Transcript 1 Starting a Business

P?
P?
What is Ryanair’s marketing mix?
Ryanair
Do each of the 4Ps for Ryanair
complement each other?
P?
P?
Has Ryanair built a successful
marketing mix?
3.1.6 B UILDING A SUCCESSFUL
MARKETING MIX
3.1.6 BUILDING A SUCCESSFUL MARKETING MIX
3.1.6 BUILDING
A SUCCESSFUL
MARKETING MIX
P RODUCT


The component of the marketing mix that looks at the goods
and services that a firm provides

Goods are physical or tangible products, you can touch them
e.g. a car or a television

Services are unphysical or intangible, they cannot be
touched e.g. financial consultancy or teaching
Firms use (scientific) Research and (technical) Development
(R&D) to improve their products
3.1.6 BUILDING A SUCCESSFUL
MARKETING MIX
Product portfolio/mix
A product portfolio is the range of products that a business sells.
As a business expands it is likely to offer more products to:


Broaden their product range

Different target markets for similar products

Diversification by selling new products
Balance their product range

Offer a range of goods or services to support the original product

Meet the needs of different customers
30 S ECOND C HALLENGE
How many products
can you name within
Cadbury’s product
range?
End
3.1.6 BUILDING A SUCCESSFUL MARKETING MIX
3.1.6 BUILDING A SUCCESSFUL
C HALLENGE
MARKETING MIX
Can you name 2 methods of product portfolio analysis?
Can you identify which picture goes together and put them in the
right order?
3.1.6 BUILDING A SUCCESSFUL
B UILDING A BUSINESS –
MARKETING MIX
PRICING DECISIONS

There are a variety of pricing methods used by a business when trying
to grow:

Price skimming

This involves setting a premium price at the launch of a product as some
consumers are willing to pay a high price for the product to have it
immediately

Using this method means that a business maximises revenues at the high
end of the market, normally those with higher disposable incomes

Once the top end of the market has been ‘skimmed’ the business will lower
prices
Have you ever paid a high price for a product when it first came out?
A mobile phone
Game station
Latest trainers
3.1.6 BUILDING A SUCCESSFUL
B UILDING A BUSINESS –
MARKETING MIX
PRICING DECISIONS

Price penetration

Here, the business sets a low price in order to gain market share. Once
this objective has been met the business will raise prices

The idea is to build up a customer base and hope for repeat custom
once prices have been increased

This tends to occur when the business is targeting a mass market
Draw a spider diagram to show products that use price penetration.
3.1.6 BUILDING A SUCCESSFUL
B UILDING A BUSINESS –
MARKETING MIX
PRICING DECISIONS

Competitive pricing

Often, a business will have to take into account the prices of other
businesses in the market

The greater the degree of competition in the market the more
important price becomes
Has the introduction of price comparison websites
increased the use of competitive pricing?
3.1.6 BUILDING A SUCCESSFUL
B UILDING A BUSINESS –
MARKETING MIX
PRICING DECISIONS

Loss leader

This occurs when a business sets price below the cost of the product

This can attract customers to a store where they will also buy additional
products

Some firms sell the core product as a loss leader and make additional
sales by selling accessories to the product
Why might a supermarket decide to sell a product such as a CD or garden furniture as
a loss leader?
3.1.6 BUILDING A SUCCESSFUL
MARKETING MIX
B UILDING A BUSINESS –
PRICING DECISIONS

Cost-plus

This occurs when a business sets a price based on the unit cost of the
product by adding a profit mark up

This ensures that every unit sold at least covers the cost of the product

This takes into account total costs
Make some additional notes on price as you watch this video clip
3.1.6 BUILDING A SUCCESSFUL
MARKETING MIX
G ROUP A CTIVITY
For each scenario below identify and justify an appropriate pricing method:

Class Kitchens Ltd. make made to measure kitchens, each one is individually
designed to meet the exact needs of the customer

HiT have just launched the latest advancement in non-stick cookware, with a
20 year guarantee

Craft Kitchens have acquired a bulk purchase of branded barbeque
accessories at an unbelievably low cost

Needle Convenience Stores are stocking Dairy Milk promotional chocolate
bars in the lead up to 2013 UEFA Champions League
Snowslopes Ltd. introduces the latest trends in ski and
surfwear each season. This year the ski industry has seen
the launch of a new high tech fabric which is ultra light
and ultra warm making ski clothing easier to pack and
more comfortable. Such technologically advanced fabrics,
however, come at a high price. Sophie is pleased with
initial sales, supported by a strategy of price skimming.
Question Time
1.
What is meant by price skimming?
2.
Identify two factors that have enabled Snowslopes Ltd.
to adopt a strategy of price skimming . (2 marks)
3.
How could Snowslopes Ltd. change its pricing methods
to help expand sales in the future? Give reasons for your
answer.
(6 marks)
3.1.6 BUILDING A SUCCESSFUL MARKETING MIX
(2 marks)
3.1.6 BUILDING A SUCCESSFUL
MARKETING MIX
5 M INUTE T EST

What is price penetration?

