive outcome for a business as many customers prefer to buy from responsible businesses. This can increase revenue.

A business may focus on:

• reducing emissions• reducing energy use for example switching off lights and equipment when not in use and reducing the

use of water• efficient recycling and waste management• reducing packaging• having eco-friendly business travel policies (for example that encourage online or in-house meetings to

reduce travel and so reduce the carbon footprint of the business)• buying locally to save fuel costs• working with environmentally-conscious suppliers and distributors• sourcing materials responsibly such as using recycled materials and sustainable timber.

There are both advantages and disadvantages to a business behaving ethically. It might have a positive impact on the business as it improves brand awareness, increases demand from consumers and so increases revenues but on the other hand, it may impact negatively on the business as it will incur higher costs if it sources sustainably rather than sourcing at the lowest price. There is also a danger that it will build expectations with consumers who will take action if they feel they have been let down or deceived. This could be by refusing to buy from the company or pushing for everyone to stop buying from the business (a ‘boycott’).


Case Study 6.4 An example of eco-friendly packaging (Ecovative and Ikea)

An American company, Ecovative, has developed an eco-friendly packaging. Called ‘mushroom packaging’, it is created by letting mycelium (mushroom roots) grow around clean agricultural waste (such as corn stalks or husks). Over a few days, the fungus fibres bind the waste together forming a solid shape. It is then dried to prevent it from growing any further.

Swedish retailer Ikea has announced that it is looking to introduce this eco-friendly mushroom packaging because many products traditionally come packaged in polystyrene that cannot be recycled but the mushroom packaging can be disposed of simply by throwing it in the garden where it will biodegrade within weeks.

Case Study 6.5 An example of corporate reputation and CSR (The Lego Group and Microsoft)

The Reputation Institute measures the corporate reputation of 100 companies annually by asking the public in 15 countries around the world questions about each company. In 2017 two well-known companies topped the vote.

1st The Lego GroupThe Lego Group produces and sells a range of plastic construction toys aimed at children. It states that as a provider of play experiences, it ensures that its behaviour and actions are responsible towards all children and towards its stakeholders, society and the environment.

2nd MicrosoftMicrosoft is a worldwide leader in software, services, devices and solutions. It states that it is working to apply the power of technology to ensure corporate responsibility, safeguard human rights and protect the planet. Its policies and business practices are intended to reflect a commitment to making a positive impact in communities around the globe.

Having strong CSR policies is an advantage to these companies as in recent studies almost most three quarters of global consumers said they were are willing to recommend companies that are perceived to be socially responsible.

Examination TipYou will need to understand the reasons for businesses having CSR policies that include ethical marketing activities, how different policies might be suitable for different businesses and the impact ethical practices have on businesses. You may be asked to apply your understanding of these practices in real life marketing contexts.


Activities

6.1 Think of an advertising or social media campaign that you have seen recently that some consumers might consider potentially offensive.

(a) What was the campaign and why could it be considered offensive?

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Chapter 6 Summary


• How legislation, regulations and codes of practice can impact on marketing activities including issues around advertising, age-restricted and dangerous goods, importing and exporting, customer information and data protection.

• Known unethical and controversial marketing activities, how ethical issues arise as a result of conflict or lack of agreement and how a business may be affected if it uses known unethical or controversial marketing strategies.

• How and why businesses incorporate ethical marketing activities into their CSR policy and the impact CSR has on businesses.


(b) Would you agree that it is offensive and should be banned or changed? Why/why not?

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Practice questions

6.1 A fast-food company is considering including a free plastic toy with its children’s meals.

Explain one ethical issue that the business should consider before it runs this campaign.

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6.2 Explain two reasons why a business should make sure its advertising is responsible.

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APPENDIX 1GLOSSARY OF MARKETING TERMINOLOGY


AAdvertisement – A message that promotes a good or a service or gives information to the public.

After-sales support – The service that is provided after goods or services have been sold. Most after-sales support involves a warranty or guarantee, upgrade or repair service.

AIDA model – An advertising effect model that describes the effect of advertising media. It stands for awareness, interest, desire and action.

BBrand – A name/term/sign/symbol/design intended to identify the products of a seller and to differentiate them

from similar offerings from competitors.

Brand extension – The process of taking a familiar brand and adding new products to it.

Business aim – A statement of what a business is trying to achieve; also known as a ‘goal’ or ‘target’.

Business objectives – The stated, measurable targets of how a business achieves its aims.

Business-to-Business (B2B) – The selling of one company’s good or service to another company.

Business-to-Consumer (B2C) – The selling of goods or services directly to consumer.

