BUSINESS STUDIES Unit 1: Introduction to marketing Photo: Morguefile.com Pedro Fernández Sánchez INSTITUT Milà i Fontanals

BUSINESS STUDIESBUSINESS STUDIES

Unit 1: Introduction to marketing

Photo: Morguefile.com

Pedro Fernández SánchezINSTITUT Milà i Fontanals

Pedro Fernández INSTITUT Milà i Fontanals2

1.1 Marketing

A. What’s marketing?

B. Importance of marketing.

C. Marketing mix.


A. What’s marketing?

Detects customers’ needs and wants.

It is a management process.

Supplies customers with goods and services to make profit (mutually beneficial).


B. Importance of marketing.

There is a need for customer satisfaction.

There is a need for business specialization.

Shows the development of an economy.

sa_ _ _ _ _ _ tion.

sp_ _ _ _ _ _ tion.

de_ _ _ _ _ ment


C. Marketing mix.

It is a combination of elements that affects customers’ decision to buy.

The elements are the 4 Ps:– Product.– Price.– Promotion.– Place.


Product

Is the good or service that a company sells.


Price

Quantity or amount of money a customer pays.



Promotion

How customers are informed about the product.

Photo: morgefile.com


Place

How the product will be distributed.

Photo: http://www.flickr.com/photos/grayconstruction


Unit 2: Marketing mix

Photo: creativecommons.org/ author: Grochim

Pedro Fernández SánchezINTITUT Milà i Fontanals


Unit 2. Marketing mix

2.1 Product

2.2 Price

2.3 Promotion

2.4 Place


2.1 Product

A. Concept

B. Types of products

C. Product portfolio

D. Product life cycle

E. Packaging

F. Brand (or Trademark)


A. Concept

Good or service that satisfies customer’s need and her desire to buy it.

Product differentiation is when a company chooses features to distinguish it from others



a) Consumption goods: they satisfy people’s needs directly. There are two types.– Non-durable goods: they disappear when we use

them.

Examples:________________________________Morguefile.com



– Durable goods: we can use them many times.

For example:___________________________Morguefile.com



b) Industrial goods: they are used to make other goods. They do not satisfy people’s needs directly.

For instance:___________________________Morguefile.com



c) Services: are non-physical products or economic activities.

Examples:_____________________________

Morguefile.com


ACTIVITY 3 – Classifying products

GOODSConsumption Goods

Industrial goods

ServicesNon-durable

Durable

Wood

Toothpaste

Machine

Clock

Water

Education

Theatre ticket

Microwave


ACTIVITY 3 – Classifying products

GOODSConsumption Goods

Industrial goods

ServicesNon-durable

Durable

Belt

Wash & Laundry

Sheets of paper

Tools

Lorry

Chalk

Restaurant Meal

Calculator

NESTLÉ

Baby Food Cereals Chocolate DairyCulinary & Frozen Food

Ice creams Coffee Drinks

Nestlé

Nativa

Nidina

Naturnes

Chocapic

Golden Grahams

Cheerios

Crunch Cereals

Kit Kat

Crunch

Caja Roja

Nestlé Noir

Dolca

After Eight

La Lechera

Sveltesse

Ideal

Buitoni

Litoral

Solís

La Cocinera

Extreme

Nestlé Gold

Maxibon

Nestlé

Nestcafe

Pirulo

Nestlé Gold

Bonka

Dolce Gusto

Ricoré

Nestea

Nesquick

Eko

Viladrau

Aquarel

San Narciso

Vittel

Perrier

S.Pellegrino


NESTLÉ

Baby Foods Cereals Chocolate DairyCulinary &

Frozen FoodsIce creams Coffee Drinks

Nestle

Nativa

Nidina

Naturnes

Chocapic

GoldenGrahams

Cheerios

CrunchCereales

Kit Kat

Crunch

Caja Roja

Nestlé Noir

Dolca

After Eights

La Lechera

Sveltesse

Ideal

Buitoni

Litoral

Solís

La Cocinera

Extreme

Nestle Gold

Maxibon

Nestlé

Pirulo

Nescafe

Nestlé Gold

Bonka

Dolce Gusto

Ricoré

Nestea

Nesquick

Eko

Viladrau

Aquarel

San Narciso

Vittel

Perrier

S.Pellegrino

Length = Width =

Product line

8 products lines 40 products

Line depth =

5 products


C. Product portfolio

a) Length (of product mix): the total quantity of goods that the company sells. It is the group or set of product lines.

b) Width (of product mix): the number of different products line.

c) Product line: is a set of goods with similar characteristic.

d) Line depth: number of products in a line.


