Edexcel A2 Business 1.3.5 Marketing Strategy PDF

Edexcel A2 Business 1.3.5 Marketing Strategy Revisionstation  Theme 1 Retrieval Challenge Matrix 1 point 2 points 3 points What is a ‘distribution Describe the process Explain online channel’? of cost-plus pricing for distribution...

Edexcel A2 Business 1.3.5 Marketing Strategy Revisionstation  Theme 1 Retrieval Challenge Matrix 1 point 2 points 3 points What is a ‘distribution Describe the process Explain online channel’? of cost-plus pricing for distribution a pizza company What products is Describe a suitable Explain how USPs can ‘competitive pricing’ pricing strategy for a impact the pricing suitable for? product in the strategy that a introductory phase of business chooses the product lifecycle Give an example of Describe an example Explain how changes ‘viral marketing’ of sponsorship in in elements of the marketing design mix can be changed in line with You will need worksheet 1.3.5 for this lesson A ruler and coloured pens are needed for this topic From Edexcel a) The product life cycle b) Extension strategies: product promotion c) Boston Matrix and the product portfolio d) Marketing strategies appropriate for different types of market: mass markets niche markets business to business (B2B) and business to consumer (B2C) marketing e) Consumer behaviour – how businesses develop customer loyalty Starter Do you remember these ? What are they? Which one is still available? Definition of marketing and marketing strategy Marketing: The management process of identifying, anticipating and satisfying consumer demands for profit Marketing strategy: The methods used by a business to achieve their marketing objectives The product life cycle Product lifecycles Like humans - products go through a lifecycle From research and development at the start to launch (birth) and through to decline (death) Some products take longer than others to go through the lifecycle The marketing mix will change depending on the stage of the lifecycle the product is at Draw a product lifecycle diagram volume Sales Time Product life cycle Developme Introducti nt on Growth Maturity Decline Volume Sales Time Product Development This is the first stage of the product lifecycle where a product is designed and market research is analysed to produce a product which will satisfy customer needs Cash flow at this point is tight, this is a very expensive phase and at this point the product is not making any revenue and therefore no profit All capital at this point will just be an investment, there is always a risk of the product not being a success Introduction of product to market The introduction phase will involve high costs in research and development and the product may have been test marketed before launching, so profits may be negative Sales will be low as customers may not yet be aware of the products Advertising will be informative to let customers know that the product has been launched Growth phase Growth phase products are enjoying rapid growth in sales and profits At this stage the customers are aware of the product and demand is high A business may advertise the product to take advantage of the high demand What other products do you think are in the growth phase?  Why are laptops in the Maturity phase maturity phase of the product lifecycle? Maturity phase products face intense competition now all the suppliers have joined the market Market is starting to be saturated – everyone has bought the product who is likely to buy Sales are high but profits are starting to fall Products have to be discounted to keep sales high – so prices may be lowered or the product may be put on sale Decline phase Decline phase products may be limited in production At this stage profits and sales have fallen and the product may be withdrawn from sale The business may decide to heavily discount to get any last sales before the product becomes obsolete There is a trend towards more What year was the Blackberry disposable items rather than withdrawn? products that can be fixed or a) 2006 repair – they are simply replaced b) 2016 with new ones, therefore C) 2010 repairable goods are in decline Extension strategies Product lifecycle extension strategies introduction There are lots of ways that a business can extend the lifecycle of a product rather than withdrawing it. This may be to use to a store of raw materials or to keep loyal customers happy. The five ways that your exam board would like you to be able to discuss are: 1. updating packaging 2. adding more or different features 3. changing target market 4. advertising 5. price reduction Product life cycle - extension Developme Introducti nt on Growth Maturity Decline Volume Sales Time Product Lifecycle extension strategies A. Change the product Development or modification of a product B. Change the promotion Rebranding or relaunching of products  Product lifecycle extension– modification of the product Since its launch in 2007 the iPhone has been undergoing constant modification, adding new features and benefits to encourage consumers to buy the latest version. Which version do you have? Are the labels correct? iPhone XS Max £1099 iPhone XR £799 iPhone 8 £749 Product lifecycle extension: product modification Extension strategies are designed to extend the life of the product before it goes into decline One of the methods of extending the lifecycle is through product modification and a good example of this is cars, which retain the same engine but change the styling This strategy will either sell to a new market or remind the old market that its time to change the products to the new version Research: product lifecycle Find a car (or other product) you are interested in and create a visual timeline by printing out images Can you show how the product has been modified over the years? Your timeline could be Can you also explain on your horizontal or timeline how the product vertical lifecycle extension will enable a business to continue to see the product in its modified form? Product lifecycle extension - rebranding Many brands over the years have been rebranded. For example JIF to CIF is one of the most famous changes, others may be as simple as a pack or logo change, can you think of any other examples? Product lifecycle extension – relaunch product Just over 10 years ago, Burberry’s famous check design was banned in pubs and clubs from Aberdeen to Leicester for its association with hooliganism. Today, the company boasts brand ambassadors – can you name them? Product lifecycle extension – promotion The North Face has found a new target market in teenagers Daily Mail article – on colouring