CCapital goods – Goods that are used for future production by manufacturers. They are goods used in the

creation of products (for example, paper, equipment and machinery).

Communication channels – The way that information flows within a business and between other businesses.

Competitor analysis – An assessment of the strengths and weaknesses of a business’s competitors in order to identify opportunities for a business.

Competitor-based pricing – A pricing strategy where businesses set prices close to the prices of their competitors (sometimes called ‘going rate’ pricing).

Consumer – The user of a product. They may not have paid for the good or service.

Consumer goods – Goods that are used for final consumption (for example, food products, household appliances, electronic items, furniture and cleaning products).

Continuous research – Regular and frequent research carried out over a long period of time.

Convenience sampling – A random sampling method where subjects are selected because of their accessibility/proximity to the researcher.

Corporate image – The public perception of a business, in other words, what the public thinks of it.

Corporate social responsibility (CSR) policy – A business policy that makes a public commitment to society and the environment.

Cost-plus pricing – A pricing strategy where the total costs of producing one unit of the product are calculated and the required profit margin is added to give the selling price.

Customer – People or businesses who purchase/pay for a product.

Customer profile (persona) – The description of a typical or ideal customer for a business.

69GLOSSARY OF MARKETING TERMINOLOGY

Customer service – The provision of service to customers before, during and after a purchase.

DDirty data – Data that contains inaccurate information.

EEthics – The moral rights and wrongs of any decision a business makes.

Exporting – Selling to another country.

External environment – The factors that occur outside of the business that cause change and are usually outside of the control of the business.

FFocus group – A research method involving a small group of people (usually six to eight participants) who are

guided through a discussion by a moderator.

GGlocalisation – The customisation of a product for the locality/culture in which it is sold.

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IInternal environment – The events, factors, people, systems, structures and conditions inside the business

that are generally under its control.

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LLegislation – A law or set of laws suggested by a government and made official.

Licensing – An arrangement where one business transfers the rights or the use of a good or service to another business.

Local community – People that live in an area and are therefore stakeholders of the businesses in that area.

MMarket – The place where buyers and sellers come together.

Market map – A map that shows where existing goods and services are positioned in the market so that the business can decide where they would like to place (position) their product.

Market research – Gathering information about consumers’ needs and preferences.

Market segment – A group of consumers who respond in a similar way to a given set of marketing efforts.


Market segmentation – The process of dividing a market into distinct groups of buyers who have different needs, characteristics or behaviours and who might require separate marketing strategies or mixes.

Marketing mix (7Ps) – A marketing tool that combines a number of components in order to strengthen a product’s brand and to help sell the good or service. Originally 4Ps/4Cs, these have been extended in modern marketing to the 7Ps/7Cs to account for the marketing of services.

Marketing planning – The process of considering the 7Ps together to form a consistent strategy.

Mass customisation – The production of personalised or custom-tailored goods or services to meet consumers’ diverse and changing needs.

Mass market – A market made up of products with mass appeal (to lots of customers).

Mission statement – A statement that defines the purpose and primary objectives of a business

Multi-branding – Marketing of more than two competing and almost identical products belonging to a single business.

Multichannel marketing – The activities that are carried out by the marketing department over a range of traditional and/or digital channels (for example using radio/TV adverts).

NNiche market – A specialist area of the market that addresses a need for a product that is not being addressed

by other mainstream providers.

OOmnibus study (omnibus survey) – A primary research method that involves a research agency conducting

a number of interviews with a specific target group on a regular basis.

PParticipants – The people who take part in research who form part of the sample target group being researched.

Penetration pricing – A pricing strategy where a business sets the product’s price significantly lower than a competitors’ price.

Perceived value – A customer’s opinion of a product’s value.

Poll – A primary research method that asks a sample group of customers to ‘vote’ on a question.

Premium pricing – A pricing strategy where the price is set higher for certain goods in the hope that the higher price will give the impression the product is of a higher quality.

Pressure groups – Groups of people who are interested in whether a business is acting appropriately. Pressure groups try to influence government policy or business activity.

Price elasticity of demand (PED) – PED measures the relationship between a change in the quantity demanded of a product and a change in its price.

Price skimming – A pricing strategy where businesses charge a high price in order to maximise profits.

Primary research (field research) – A research method where information is gathered first hand.

Private sector businesses – A type of business that is owned by private individuals or groups.

Product differentiation – Making products that stand out from the competition.

71GLOSSARY OF MARKETING TERMINOLOGY

Product life cycle (PLC) – The process which a product goes through in its lifetime from introduction, through growth, to maturity and decline.