State one advantage of using price skimming

A garden bench costs £20 to make. A business uses cost-plus
pricing adding a ten percent profit mark-up. What is the selling
price?

What is meant by the term loss leader?

State two factors that will affect the pricing decision of a business.
End
3.1.6 BUILDING A SUCCESSFUL
MARKETING MIX
B UILDING A BUSINESS P ROMOTION
Growing businesses employ a number of promotional methods,
including:

Advertising

Sales Promotion

Sponsorship

Direct Marketing
Growing firms will monitor sales revenue during a promotional
campaign to see the impact of the promotion.
P ROMOTIONAL ACTIVITIES TO
ENABLE GROWTH
Advertising is communication used to inform potential customers about
products and persuade them to buy the products.
Advertising takes a variety of forms:

Television and Radio

Newspapers and Magazines

Posters

As they grow businesses can afford to pay for more expensive
advertising that will reach a wider market

This will lead to an increase in the potential customer base and higher
sales revenue
3.1.6 BUILDING A SUCCESSFUL MARKETING MIX
P ROMOTIONAL ACTIVITIES TO
ENABLE GROWTH
Sales promotion is a short-term method designed to attract customers
into purchasing a product.
Sales promotion can take a variety of forms, including:

Competitions

Special offers

Free samples

As they grow businesses target a wider audience through national
sales promotions

Sales promotions will create interest in the product and attract new
customers, helping the business to grow
3.1.6 BUILDING A SUCCESSFUL MARKETING MIX
P ROMOTIONAL ACTIVITIES TO
ENABLE GROWTH
Sponsorship is a method of raising awareness of a business’
brand name in return for financial support of events.
Sponsorship can target a variety of areas, including:

Cultural

Sporting

Musical

Sponsorship of events can gain nationwide or even global
publicity for a business

This awareness can enable the business to expand into
national or global markets
3.1.6 BUILDING A SUCCESSFUL MARKETING MIX
P ROMOTIONAL ACTIVITIES TO
ENABLE GROWTH
Direct marketing is any marketing activity that is aimed directly at the customer.
Direct marketing can take a variety of forms, including:

Direct mail

Electronic mail

Door to door selling

A business can target and engage customers directly. Specific market segments
can be targeted leading to a higher success rate in turning potential customers
into sales

New technologies have made it easier and cheaper for businesses to
communicate with target markets
Make some additional notes on promotion as you watch this
video clip
3.1.6 BUILDING A SUCCESSFUL MARKETING MIX
G ROUP A CTIVITY

On A3 paper draw a box with the term promotion at
the centre of the paper

Choose one large organisation e.g. Marks and
Spencer. Carry out some research into its promotion

Develop a spider diagram by drawing lines from the
central box detailing the different types of promotion
used at your organisation

Suggest three reasons why your organisation has been
influenced in its use of the promotion? Justify your
answer.
3.1.6 BUILDING A SUCCESSFUL MARKETING MIX
5 M INUTE T EST

What is meant by promotion?

Name three places where a firm might advertise its products.

Outline two benefits of using sponsorship as a form of promotion.

Name two forms of direct marketing that a firm might use for
promotion.