D. Product Life Cycle (PLC)


PRODUCT LIFE CYCLE (PLC) Concept: It is the period of time from the introduction until the withdrawal of a product.

TIME (Years)

SALES (€)

Product Life Cycle Curve

STAGES PLC

Introduction Growth Maturity Decline

The product is new; there are low sales and slow growth.There are high costs of developing, making and advertising the product.Usually the product makes a loss.Adverts objective: Inform customer

Sales increase when more customers buy the product.The production increases and costs fall (economies of scale).Competitors enter the market when the product starts to make a profit.Adverts objective: Differentiate from other products.

The product reaches maximum sales and profits.There is more competition until the market reaches saturation.Adverts objective: Maintain or increase market share

Sales and profit fall until the product makes a loss.Adverts objective: Remind customers


E. Packaging

a) Importance. It is important because it helps to sell and to

distinguish the product (differentiates) More so for Fast Moving Consumer

Goods (FMCG) Examples of FMCG: chocolates, soft

drinks…

PRODUCTS THAT WE CAN SELL QUICKLY AT

RELATIVELY LOW COST.


E. Packaging

a) Characteristics:

BEFORE BUYING Easy to identify (e.g.______________) Attractive (encourages buying our product) e.g._______________


Packaging characteristics

Inform about its content for non transparent packaging (e.g. _________________)

AFTER BUYING Easy to open (e.g. _________________) Convenient to use (especially if we use

often) e.g. _________________________ Ease of transportation and storage

e.g._______________)


F. Brand (trademark)

a) Concept: is a name (pronounced), symbol, logo (image), slogan or design that distinguishes a seller’s goods or services in the market.


F. Brand (trademark)

b) Characteristics: Short Easy to remember Associated with product (e.g.___________) Sometimes we use brand to talk about

product (e.g._____________________)


Brand Strategies

I. Global brands.

II. Multibrands. Individual brands Product line brand Second brand

III. Own-brands.


I. Global brands

When the company uses the same name for all the products. E.g. __________________


II. Multi-brands

Individual brands: we use a different brand for each product. E.g. Procter & Gamble, Henkel, Uniliver, Sara Lee


II. Multi-brands

Product line brand: we use the same brand for similar products. E.g. Pascual - Zumosol


II. Multi-brand

Second brand: Companies with an exclusive / luxury brand; they want to find another market segment (low price) to sell another brand. E.g. Rolex - Tudor


III. Own-brands

When big supermarkets sell their own products, made by other companies, at a lower price. E.g. Dia, Mercadona, Carrefour


2.1 Price

A. Concept

B. Fixing prices- Market based pricing

- Cost based pricing

- Competition based pricing

C. Price strategies- Price skimming or creaming.

- Penetration pricing

- Psychological pricing

A. Price concept

Price tells us the money that a company can earn selling its product (revenue).

B. Fixing prices

MARKET BASED PRICING It uses the market demand to calculate price. Demand is the quantity of goods a consumer

wants to buy. Supply is the quantity of goods that a

company wants to produce and sell.

Demand & Supply Law

The basic law of demand and supply says:- If price goes up, then demand falls and

supply increases.- If price falls, then demand goes up and

supply decreases.- At the equilibrium, demand equals supply

and we have a market price.

GRAPH: Demand - Supply Law & Equilibrium

QUANTITY (units)

Pric

e (€

- E

uros

)

Demand (curve)

Supply (curve)

Equilibrium

40 units (Qe)

€10

Pe

m

(40 units,€10 )As price falls

Quantity of demand goes up

As price falls

Quantity of demand falls

B. Fixing prices

COST BASED PRICING

It uses production costs to work out price.

It takes fixed costs and variable cost, and adds a fixed percentage of the cost of making the product, called mark-up.

Selling price = unitary production cost + mark-up;

production cost = fixed cost + variable cost

COST BASED PRICING: A Practical Example

A manufacturer business has a production unitary cost of €20/unit. Find the selling price if the company wants to get a 15% mark-up.

DATA:

Cu = €20/unit

Mark-up = 15% o/Cu

SOLUTION:

Selling price = Cu + Mark-up

Sell. price = €20/unit + 0.15 (€20/unit)

Sell. price = €20/unit + €3/unit = €23/unit

COST BASED PRICING: Exercise

A small firm has a unitary: fixed cost of €10/unit and a variable cost of €5/ unit. Find the selling price if the company wants to get a 30% mark-up.