Product modification – Making changes to existing products to give them greater appeal or improve functionality.

Product portfolio – The range of products sold by a business.

Products – The goods or services of a business.

Promotional plan – The marketing and pricing strategies for a business, to include how the product(s) will be sold to the customer.

Public corporation – A statutory body that serves the general public but is owned by the government.

Public sector businesses – Businesses owned and run by the government and funded by the tax payer.

Psychological pricing – A pricing strategy where pricing is decided based on what looks more attractive to customers in the market. For example $1.99 looks more attractive than $2.00.

QQualitative research – A research method that focuses on opinions and feelings.

Quantitative research – A research method that focuses on numbers and statistics.

Quota sampling – A sampling method where a researcher selects a group that represents certain characteristics of the population and interviews a set number of people who fit the requirements of characteristics (quota).

RRandom sampling – A sampling method in which every person has an equal chance of being selected.

SSales revenue – The income a business receives from the sale of its products.

Sampling – The process of using data about a small group of customers to inform a business about a larger population.

Sampling bias – A sample that is collected in such a way that some members of the intended population are less likely to be included than others.

Sampling frame – The list from which potential participants for research are drawn.

Secondary research (desk research) – A research method of collecting and analysing information that is already available and has been collected by someone else.

Services – Things that are done to a customer or for a customer.

Shareholder – The ownership of a limited company is divided up into equal parts called ‘shares’ which can be bought or sold. Whoever owns one or more of these is called a shareholder.

SMART objectives/targets – Specific, measurable, achievable, relevant and time-bound targets used to help a business to meet its objectives.

Stakeholders – The people who have an interest in a business and who are affected by what it does and the way it operates.


STEEPLE analysis – A tool used to analyse the social, technological, economic, environmental, political, legal and ethical factors affecting a business.

Strategic alliance – A partnership in which two or more businesses work together to achieve objectives that are mutually beneficial.

Strategic plan – A plan that outlines the mission vision, and high-level goals for a business for the next three to five years. It also takes into account how they will be measured and the major projects that will be taken on to meet them. It shares the vision for the future.

Stratified sampling – A sampling method in which the population is divided or classified into sub-groups and the sample reflects each sub-group in proportion to their representation in the population as a whole.

Suppliers – Provide goods, services or loans to a business.

Surveys – A primary research method where a sample group of customers have been chosen to represent the target market using a range of questions.

SWOT analysis – A tool used to analyse the strengths, weaknesses, opportunities and threats of a business.

Systematic sampling – A sampling method that takes a starting point then selects every person at a fixed interval.

TTactics – The immediate, specific actions that a business can take to respond to changes in market conditions.

Target markets – The specific market segments select by a business for its marketing.

Target population – The total group of individuals from which a sample might be drawn.

Telemarketing – A primary research method using the telephone to undertake surveys.

U

VVision statement – A statement that defines what the business wants to achieve over time by focusing on the

goals and aspirations of a business.

WWarranty – A written guarantee, issued to the purchaser of a good by its manufacturer, promising to repair or

replace it if necessary within a specified period of time.

Watershed – The time when TV programmes that might be unsuitable for children can be broadcast.

X Y Z

APPENDIX 2ANSWERS


Chapter 1 – Understanding marketing

Answers to activities

1.1 The two kinds of customer that a marketing department has a relationship with are:

• New customers• Existing customers

1.2 Business objectives are the stated, measurable targets of how to achieve business aims.

1.3 In a marketing context, glocalisation is maintaining a global image and brand while adapting goods and services to local preferences and tastes. Customers are more likely to respond to marketing messages which they feel are specifically speaking to them and focusing on a local area also creates an impression of being more personal to someone in that area.

Answers to practice questions

1.1 (D) Supplier

1.2 Mass market is a marketing strategy that uses mass distribution and mass media to market across all demographics.

1.3 Market research allows the business to understand the differences between countries because different cultures may respond differently to its products/marketing.

Chapter 2 – The marketing plan

Answers to activities2.1, 2.2 and 2.3Due to the nature of these activities, it is not possible to provide sample answers. We therefore recommend you work through these activities either on your own, in class with your tutor or with a fellow student and you check your answers with your tutor.


2.1 (C) Attract new customers

2.2 Market maps show where existing goods and services are positioned in the market so that the business can decide where they would like to place (position) their product.