books for adults here Past paper Question Assess the usefulness of the product life cycle to Birkenstock when making business decisions (10) Benefits A benefit of using the product life cycle is that it can help devise promotional strategies. New shoes in the range, which are in the growth stage, will benefit from advertising and promotion The model will help make decisions on the established products. Those shoes in the maturity stage, such as Arizona may benefit from extension strategies to prolong the life of the sandals The product life cycle may help Birkenstock make decisions on those shoes with low sales in the decline stage. lt may help them to make decisions on which ranges to discontinue to maintain the reputation of the business Limitations/Drawbacks The product life cycle is a simplistic model. Whilst there are many products whose sales follow the classical shape of the model, many others do not. It is very difficult for Birkenstock to predict the life of a shoe due to changing fashions The model does not take account of competitors' actions. Some of the Birkenstock shoes may move into the decline stage quickly if competitors introduce a superior shoe or sandal Whilst the model is a good visual tool for analysing a portfolio of products, Birkenstock would need to take account of other research findings on competitors, the economy, changing trends etc before decisions were finalised on the product range Boston Matrix and the product portfolio Product portfolio defined A product portfolio is the collection of all the products and services offered by a company A detailed analysis of this portfolio can provide insights into the sources of company sales and profits, and growth prospects This is just some of the products in the portfolio of Unilever – see more here Boston Matrix Introduction The Boston matrix is a marketing planning tool which helps managers to plan for a balanced product portfolio It looks at two dimensions: market share and market growth, in order to assess new and existing products in terms of their market potential It helps marketing managers Have a go at drawing one, larger work out how much to spend version of this blank on the next slide. on each product You won’t need to draw one in an exam, but it will help you to learn about this business analysis tool. Boston matrix Market share High market share Low market share High Market Growth Market Growth Low Market Growth Boston matrix - star Star products: Have high market share Are in a high growth market Star products need to maintain their current marketing spend to keep sales high Stars should become cash cows in time, if the marketing is managed correctly For Unilever Stars can Lynx is a become star in cash cows in their time portfolio Boston matrix – question mark Question mark products: Have low market share Are in a high growth market Question mark products have lots of potential to become stars if they are managed correctly Question marks will need lots of investment in marketing and promotion – if they are to succeed For Unilever the new mini Berry Truffle magnum Question product is a question marks can mark as its sales are as become stars yet unknown in time Boston matrix – cash cow Cash cow products: Have high market share Are in a low growth market Cash cow products are good sellers and need little or no new investment The product just need to be “milked” for cash (hence the term) Cash cows need monitoring in case they become dogs For Unilever the Cash cows Hellman’s can brand is a become cash cow in dogs in their time portfolio  Boston matrix - dog Dog products: Have a low market share Are in a low growth market Dog products require no investment as they are in the decline phase of their lifecycle The product may have become obsolete or replaced The business may consider discontinuing or withdrawing the product Why do you think Flora Dogs get is a “dog” product in withdrawn their portfolio? in time Boston Matrix Uses Limitations Uses of the Boston matrix The Boston matrix is a good starting point when reviewing an existing product line to decide future strategy and budgets The conclusions drawn from such an analysis are to transfer the surplus cash from cash cows to the stars and the question marks, and to close down or sell off the dogs In the end, question marks reveal themselves as either dogs or stars, and cash cows become so drained of finance that they turn into dogs Ragu sauce – Cash cow, question mark, star or dog? Limitations of Boston Matrix Products may not be low or high market share they could be medium High market share does not always lead to high profits, there are high costs also involved with high market share Many people argue this matrix is too simple What do you think– dogs, stars, cash cows or question marks? Phone holder Sweet corn drink Snack holders Emoji hat for cars Marketing strategies appropriate for different types of market  Mass market strategies A mass market is one that caters for (almost) everyone, mass marketing is the process of selling products to all consumers regardless of age, gender, etc. in the same way These products can be marketed to consumers all over the world in the same way Large quantities produced mean lower average costs means EOS, which means high profits Media used will be; TV, radio, newspapers, mass media Examples include: Perfume, pop stars, Coca cola, computers and Microsoft  Niche market strategies A market segment is consumers who can be grouped in different ways; income, gender, lifestyle, ethnicity, religion, age, interest A niche market is one that caters to a small subset of a segment and will target consumers in a very specific way Products are designed for a specific purpose Small turnover keeps larger firms from entering the market Inelastic demand means higher prices can be charged Media used will be; specialist magazines, trade fairs, websites, word of mouth, leaflets  B2B marketing B2B stands for Business to Business marketing. Many businesses just deal with other businesses rather than consumers. For example a school or college will have a paper supplier so they can keep giving you handouts and you can print your work out. Advertising needs to be informative rather than persuasive or “clever” This will typically involve larger transactions than with consumers (think paper again) Suppliers need to build up closer relationships with customers Focus will be on offering a quality product and a quality service B2B Business to business or B2B is selling to industrial buyers or retailers are not direct to the public. Businesses purchase: goods for resale raw materials to make