DATA:

CFu = €10/unit

CVu = €5/unit

Cu = (€10 + €5)/unit

Mark-up = 30% o/Cu

SOLUTION:

Selling price = Cu + Mark-up

Selling price = (CFu + CVu) + Mark-up

Sell. price = €15/unit + 0.3 (€15/unit)

Sell. price = €15/unit + €3.5/unit = €18.5/unit

B. Fixing prices

COMPETITION BASED PRICINGSets price based on competitors’ prices. Thereare three possibilities: Similar price (for similar products’ features). Lower price (we earn more selling big

quantities). Higher price (we have a famous product or

better quality).

COMPETITION BASED PRICING

If the market has a leader (e.g. Telefónica),

Then other businesses can: Follow the leader (similar prices) Set independent price (it can provoke a price

war)

C. Price strategies

Price skimming or creaming

Penetration pricing

Psychological pricing

C. Price strategies

Price skimming or creaming: company starts with a high price (market segment) and reduces it later (to increase the market).It is used for:

- products with no competitors- new products (e.g. latest Channel)- fashionable products (e.g. New Diesel jean)- technological products(e.g. Iphone4)____________)

______________)

______________)

C. Price strategies

Penetration pricing: when a product has a low initial price to enter the market.

When sales go up, the price is increased.

E.g. New Airplane Company.___________________)

C. Price strategies

Psychological pricing: It is based on how customers associate a price with a feature of a product.

TYPES:- Regular price- Premium prices- Price on customers’ expectation- Critical price point

C. Psychological pricing (TYPES)

TYPES: Regular price (daily used product such as

milk, tea, sugar…) Premium prices (or prestige pricing, for

luxury products; e.g. Ferrari limited edition) Price on customers’ expectation (depending

on customer satisfaction) Critical price point (e.g. €99.99 or €4.95)

e.g.___________________)

(e.g.______________)

(e.g.__________________)

PRICE Mind Map (Grid)

________ ________

GRAPH: Demand - Supply Law & Equilibrium

QUANTITY (units)

Pric

e (€

- E

uros

)

Demand (curve)

Supply (curve)

Equilibrium

40 units (Qe)

€10

Pe

m

(40 units,€10)

3. Promotion (or promotion-mix)

A. ADVERTISING

B. SALES PROMOTION

C. PERSONAL SELLING

D. PUBLIC RELATIONS

A. Advertisement

a) Concept.

b) Basic objectives (AIDA Model).

c) Principles.

d) Advertising media.

e) Stages to design an advertisement message.

Concept of Advertisement

It is a message that companies (firms) send to inform customers and/or to persuade them to buy a product.

It uses a channel of communication or media so you need to pay (cost).

Basic objectives of Advertising(AIDA Model)

A – Attention (attract customers’ attention). I – Interest (raise customers’ interest

demonstrating advantages). D – Desire (convince customers that our

product will satisfy their needs). A – Action (convince customers to buy, most

important and difficult).

Principles of Advertising

Be simple (don’t make them think too much). Be creative (your product will be different

from others). Be repetitive (to remember the message:

slogans, songs…). Be honest (you cannot cheat a customer

twice).

Advertising Media (I)

TYPES PROS CONS

TV -Can reach a lot of people and target customers-Good for mass-market products-It is profitable

-It is very expensive

Radio -It is short, dynamic & very repetitive-Low cost

-Can target listeners (only sound)-Small audience

Advertising Media (II)

TYPES PROS CONS

The Press -It is easy to target effectively.

-It is silent and static.

Poster & Billboards

-Have high visual impact.-Many people see them

-Only see them for a few seconds.-Limited information

Internet -Global coverage-Low costs

-Security problems-Great competition

Stages to design an advertisement message

1. Market research. The business needs to know:

- If the product has a market.

- If the product raises interest for futures sales.

2. Advertisement strategies.

- Define the market segment (customers we target).

- How much the firm wants to earn.

- Show Special qualities that the company has to offer.

Stages to design an advertisement message

3. Advertisement message.

- Media (the ads depend on the media we choose), e.g. magazines play with colour.

e.g. TV plays with sound, voice, music.

- Target audience (it depends on the market segment).

e.g. small car, low price.

B. Sales Promotion

a) Concept. Businesses use it to produce a short-term increase in sales.

b) Reasons:

- Increase market share - Cash needs

- New product or new use - Stock surplus

B. Sales Promotion

c) Examples:

- Special offers (buy one get one free)

- Free gifts

- Sales (in January / July, 50% off)

- Discount vouchers (€5 off the next book you buy)

- Free samples of the product.

C. Personal Selling

a) Concept.

– There is direct contact between the sales person and the customer.

– The sales person can satisfy customers’ needs better.

C. Personal Selling

b) Characteristics:– Transmits the image of the company.– Informs, persuades the customer to

buy.– It has a quick response.– Sales person needs to know the

product very well.

