For this unit you will need a calculator

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2 For this unit you will need a calculator

3 OCR GCSE Business (1-9) Business 1 (01) 2.4 The marketing mix

4 From the OCR specification The 4 Ps of marketing and their importance Product Design, invention, innovation Product stages of the lifecycle Introduction, growth, maturity, decline Pricing methods Skimming, cost-plus, penetration, competitor, promotional

5 From the OCR specification Promotion point of sale Price reductions, loss leaders, competitions, free samples Promotion - advertising Social media, websites, print media, television, radio Place distribution of products and services Digital and physical distribution channels

6 From the OCR specification How the 4 Ps of the marketing mix work together The use of the marketing mix to inform and implement business decisions Interpretation of market data Changes in demand, target market and market share, changes in product and effects of promotion

7 Worksheet

8 Lesson objectives To be able to understand the importance of the 4ps of marketing To be able to identify how the 4Ps of marketing mix work together To be able to understand how the marketing mix is used to inform and implement business decisions To be able to calculate and interpret market data

9 Starter What was the last item you bought? Where di you buy it from? How much did it cost? Was it on offer (like a meal deal)?

10 TO BE ABLE TO UNDERSTAND THE IMPORTANCE OF THE 4PS OF MARKETING

11 The 4Ps of marketing In order to get customers to buy a product, a business needs to make sure it is the: Right product (Nike Air Jordan 5 Retro) Right place ( Right price ( 160) Right promotion (Free postage and no hassle returns policy if they don t fit)

12 PRODUCT

13 What is a product? A product is anything which satisfies customers needs and wants, and could be wither a good or a service: Goods physical products like the Nike Air Jordan 5 Retro Services intangible products like car insurance or a haircut

14 Design Pace of technology and dynamic markets with ever changing trends means that businesses need to develop new products just to survive This is good news for customers as we get more choice of products A woman trying to pick from the hundreds of varieties of yoghurt for sale in a supermarket

15 Design A business will invest in R&D this means research and development When designing new products they will have to consider CAFEQUE Cost; will the product be value for money? Aesthetics; will the product look good Function; what the product actually does Ergonomics; if the product is easy to use Quality; is the product made of good quality materials Use; who is the product aimed at? Environment; will the product be easy to recycle

16 Invention An invention is a process or device that has been first thought of At this stage the new product may just be an idea or an early prototype, so it is called an invention

17 This is Art Fry he invented the post-it note by accident Originally it was called the press and peel It was yellow as he had yellow paper to hand He invented it to keep the page open in his hymn book Invention

18 Invention In 1946 Earl Tupper invented plastic containers called Tupperware from recycled plastic from the oil refining industry In the 1950s it was popular to have a tupperware party

19 Invention Charles Strite invented the pop up toaster in 1921 It sold originally as the toastmaster He invented it because he was fed up with burnt toast done under a grill

20 Innovation Innovation is the whole process of designing inventing and testing a product to take it to market Innovation is when an invention is ready to go to market and for customers to use it Watch this video and see if you can decide if the product is an invention or an innovation Website for the eggxactly

21 PRODUCT STAGES OF LIFECYCLE

22 Revenue Draw a product lifecycle Time

23 Revenue Product life cycle Maturity Growth Introduction Decline Time

24 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 to yet be aware of the products Advertising will be informative to let customers know about the product Introduction

25 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 Growth

26 Maturity phase products face intense competition now all the producers have joined the market Sales are high but profits are starting to fall Products have to be discounted to keep sales high Maturity

27 Decline Decline phase products may be limited in production At this stage profits and sales have fallen The product may be withdrawn from sale The business may decide to heavily discount to get any last sales before the product becomes obsolete

28 Can you guess what stage of the product lifecycle each of these products is at?

29 PRICE

30 Skimming pricing A product is priced high to begin with as it has a desirability factor (novelty) that will mean customers will want it when it is new The price can be lowered later on, but is high to start with to skim the profit while the product is hot Usually applied to technological items with a short product lifecycle (soon to be replaced with a new model) E.g. iphone6, ipad,

31 Cost plus pricing Cost-plus pricing is worked out by calculating the total cost to produce the product or service and then profit is added on top Most often used in the food industry where it is easy to calculate the exact cost of ingredients There are two ways of doing this: Add a profit margin in pounds e.g. 27 Add a % percentage mark-up on top of the cost of making the product e.g. 25% Companies like Pizza hut use cost-plus

32 This means setting prices really low for a new product or service to encourage sales and to persuade customers to try the product for the first time Then when customers like the product and have to keep buying it, the business raises the price Low prices should gain the business more market share Penetration pricing

33 Some products or services are priced very similar to close competitors This means that customers will have to judge a product or service on non-price methods such as; quality of service, speed, extras Competitor pricing