2.3 An environmentally friendly business reduces its impact on the environment and preserves natural resources. It may use products that reduce its reliance on natural resources (such as rainwater tanks, solar hot water systems, use office supplies made from recycled plastic, or furniture made from recycled rubber). It will look at its business activities to see if it can do anything differently (such as reducing

75ANSWERS

travel by holding conference calls instead of regional meetings). Making a business environmentally friendly not only benefits the environment but can also save money as recycling saves on costs, and good practice can attract new customers. Reducing its environmental impact will improve the sustainability of the business. If it is less dependent on natural resources than its competitors and has ways to deal with rising costs, the business will have a greater chance of long-term success.

Chapter 3 – Market research, data collection and segmentation


3.1 Product 1 – Simply Smooth Bath Oil Flower scent would probably be more attractive to females. Could appeal to someone with a stressful job

that needs to relax, or a parent who wants to relax after a long day with children.

Product 2 – Smash Shower Scrub Masculine smells of sandalwood and patchouli would probably be more attractive to males. Could appeal

to someone who likes to be active.

3.2 To get a random sample, one possible example could be for Markos to use the school register as his sampling frame, give every pupil a number and then pull 50 numbers out of a hat.

Note: This is not the only possible answer to this question and therefore we suggest you discuss your answers with your tutor.


3.1 An omnibus study involves a research agency conducting a number of interviews with a specific target group on a regular basis.

3.2 One source of secondary research data that can be used to find information on customer behaviour may be loyalty card data. Customer records is another source of internal secondary research.

3.3 Market segmentation means to classify prospective groups of customers in line with their needs and requirements by learning as much as possible about the customers. Businesses know that customers have different needs, interests and views on the different goods and services that they offer. Businesses can segment by gender, age, where they live, where they work, their family size and how, why and what they spend money on. By segmenting their customers, businesses can understand how its goods or services may best meet customer needs and which goods or services customers might buy from them. This impacts positively on a business as it gives it the ability to cater to the needs of specific customers, although it must be careful not to limit its approach and ignore other prospective customers. If a business segments the market, it can allocate its resources to develop a marketing mix in line with the demands and requirements of its target consumers. This can help a business to increase sales and profitability by increasing how much and how often customers buy from it. On the other hand, if a business ignores market segmentation and ignores their target customer, they will not know what to sell or who to sell it to which could lead to the business failing.


Chapter 4 – Marketing mix


4.1 (a) The position has the product has reached in its life cycle at point A is maturity.

(b) The maturity stage of the product life cycle presents business with a wide range of challenges. With sales reaching their peak and the market becoming saturated, it can be very difficult for them to maintain their profits, let alone continue trying to increase them, especially when there is competition. Businesses will therefore look for ways to make their mature products more appealing to the consumer.

4.2 AIDA – Due to the nature of the question, we have provided an example response of the type of answers that could be given. You should check your answers with your tutor to make sure your answers are correct.

ATTENTIONThe first thing the promotional materials must do is to get the attention of the target audience. Advertisers will need to attract the attention of potential customers by using bright, bold colours/attractive, eye-catching design/striking illustrations/attractive people/well-known actors and actresses.

INTERESTGrabbing the attention of potential customers is the first step. Next the promotional material has to build on this by holding their interest long enough for the message to be conveyed. The actual content of the promotional material must be appropriate to the movie and relevant to the audience.

DESIREThe content of the promotional material must also make potential customers actually want to see the movie being promoted.

ACTIONThe promotional material must encourage potential customers to take the necessary action to buy the product and so become actual customers. Buying the product must therefore be made as easy as possible – movie tickets may be available on online or through apps, for example.


4.1 The benefits of a business using multichannel marketing could be:

• Multichannel marketing uses both traditional and digital marketing. This combination of channels gives the promotion more chance of reaching the prospective customer.

• Multichannel marketing uses more than one method of marketing and so may reach a greater variety of customers from different market segments.

4.2 The advantages for a business trading online only could be:

• The business will make savings in operational costs as there is no need to rent expensive high street premises.

• It increases sales opportunities because it can reach a global audience.• Customers can place orders 24 hours a day, seven days a week (convenience), which allows the

business to compete with other businesses.

77ANSWERS

4.3 A report showing how Max View Vision could use people, process and physical evidence/environment to improve their marketing mix:

People – Staff will need good communication and listening skills and will need to be trained to high standards. They will need technical knowledge of the products on sale, yet know how to explain these benefits to the customer. They should be able to identify what product will be suitable for each customer and have some sort of sales background. This is important as the customer will not buy from people who do not seem to know and understand the products, and they may go a competitor instead.

