THEME 1: 1.1. Meeting Customer Need
by a business, product or brand. It can be used as a measure of success
MASS MARKET: MARKET SIZE AND MARKET SHARE: BENEFITS + LIMITATIONS
Aimed at general population with a generic product Market size can be measured through: Reduces risk and cost o
Potential for large sales revenue To react to and prepare
VOLUME OF SALES: total quantity sold by
Possible high competition, need to be competitive on price in To become market orie
business
order to succeed Often biased
VALUE: total amount consumers spent on
EOS and lower average unit costs Reliable?
product
Large volume of sales means high sales revenue. This can be used Collecting data is time c
for research and development Market share: the proportion (%) of a market that Cost effective; are costs
High competition is taken
Homogenous products need to be differentiated through
marketing, this can be expensive MARKET SHARE = MARKET MAPPING
High volume production isn’t flexible to demand changes SALES OF A BUSINESS X 100
Technique used to unde
TOTAL SALES IN THE MARKET
competitors, based on t
Helps decide whether to
NICHE MARKET: MARKET RESEARCH: Decide where to positio
Gain better understand
A subset of the main market; addresses specialist needs PRIMARY RESEARCH Often perceptions of bu
Few competitors but limited numbers of potential customers Original data gathered by researcher New entrants will chang
Businesses will have to compete on quality and customisation in Up to date information; reliable
order to succeed Tailor to meet business needs
High profit margins as can charge premium price Time consuming
Small scale production so can be flexible and follow trends Expensive to conduct DIFFERENTIATION
Less competition than in mass markets
Low response rates can distort findings Product differentiation is the pr
- Very risky as demand may not be constant
Is sample representative? products
- Higher unit costs so no EOS
SECONDARY RESEARCH This is linked to a u
Research that already exists. Conducted business apart from
DYNAMIC MARKET: by another organisation
Easily accessible and a good starting point
,THEME 1: 1.2. Market THE MARKETS :
Price
S
1
DEMAND: SUPPLY: P
2
P
DEMAND: is the amount of a good that consumers are SUPPLY: is the amount of a goods and services provided 1
willing and able to buy at a given price at a given price by companies in a market over a given D
time period D 2
Factors affecting demand: 1
Factors affecting supply: Q Q Quantity
Changes in the price of substitutes 1 2
Change in price of complementary products Cost of production S
Price
1
Changes in consumer incomes New technology S
2
Fashion, tastes and preferences Indirect taxes
Advertising and branding Government subsidies
Demographics External shocks
External shocks
S1
Seasonality
S2
Increase in supply
Quantity
(shift outwards/to the
Increase in demand right)
PED:
Price
(shift outwards/to the
Price elasticity of demand (PED
right)
change in price.
ELASTIC
Between -1 and - infinity
Quantity
PRICE Leads to a bigger percenta
INCREASE quantity demanded. Reven
S3
PRICE Leads to a bigger percenta
S1
DECREASE quantity demanded. Reven
Fall in demand Factors influencing PED:
,hdidj
THEME 1: 1.2. Market (continued)
YED: YED: % CHANGE IN QUA
% CHANGE
Income elasticity of demand (YED) is the responsiveness of demand to a change in incomes. The change
in economy is outside the control of the business.
NORMAL GOOD
Demand rises as incomes rise but relatively inelastic
Positive number between 0 and 1
These products might be seen as a necessity
Examples: milk, bread
LUXURY GOOD
Demand rises as incomes rise but relatively elastic
Positive number greater than 1
Examples: exclusive resorts, business class travel, luxury cars
INFERIOR GOOD
Demand falls as income rises or demand rises as income falls
It is a negative number
Examples: supermarket own brands, bus transport
Factors influencing YED:
Necessity or luxury?