State three factors that will influence the type of promotion used
by a growing firm
End
3.1.6 BUILDING A SUCCESSFUL MARKETING MIX
3.1.6 BUILDING A SUCCESSFUL
MARKETING MIX
P ROMOTION AT M C D ONALDS
One of the methods used by McDonalds is advertising. Advertising is conducted on TV, radio, in
cinema, online, using poster sites and in the press, for example in newspapers and magazines.
What distinguishes advertising from other marketing communications is that media owners are
paid before the advertiser can take space in the medium. Other promotional methods include
sales promotions, point of sale display, direct mail, loyalty schemes, door drops etc.
The skill in marketing communications is to develop a campaign which uses several of these
methods in a way that provides the most effective results. For example, TV advertising makes
people aware of a food item and press advertising provides more detail. This may be supported
by in-store promotions to get people to try the product and a collectable promotional device to
encourage them to keep on buying the item.
(Source: www.mcdonalds.co.uk)
1. Identify one advantage to McDonalds of advertising as a promotional technique.
(1)
2. Identify one disadvantage to McDonalds of advertising as a promotional technique.
(1)
3. Briefly explain how one of the promotional techniques used by McDonalds may encourage
repeat purchases.
(3)
4. Assess two possible benefits to McDonalds of using a coordinated marketing campaign.(6)
3.1.6 BUILDING A SUCCESSFUL
MARKETING MIX
B UILDING A BUSINESS P LACE
Getting your product into the right
place is crucial.
The retailer has to want to stock it!
C HANNELS OF DISTRIBUTION
3.1.6 BUILDING A SUCCESSFUL
MARKETING MIX
There are a variety of channels of distribution used by retailers to
gain access to potential customers. These include:
•
Wholesalers
•
Retailers
•
Telesales
•
Mail order
•
Internet selling
C HANNELS
OF DISTRIBUTION
3.1.6 BUILDING A SUCCESSFUL
MARKETING MIX
Wholesalers
A wholesaler is a business that provides a link between the
manufacturer of goods and the retailer.
They buy large quantities of goods and sell these on to retailers in
smaller amounts. They gain a discount for bulk buying.
Growing firms can benefit from higher output.
•
Manufacturers can benefit from the high amount of output
they are able to sell to wholesalers, leading to increased
capacity utilisation, reducing unit costs and increasing profit
•
Retailers can benefit as unit costs fall if they buy in bulk off a wholesaler
C HANNELS OF DISTRIBUTION
3.1.6 BUILDING A SUCCESSFUL
MARKETING MIX
Retailers
A retailer is a business that buys from a manufacturer or
wholesaler and sells on to the general public.
Large retailers can hold a great deal of power over their
suppliers, reducing the price a business might receive for its
goods.
If a firm sell its products to larger retailers it is likely to benefit
from a nationwide profile, leading to growth.
C HANNELS OF DISTRIBUTION
Telesales
This is a method of direct marketing, usually over the telephone,
but also through other face to face media such as web
conferencing.
As firms grow they often make use of call centres to ‘cold call’
telephones nationwide. Although this can lead to a poor
reputation it can also increase sales revenue.
Growing firms make use of telesales for the breadth of coverage it achieves
in contacting potential customers.
3.1.6 BUILDING A SUCCESSFUL MARKETING MIX
C HANNELS
OF DISTRIBUTION
Mail order
Consumers use catalogues from home and then
order the items that they wish to buy. The firm do
not have the expense of a store but do have to pay
for warehouse facilities and the cost of the
catalogues.
The modern version of this is the online catalogue.
Associated costs include technology, storage and
distribution of the goods.
It is more likely that larger firms will use mail order
due to the expense of the system.
3.1.6 BUILDING A SUCCESSFUL MARKETING MIX
C HANNELS OF DISTRIBUTION
3.1.6 BUILDING A SUCCESSFUL
MARKETING MIX
Internet selling
This has seen rapid development over the last decade.
Firms have found it easier to grow through the internet as it
is relatively cheap to set up and run.
An internet site can target the whole globe.
Distribution centres are very important for selling goods.
Manufacturers are starting to bypass the ‘middle men’ such as wholesalers
and are selling direct to consumers.
N EXT P LC
3.1.6 BUILDING A SUCCESSFUL
MARKETING MIX

What distribution channels are used by Next?

What is Next’s product portfolio?

Who are Next’s target market?

Why does Next choose to offer its customers a
range of places to buy its goods?

What other businesses can you think of that use
more than one channel of distribution?
C HANNELS OF DISTRIBUTION AT
S NOWSLOPES LTD .
3.1.6 BUILDING A SUCCESSFUL
MARKETING MIX
Snowslopes Ltd has looked at a variety of ways to distribute its product range. It aims to
expand its business and Sophie, the Marketing Director, has identified three channels of
distribution that the business might use:
•
Mail order
•
Telesales
•
Internet selling
She is unsure whether she should use only one channel, or a combination.
Question Time
1.
What is meant by ‘channels of distribution’?
(2 marks)
2.
Explain two disadvantages to Snowslopes Ltd of not using retailing as a channel of
distribution.
(5 marks)
3.
Discuss what combination of the channels of distribution should be used in order to
meet the objective of expansion that has been set by the business.
(6 marks)
S ELECTING CHANNELS OF
DISTRIBUTION
Different scenarios have already been mentioned, but it is important to
recognise the changing nature of distribution. New technology is
removing layers. Producers can now sell directly to the consumer
through the internet.
Producer
Producer
Producer
Wholesaler
Consumer
Retailer
Retailer
Consumer
Consumer
3.1.6 BUILDING A SUCCESSFUL MARKETING MIX
S ELECTING CHANNELS OF
DISTRIBUTION
In pairs add an example to each box to show the different channels of distribution
chosen by firms operating within the food industry.
3.1.6 BUILDING A SUCCESSFUL MARKETING MIX
E XAM TECHNIQUE THE 4 P S
3.1.6 BUILDING A SUCCESSFUL MARKETING MIX
5 M INUTE T EST
3.1.6 BUILDING A SUCCESSFUL
MARKETING MIX

What is meant by place?

State 1 advantage and 1 disadvantage of using wholesalers to
distribute products

Draw a channel of distribution that involves four channels?

Outline two reasons why internet selling is beneficial to a growing
firm?

State 1 advantage and 1 disadvantage of using telesales to help the
expansion of a business
End