34 Promotional pricing A product or service is offered for sale at a cheaper price for a limited time Customers may also be offered free extras to encourage them to make a purchase

35 PROMOTION POINT OF SALE

36 Price reductions Price reductions can be made to persuade consumers to try a product for the first time A business may also have price reductions to encourage sales levels and therefore increase revenue and profits

37 Loss leaders A loss leader is a product which is sold at below cost price (for a loss) to entice customers into a shop or to try the product An example is a printer which is sold cheaply, and then the customer will have to keep buying the ink

38 Competitions are a great way for a business to create a fan base, engage customers with the product and to spread the message about any special promotion Competitions

39 Free samples Free samples might be given out in magazines Free samples are sometimes available in shops and supermarkets This is a great way to get customers to try the product

40 PROMOTION ADVERTISING

41 Social media Social media advertising is free or low cost so very cost effective All brands now need a web presence and can do this with SM Customers can be kept informed of new products Increases customer engagement with the brand Can show customer service with a quick response

42 Websites Advertising on websites is one of the cheapest ways to increase sales and inform customers The internet is currently a market of about 50 million customers, and is rapidly growing all the time Website ads can be interactive and are on show 24/7

43 Print media Print media includes; Newspapers, gives credibility Magazines, are entertaining Direct mail can be targeted at specific customers Catalogues can provide inspiration to customers

44 Television TV adverts reach the largest audiences of all TV advertising can be expensive for example the x factor final for 30 seconds would cost 200,000 Lots of specific channels helps to target customers for example Dave and Shed TV adverts are multi sensory with sound and vision

45 Radio Radio adverts are very cost effective, much cheaper than other methods of advertising Radio stations have very specific audiences so are able to help businesses target the right customers Radio adverts can be on the air quickly Frequency of advertising sells

46 PLACE

47 Digital distribution Digital distribution is the delivery or distribution of media content such as audio, video, software and video games An example would be a digital download of a movie or a song

48 Physical distribution This means that goods are sent in more traditional channels For example goods ordered online are sent via Royal Mail or UPS It is the movement of goods from the supplier to the consumer

49 TO BE ABLE TO IDENTIFY HOW THE 4PS OF MARKETING MIX WORK TOGETHER

50 The marketing mix how the elements work together Product Price Place PlayStation 4 Pro 1TB GAME online store, high street gaming stores Promotion Comes with Dualshock Controller+ Wireless Headset+ Dishonored 2+ Infinite Warfare & NOW TV 3 Month Entertainment Bundle deal = added value for the consumer and incentive to buy

51 TO BE ABLE TO UNDERSTAND HOW THE MARKETING MIX IS USED TO INFORM AND IMPLEMENT BUSINESS DECISIONS

52 Marketing mix - decisions A marketing manager wants to best satisfy their customers so they will buy the product or use the service The marketing manager has four key decisions to make to help them satisfy their business customers Decisions about products Decisions about what price to charge Decisions about where to sell the product Decisions about what promotions will best attract their target segment and persuade them to make a purchase

53 Discounts RRP Finance options Appearance Function Quality Brand Packaging Price decisions Product decisions Location Transport Access to market Advertising Message Media Budget PR Place decisions Promotion decisions Marketing mix business decisions

54 TO BE ABLE TO CALCULATE AND INTERPRET MARKET DATA

55 Changes in demand Demand for a product or service can be effected by: Incomes of the customers if you are paid less, you are unlikely to demand a luxury car Tastes, remember when everyone wanted loom bandz? Not so popular now. Other factors that effect demand: Prices of related goods For example a coffee machine with pods are related goods Xbox games for a console Ink for a printer

56 Target market A target market is the group of customers that would be satisfied by the products needs and so the business will target them with the marketing You are the target market for: Coca-Cola KFC Cinema films Vloggers Nintendo and Sony consoles

57 Market share Market share is how much of a market that a business has If the total market is worth 2,000,000 (2 million) Market share may be shown as a value Business A has market share of 450,000 A Market share may also be shown as a percentage Business A has a 22.5% share of the market

58 Sample market share question [1]

59 Sample market share - answer Correct answer is: Option A 25% How to get that answer Add up ALL the shares to find out 100% 300, , , , ,000 = 1,200,000 Then Divide firm E s share by the total: 300,000 / 1,200,00 = 0.25 Then Multiply by %

60 Changes in product Changes in the product may create changes in demand Demand may increase if the product is seen by customers to have improved in some way Demand may decrease if the change is seen by customers to be negative Toblerone changes its iconic shape and chocoholics go crazy article HERE Did demand increase or decrease as a result of changes to this product?

61 Effects of promotion Good promotion can increase demand for a product Equally if a business gets their promotion wrong this can also negatively effect demand for the product Sunny delight originally marketed as a heathy drink for kids, it was placed next to orange juice but was a totally artificial product The ad agency called it an own goal Judge for yourself watch the video of the advert here

62 1)What are the 4P s of the marketing mix? 2) What is a target market? 3) What is a market share? 4) What is digital distribution?