o Necessity = inelastic, luxury = elastic
Attractiveness/brand power
o Strong brand power means people will still buy the products even if incomes are
squeezed
, THEME 1: 1.3. Marketing Mix and Strat
PRICING STRATEGIES PRODUCT/SERVICE DESIGN: BRANDING AND
COST-PLUS
DESIGN MIX: PROMOTION
The cost to produce the products are worked out then the money is added on
Combination of factors needed Process by w
top
Add a profit margin as a monetary value or add a percentage mark-up to create an effective design product/serv
Considers profit margin business is willing to accept E.g. aesthetics, function, cost Attracts custo
+ Easy to calculate and justify Why is the design mix important? Offers an ‘inc
- Ignores PED, product not market orientated Good design mix gives a BRANDING
COMPETITIVE PRICING business a competitive advantage over A characteris
Products/services prices are in line with competitors rivals another supp
Business has no market power to set a different price A strong bran
Customers judge product/service on ‘non-price’ factors such as quality promotion
Used in very competitive markets and helps avoid price wars CHANGES TO MEET SOCIAL TRENDS: Ways to build a bran
+ Scope to develop non-price factors Concern over resource depletion: Focus on a un
- Shows a weak brand/product differentiation - Waste minimisation Advertise; fre
PRICE SKIMMING - Re-use Sponsorship
Product priced high to begin with as it has a desirable factor - Recycling
Social media
Customers want it when its new Ethical sourcing
o Direc
Usually applies to technology with short product lifecycle - Buying supplies/products that are
+ Greater profit early on produced with fair working o Rapid
- Ineffective as new competitors appear conditions, pay for workers and
PENETRATION PRICING minimal impact on environment Benefits of strong br
Setting prices really low on a new product - Adds value to
Designed to encourage sales and to persuade customers to try the product + Develop competitive advantage/USP Enables prem
Low prices should gain business more market share over rivals Reduces price
Prices rise once loyalty established + Gain stronger brand image/reputation. Builds trust
Applies to new product attempting to enter market Seen as socially responsible Makes it a ‘n
+ Establishes foothold in the market + Lower costs reducing waste/cheaper raw Recognition
- Low profit and to some symbolizes poorer quality materials
ABOVE THE LINE ADV
PREDATORY PRICING - May increase cost of production
Advertising to
Purposely lower prices so that any competitor cannot make a profit if entering - May lead to increase price
+ reach large a
the market/drive out existing businesses. Normally businesses with high market - Do customers care? Aesthetics, function
by a business, product or brand. It can be used as a measure of success
MASS MARKET: MARKET SIZE AND MARKET SHARE: BENEFITS + LIMITATIONS
Aimed at general population with a generic product Market size can be measured through: Reduces risk and cost o
Potential for large sales revenue To react to and prepare
VOLUME OF SALES: total quantity sold by
Possible high competition, need to be competitive on price in To become market orie
business
order to succeed Often biased
VALUE: total amount consumers spent on
EOS and lower average unit costs Reliable?
product
Large volume of sales means high sales revenue. This can be used Collecting data is time c
for research and development Market share: the proportion (%) of a market that Cost effective; are costs
High competition is taken
Homogenous products need to be differentiated through
marketing, this can be expensive MARKET SHARE = MARKET MAPPING
High volume production isn’t flexible to demand changes SALES OF A BUSINESS X 100
Technique used to unde
TOTAL SALES IN THE MARKET
competitors, based on t
Helps decide whether to
NICHE MARKET: MARKET RESEARCH: Decide where to positio
Gain better understand
A subset of the main market; addresses specialist needs PRIMARY RESEARCH Often perceptions of bu
Few competitors but limited numbers of potential customers Original data gathered by researcher New entrants will chang
Businesses will have to compete on quality and customisation in Up to date information; reliable
order to succeed Tailor to meet business needs
High profit margins as can charge premium price Time consuming
Small scale production so can be flexible and follow trends Expensive to conduct DIFFERENTIATION
Less competition than in mass markets
Low response rates can distort findings Product differentiation is the pr
- Very risky as demand may not be constant
Is sample representative? products
- Higher unit costs so no EOS
SECONDARY RESEARCH This is linked to a u
Research that already exists. Conducted business apart from
DYNAMIC MARKET: by another organisation
Easily accessible and a good starting point
,THEME 1: 1.2. Market THE MARKETS :
Price
S
1
DEMAND: SUPPLY: P
2
P
DEMAND: is the amount of a good that consumers are SUPPLY: is the amount of a goods and services provided 1
willing and able to buy at a given price at a given price by companies in a market over a given D
time period D 2
Factors affecting demand: 1
Factors affecting supply: Q Q Quantity
Changes in the price of substitutes 1 2
Change in price of complementary products Cost of production S
Price
1
Changes in consumer incomes New technology S
2
Fashion, tastes and preferences Indirect taxes
Advertising and branding Government subsidies
Demographics External shocks
External shocks
S1
Seasonality
S2
Increase in supply
Quantity
(shift outwards/to the
Increase in demand right)
PED:
Price
(shift outwards/to the
Price elasticity of demand (PED
right)
change in price.