D. Public Relations

a) Purpose. It is to improve and keep good relations between company and the public.

b) How?• In charity events, sponsorships,

concerts, conferences…

D. Public Relations

c) When?• Change the company’s image• Update the company’s image• The company is in a new market• The company has been discredited

4. Place

A. CONCEPT

B. FUNCTIONS

C. INTERMEDIARIES

D. CHANNELS

E. STRATEGIES

A. Place concept

The product needs to be at the right time, in the right amount and in the right market.

The product usually passes through intermediaries before arriving at the customer (e.g. wholesalers, retailers…).

B. Place Functions

a) Transport. We need to decide lot size and frequency to choose one. It depends on type and price of the product. E.g. FMCG (see packaging).

b) Store. Intermediaries buy goods in large quantities (bulk), and then divide them into smaller quantities breaking bulk process.

B. Place Functions

c) Customers’ information & advice: important to introduce a product into a new market.

C. Intermediaries

a) Types: Wholesalers. Buy goods from

manufacturers and sell to other wholesalers or retailers. Types: specialised (e.g. PLATAFORMA) and general (e.g. MAKRO)

Retailer. They only sell to final customers

C. Intermediaries

b) Functions: (they justify their added value) Physical Distribution. It cuts down the

number of transactions between manufacturers and retailers. It makes distribution simpler.

Financing. Wholesalers pay the total amount for the products to the manufacturer. This way manufacturer does not have to wait to charge.

D. Place Channels

a) Concept: It is the route a product takes from the producer to the consumer.

b) Types: Channel 1. Producer Customer

(e.g. jewellery, it is important to give customer’s advice)

__________ __________

_______ _______(e.g.______,

(________ ______)

D. Place Channels

b) Types: Channel 2. Producer Retailer

Customer (e.g. Supermarkets)

Channel 3. Producer Wholesaler Retailer Customer (e.g. FMCG –traditional distribution)

_______ _______

_______ ______________ _______(e.g. _______

(e.g.____________)_______

D. Place Channels

c) Alternative channels: E-commerce. It is becoming a more and

more important way to distribute your products.

Franchising. It is when a firm (franchisee) uses the business model of another company (franchisor). The franchisee has to pay the franchisor (e.g. Pan’s & Company)

___________

__________.

____

__________________

____ _____________________

D. Place Channels

c) Alternative channels: Teleshopping. Goods are bought on the

phone with credit card.

Vending machines. E.g. tobacco,soft-drinks, cinema, theatre…

_______ _____________.

_____________,

_____________, _________, _________...

E. Place Strategies

a) Intensive distribution.

b) Exclusive distribution.

c) Selective distribution.

A. Intensive distribution

B. Exclusive distribution

C. Selective distribution

Concept Distribution of low priced or impulse purchase products

Limits the distribution to a single retailer

Small number of retailers chosen with large geographical distribution

Channel Channel 3 Channel 2 Channel 2

Product FMCG or impulsive purchase product

Important to give customers’ advise

Computers, TVs,…

Examples Chocolates, soft drinks,…

Bang & Olufsen, iPod,…

Computers: Media Markt, PC City,…

E. Place Strategies

a) Intensive distribution.

c) Selective distribution.

Strategies a) and c) require selecting an

intermediary which has experience, credibility

and is known by the target audience.

_________, _________,

_________.


Unit 3: Merchandising


Pedro Fernández SánchezINTITUT Milà i Fontanals

1. Elements of merchandising.

A. CONCEPT

It is a way of attracting consumers to a product and persuading them to buy it.

B. POINT-OF-SALE (POS) material

It is the most important form of merchandising.

_____________

________.

___________

___________________.

Examples of POS

Display stands and cases Moving or illuminated in-store displays Pavement models, such as palm tree in

summer Wire racks, like those that store packets of

crisps Show cards, posters…

_______ _______

________ ____________

____________

_____________,

_______, ______________...

Examples of POS

High quantity of products (especially for dairy products to show they are fresh)

Pile presentation (no need to have a perfect look, untidiness)

Hypermarket displays (height levels 1-2-3, impulse purchase products, well known brands…)

(_______________________________________________________)

___________________________________)

(_________________________

_________________________,

_________,

_________________

_________________________,

POS Hypermarket displays (examples)

Height levels 3-2-1Level 3 (eyes): to level 1 –32%; to level 2 –20%

Level 2 (hands): to level 1 –40%; to level 3 +63%

Level 1 (feet): to level 2 +34%; to level 3 +78%

POS Hypermarket displays (examples)

Height levels 3-2-1

Documents

BUSINESS STUDIES Unit 1: Introduction to marketing Photo: Morguefile.com Pedro Fernández Sánchez INSTITUT Milà i Fontanals