63 1) Product, price, place, promotion 2) Target market is the part of the population that the business is aiming its marketing at 3) Market share is the amount of the total market that the business has in sales, this could be in value or in % 4) Digital distribution is the delivery or distribution of media content such as audio, video, software and video games

64 Sample questions

65 Sample question 1 [1]

66 Answer question 1 Correct answer is: Option A Decline

67 Sample question 2 Invention involves: A behaving dishonestly B creating new products C developing existing products D discrimination in the workplace Your answer [1]

68 Answer question 2 Correct answer is: Option B Creating new products

69 Sample question 3

70 Answer question 3 Correct answer is: Option C 18.2%

71 The following three questions are based on the boohoo case study Boohoo was started in 2006 by two entrepreneurs who had the idea of starting a business where customers could buy the latest fashions online. Boohoo has expanded using organic growth, and has become a global online retailer of its own brand clothes, shoes and accessories. It now sells in over 100 countries. Boohoo charge for delivery. It has millions of website users per month. The target market for the Boohoo brand is men and women who are 16 to 24 years old and are fashion conscious. To reach this market, Boohoo uses social media. The business is active on Facebook, Twitter, YouTube and Instagram. Boohoo has also introduced apps for smartphones and tablets that allow customers to browse and buy products very easily.

72 Sample question 4 Analyse one disadvantage to a customer of Boohoo s distribution channel. [3]

73 Answer question 4 Answers may include: postage will customers be willing to wait? no shops more difficult to return goods website requires the Internet, no way to try product etc. smartphone and tablet apps size of screen, security of payment etc. Exemplar response: There is no way for a customer to try the products before purchase with internet sales (1). This is particularly important when clothes are being sold (1) because the customer may be disappointed with the clothes and have to spend more time sending the clothes back to Boohoo (1).

74 Sample question 5 Boohoo uses social media to promote its products. (i) (ii) State one advantage to a business of using social media to promote its products. [1] State one disadvantage to a business of using social media to promote its products. [1]

75 Answer question 5 Answer part (i) cheap to use targets market segment - younger people/consumers trends/fashion often decided on social media larger audience quick to communicate Answer part (ii) no guarantee that it will target the correct market easy to ignore customers may skip ads many forms of social media may be expensive to target all of them message may be distorted through social media users may require an employee to monitor social media response

76 Sample question 6 Boohoo uses social media to promote its products. Evaluate whether or not Boohoo should continue to use social media when promoting its products. [7]

77 Answer question 6 Level 3 (5-7 marks) Level 2 (3-4 marks) Level 1 (1-2 marks) Good application, analysis and evaluation Good application, limited analysis and limited evaluation No evaluation at all, basic statements, chains of reason See next slide for an example full marks answer from the exam board

78 Exemplar response question 6 Boohoo should possibly continue to use social media because it has obviously helped the business to grow. (AO2) However this depends upon whether Boohoo can continue to use social media at a low cost compared to other methods. (AO2) If other methods prove more effective and cheaper the business could switch methods to make more profit. (AO3a). Social media is the best way for Boohoo to target the younger audience, which is their target market (AO2). Using traditional media like newspapers might not work as their target audience don t read them, and TV ads might be too expensive to be worth it (AO3a) If Boohoo do use social media, they must consider which sort of social media is the most appropriate (e.g. Facebook, Twitter, Instagram), (AO2) and which is the most cost-effective. To do this they probably need to do some research to find out which media their customers use the most.(ao3a) On balance, given that less and less people are reading newspapers and magazines, TV is expensive and there are so many channels, and radio may not reach their target audience, I think Boohoo should continue to use social media to promote its products. (AO3b) If the most appropriate social media strategy is selected, it should be able to reach their target audience, and if properly researched it should raise awareness of Boohoo in a fairly costeffective way. (AO3b)They have already had some success using this strategy, and social media use is still on the increase. (AO3b)

79 Sample question 7

80 Answer question 7 (a) Candidate puts the decimal point in the incorrect place. (b) Correct answer: Total market size = 1,500,000. Firm D s market share = 150,000/ 1,500,000 x 100 = 10% (c) Candidate confuses the percentage with 360 o and erroneously calculates 150,000/360 x 100 = (d) Candidate assumes that the 150 in 150,000 equates to 150%.

81 Glossary Promotion; this is the communication between the business and the customer Social media; This means communicating with customers using online tools such as Facebook, Twitter, Instagram, etc. Market share; the value or percentage of the market sales that the business has e.g. that business has 25% of the whole market share

82 Revision Video

83 Resources written by Sarah Hilton for revisionstation.co.uk