ELASTIC
Between -1 and - infinity
Quantity
PRICE Leads to a bigger percenta
INCREASE quantity demanded. Reven
S3
PRICE Leads to a bigger percenta
S1
DECREASE quantity demanded. Reven
Fall in demand Factors influencing PED:
,hdidj
THEME 1: 1.2. Market (continued)
YED: YED: % CHANGE IN QUA
% CHANGE
Income elasticity of demand (YED) is the responsiveness of demand to a change in incomes. The change
in economy is outside the control of the business.
NORMAL GOOD
Demand rises as incomes rise but relatively inelastic
Positive number between 0 and 1
These products might be seen as a necessity
Examples: milk, bread
LUXURY GOOD
Demand rises as incomes rise but relatively elastic
Positive number greater than 1
Examples: exclusive resorts, business class travel, luxury cars
INFERIOR GOOD
Demand falls as income rises or demand rises as income falls
It is a negative number
Examples: supermarket own brands, bus transport
Factors influencing YED:
Necessity or luxury?
o Necessity = inelastic, luxury = elastic
Attractiveness/brand power
o Strong brand power means people will still buy the products even if incomes are
squeezed
, THEME 1: 1.3. Marketing Mix and Strat
PRICING STRATEGIES PRODUCT/SERVICE DESIGN: BRANDING AND
COST-PLUS
DESIGN MIX: PROMOTION
The cost to produce the products are worked out then the money is added on
Combination of factors needed Process by w
top
Add a profit margin as a monetary value or add a percentage mark-up to create an effective design product/serv
Considers profit margin business is willing to accept E.g. aesthetics, function, cost Attracts custo
+ Easy to calculate and justify Why is the design mix important? Offers an ‘inc
- Ignores PED, product not market orientated Good design mix gives a BRANDING
COMPETITIVE PRICING business a competitive advantage over A characteris
Products/services prices are in line with competitors rivals another supp
Business has no market power to set a different price A strong bran
Customers judge product/service on ‘non-price’ factors such as quality promotion
Used in very competitive markets and helps avoid price wars CHANGES TO MEET SOCIAL TRENDS: Ways to build a bran
+ Scope to develop non-price factors Concern over resource depletion: Focus on a un
- Shows a weak brand/product differentiation - Waste minimisation Advertise; fre
PRICE SKIMMING - Re-use Sponsorship
Product priced high to begin with as it has a desirable factor - Recycling
Social media
Customers want it when its new Ethical sourcing
o Direc
Usually applies to technology with short product lifecycle - Buying supplies/products that are
+ Greater profit early on produced with fair working o Rapid
- Ineffective as new competitors appear conditions, pay for workers and
PENETRATION PRICING minimal impact on environment Benefits of strong br
Setting prices really low on a new product - Adds value to
Designed to encourage sales and to persuade customers to try the product + Develop competitive advantage/USP Enables prem
Low prices should gain business more market share over rivals Reduces price
Prices rise once loyalty established + Gain stronger brand image/reputation. Builds trust
Applies to new product attempting to enter market Seen as socially responsible Makes it a ‘n
+ Establishes foothold in the market + Lower costs reducing waste/cheaper raw Recognition
- Low profit and to some symbolizes poorer quality materials
ABOVE THE LINE ADV
PREDATORY PRICING - May increase cost of production
Advertising to
Purposely lower prices so that any competitor cannot make a profit if entering - May lead to increase price
+ reach large a
the market/drive out existing businesses. Normally businesses with high market - Do customers care? Aesthetics, function