other products and consumables services needed for their day-to-day operations What is a consumable? Related marketing activities B2B Marketing B2B involves promoting the product at trade fairs, networking with contacts in the industry and talking to potential purchases face to face Business buyers are focused on price and benefits and expect to: receive detailed information about a product, see demonstrations and presentations, negotiate discounts and payment terms  B2C Marketing B2C means business to consumer They are not looking to build up long term relationships with the supplier, maybe a one off purchase like a sofa Consumers want a variety of distribution channels for convenience e.g. online, click and collect, delivery etc. Short advertising messages which clearly point out the benefits e.g. Olay face cream will make you look 10 years younger Emotional connection with the product or supplier e.g. Watch the John Lewis Penguin advert here B2C Business to consumer or B2C is selling to private individuals and households who buy goods and services for their own use, such as clothes retailers and hairdressers Can you think of other examples? Related marketing activities B2C Marketing to consumers involves; persuading people to purchase carrying out market research promoting a brand identifying the benefits communicating to potential customers through targeted advertising A business in this market needs to provide excellent customer service to enhance its reputation e.g. a good returns policy Consumer behaviour – how businesses develop customer loyalty Customer loyalty Businesses have discovered that it is much cheaper to keep a loyal customer than to gain new customers through marketing The expression “plugging the leaky bucket” is used – where business owners should focus on keeping their existing customers with loyalty schemes, discounts and extras rather than continually trying to attract new customers Customer loyalty is creating a product or service that ensures repeat purchases Effective customer service Customer service can be During the purchase e.g. defined as; the assistance on a car test drive, the and advice provided by a sales person can answer company to those people questions on fuel who buy or use its economy, reliability and products or services features of the car This can be After the purchase e.g. Before the purchase e.g. repairs, warranties, answering questions on the guarantees and service phone or by e-mail plans Loyalty Cards Loyalty cards can work in a number of ways: They can improve customer retention e.g. a coffee shop making sure customers return by offering a stamp They can also collect important data on buyer behaviour and purchase decisions e.g. Boots advantage card, Tesco Clubcard Saver schemes Each week consumers can carry out their shopping and pay into a saver card – ready for Christmas They are rewarded by the supermarket for paying in. Here is the current ASDA scheme: Save £49 and get a £1 bonus Save £97 and get a £3 bonus Save £144 and get a £6 bonus Plenary Quiz Quick quiz questions A. If a pizza company manufactures its pizzas in a factory and then sells them to supermarkets, what type of market are they targeting? B. What is meant by a niche market? C. If a gift shop company are selling craft items to the public, what type of market are they targeting? D. What is meant by a mass market? Plenary Quiz Answers If a pizza company manufactures its pizzas in a factory and then sells them to supermarkets, what type of market are they targeting? B2B or business to business What is meant by a niche market? Small group of customers who have specialised needs If a gift shop company are selling craft items to the public, what type of market are they targeting? B2C or Niche market would be accepted as answers What is meant by a mass market? The mass market is a large group of consumers who all have similar needs Sample Edexcel A2 questions  Case study for sample question 1  Sample question 1 Knowledg Applicati Evaluatio Analysis e on n 3 2 2 3 Answer sample question 1  Peer / self marking grid for 10 mark question Mark 1-2 marks Limited knowledge and some recall of business theory, answer may not be in context What went well: You used business terms correctly Even better if: You had discussed the business context given in the case study 3-4 marks Comments are in context, and chains of reason are present but very basic. Unbalanced argument, only discusses one side. What went well: You were able to give chains of reason in context in your answer Even better if: You had given both sides of the argument 5-6 marks Chains of reason are complete and argument shows both sides. Answer is in context, an attempt at a assessment using numerical data given in the case study. What went well: Your analysis was shown in your chains of reason Even better if: You had reached a supported judgement 7-10 marks Accurate understanding and knowledge. Logical chains of reason, balanced argument, in context leading to a supported judgement What went well: You had logical chains of reason showing cause and effect Case study for sample question 2 Sample question 2 Applicatio Knowledg Analysis n e1 1 2 Answer sample question 2  Peer / self marking grid for 4 mark essay question Mark Knowledge 1 Giving a correct business keyword definition, understanding of the question Award 1 mark Application 2 Applying the answer to the business in the question. Not just a name drop, has to be about the product, the market, the objectives or the situation given. Somewhat applied with some general comments – only award 1 mark Very well applied and all about the case study – award 2 marks Analysis 1 Chain of reason, ‘this means’ or ‘which means’ or ‘because’ or ‘therefore’ which is logical and fully developed. xamples of peer review comments: Award 1 mark hat went well: You gave a correct business definition and applied your comments to the case study ven better if: You had more analysis or a complete chain of reason Key terms Product life Cycle; the stages that a product moves through over time BCG matrix; The Boston Consultancy Group or Boston Matrix for short, a marketing portfolio analysis tool Extension strategy; a plan to extend the maturity stage of a product life cycle of a product, either through changes to the product or promotions to boost sales B2B marketing; Business to business marketing Mass Market; A market which caters to everyone, for example corn flakes or toothpaste Niche market; A small market with very specialised customers, for example Harley Davidson motorbikes Dynamic market; a market that is subject to rapid or continuous change