Process – The company will have to be able to promptly dispatch a TV after an order is placed. An order received must be sent to the suppliers, then on receipt delivered to the customer. Also products that break over the warranty/guarantee period will need to be collected and repaired. When customers phone the help line, the business must have enough staff to deal with the calls within a reasonable time. Again staff will need to be trained on how to troubleshoot problems over the phone and have the skills to deal with customers who may lose their patience. This is important because business are judged on not just on their tangible products but also the processes that support the pre-sale and after sales service of the company.

Physical evidence/environment – The show room will have to look ‘high tech’ and put forward a professional image to impress Max View Vision customers. Customers should be able to see display models, have demonstrations and have an adequate number of staff to deal with enquiries. This is important because the TVs will be expensive and people will expect the physical evidence/environment to reflect this and match their expectations or may decide to shop elsewhere.

Chapter 5 – Measuring the success of marketing activities


5.1 Possible answers could be any from the following qualitative and quantitative measures:

Quantitative measures Qualitative measures

Increase in total sales Increase in repeat sales (customer loyalty)

Increase in market share Increase in brand awareness

Increase in revenue growth Increase in brand attitudes (positive comments from customers)

Increase in product profitability Increase in customer referrals

Increase in new sales leads Increase in new customers gained

5.2 The measurements that a business will carry out depends on the objectives of the marketing activities. For example, if a business runs a marketing campaign to increase sales it is likely to rely more heavily on quantitative measures, whereas a marketing campaign designed to influence customer opinion is likely to rely more heavily on qualitative measures.



5.1 Sales per square metre is used to show how well a physical store is performing.

5.2 The advantages to a business of measuring the success of marketing activity could be:

• Marketing can be one of the biggest investments for a business and so it is important to ensure that the business gets a return on this investment.

• To confirm whether a campaign has hit its overall objectives and to help to make informed future decisions on marketing activities.

• To gain more in-depth insights into consumers and their behaviours in order to inform future marketing activities.

5.3 What the data shows – By looking at the total sales in each quarter, the retailer can see the effect on sales of the marketing activities and make decisions as to whether it should continue spending this money. Both promotions were successful in increasing sales. The figures show that sales were up both in-store and online in Q1 of 2016 but figures were not as high in Q1 2017 for in-store sales.

The effect of the free gift promotion was positive for both in-store and online sales in Q4 in 2016 in comparison to the figure for the previous quarter. Both online and in-store figures went up for Q4 after the campaign in Q3 but the gain in sales in-store was less in Q4 for both 2016 and 2017 than the gain in sales online. In-store sales only increased by 2,000 in 2016 and 3,000 in 2017 whereas online sales increased in Q4 by 9,000 in 2016 and 8,000 in 2017.

Interpretation – Due to the sales increasing both in-store and online in Q1 in 2016 and 2017, the retailer may want to continue offering a discount online as this is a successful activity but find another marketing activity to increase sales in its store in Q1. They may also wish to look at the sudden drop in sales in Q2 once the promotion ended and find a marketing activity to address this. Using a code to gain money-off when shopping online made sales increase more and therefore seems more popular for customers than taking a money-off coupon into a store. Again the retailer may need to rethink the marketing activity if it wants sales to increase.

Conclusion – Although both promotions have been successful in increasing sales the retailer should note these differences when planning future promotions. It could carry out more research into the preferences of its in-store and online customers and adapt its marketing activities in line with this. It should also consider the costs of these promotions against the increase in sales to see if these promotions are worthwhile financially.

Chapter 6 – Legal and ethical issues

Answers to activitiesDue to the nature of these questions, we have provided an example to guide you but we recommend you discuss your answers with your tutor.

The following examples are based on a charity advertising for cancer support.

6.1 (a) A TV ad for a cancer support charity included scenes of a father talking to his daughter, receiving chemotherapy, vomiting in a sink, sitting slumped in a bath and crying in a car before being comforted by a nurse. This might be distressing to viewers, especially scenes of someone vomiting.

79ANSWERS

(b) As the charity was trying to illustrate the reality of living with cancer, and was about people getting help and support from nurses, it needed to show the serious nature of the illness. As it was shown after the watershed so it would not be shown around children’s programmes and upset children it would not need to be banned or changed.


6.1 Promoting children’s meals using toys is ethically questionable and this business could be seen as using pester power to sell its meals.

6.2 Two reasons why a business should make sure its advertising is responsible could be:• A business should apply the codes of practice that set out what is acceptable in an advertisement as

this helps to ensure viewers are not offended by the way advertisements are presented.• If a business applies the relevant codes, viewers will be less likely to make complaints and this will

mean advertisers will not have to make changes to the advert.

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