Marketing (A Level)

8.1 Marketing analysis

Price elasticity of demand and revenue

Businesses use PED to set prices and to judge the effect of promotions and tax changes. Its limits: it is estimated from past data, changes over time, and other factors (income, competitors) move at the same time.

Promotional elasticity of demand measures how responsive quantity demanded is to a change in promotional spending: % change in quantity demanded ÷ % change in promotional spending. A value above 1 means extra promotion raises sales proportionally more, so it is worth the spend; a low value means promotion has little effect.

Income elasticity of demand (YED)

A business with luxury goods should expect big swings in sales over the economic cycle; one selling inferior goods may do better in a recession. Firms may diversify to spread this risk.

Sales forecasting

Forecasting estimates future sales to plan production, finance and staffing.

The syllabus method is the four-period centred moving average. For quarterly data, take the average of four successive quarters, then average two successive four-quarter averages so the result is centred on a quarter. Sales for six quarters are 40, 52, 60, 44, 48 and 56. The four-quarter averages are (40 + 52 + 60 + 44) ÷ 4 = 49, (52 + 60 + 44 + 48) ÷ 4 = 51 and (60 + 44 + 48 + 56) ÷ 4 = 52. The centred averages are (49 + 51) ÷ 2 = 50 (for quarter 3) and (51 + 52) ÷ 2 = 51.5 (for quarter 4). The trend is rising by about 1.5 a quarter, so the next trend value is about 53. The seasonal variation is actual − trend: quarter 3 is 60 − 50 = +10 and quarter 4 is 44 − 51.5 = −7.5.

Limitations of forecasts: they assume the past continues and external changes (competitors, fashion, the economy) are ignored; more data and short horizons improve accuracy. Seasonal patterns need adjusting.

The product life cycle

Stages: development → introduction (slow sales, high costs) → growth (rising sales, profit) → maturity (sales plateau, strong profit) → decline. Extension strategies delay decline. Limits: the length of each stage is unpredictable, not every product follows it, and marketing can change it.

The Boston Matrix

The Boston (BCG) Matrix classifies products or business units by market growth and relative market share.

Use: balance the portfolio and decide where to invest. Limits: market share and growth are not the only factors, it simplifies, and labels can be self-fulfilling.

Analysing the market and customers

Consumer behaviour is shaped by needs, income, lifestyle, brand image and peers. Competitor analysis studies rivals' prices, strengths and strategies. Customer relationship management (CRM) uses data to retain customers and target offers.

Product development

Product development moves from ideas through screening, concept testing, prototype and testing, market testing and launch. Sources of ideas include customers and market research, employees, R&D, competitors' products, suppliers and new technology. Research and development (R&D) creates new products and processes, protects competitive advantage (for example through patents) and replaces products in decline, but is expensive, slow and uncertain (most projects fail). The limitations of elasticity are that it is estimated from past data, changes over time and in different markets, and other variables move at the same time.

8.2 Marketing strategy

Marketing strategy is the long-term plan for how marketing will meet the corporate objectives. It starts from analysis, sets objectives, picks target markets and positioning, and designs a marketing mix.

Objectives and positioning

Marketing objectives include sales growth, market share, brand awareness and entry to new markets. Positioning is how a product is seen relative to rivals: price versus quality. A positioning map helps find gaps in the market.

Branding and differentiation

A brand gives recognition, loyalty and the ability to charge a premium. Unique selling point (USP) differentiates the product. Building a brand is costly; brand damage (scandal, poor quality) harms all products under it. Brand extension uses an established brand for new products, reducing launch risk.

New product development

Innovation (new products, processes) can give competitive advantage, but R&D is costly and most new products fail. Stages: idea, screening, development, testing, launch. Adopters differ: innovators, early adopters, early and late majority, laggards.

The marketing plan

A marketing plan sets out objectives, resources (budget), research findings and the marketing mix, and how results will be monitored. Benefits: direction, co-ordination and a way to measure success. Limits: time and cost, forecasts can be wrong and plans can be inflexible. The strategy must be consistent with the business, its product and its market, with the 4Ps working together.

IT and AI in marketing

IT and AI let marketers use big data and customer analytics to target offers, personalise messages, automate email and advertising (programmatic advertising), run chatbots, make recommendations and predict demand. They cut cost and improve accuracy, but need investment, raise privacy and ethics concerns and can make marketing seem impersonal.

Digital marketing and e-commerce

Digital marketing uses websites, search, social media, email and mobile. E-commerce sells online: wide reach, lower overheads, data on customers and round-the-clock sales, but it faces intense price competition, security and delivery problems, and lack of personal contact. Social media allows viral marketing and customer engagement, but bad reviews spread quickly.

International marketing

Entering foreign markets: exporting, joint ventures, licensing, franchising, direct investment. Adapt the mix to culture and law: standardised marketing saves cost; adapted marketing fits local tastes. Risks: exchange rates, tariffs, political change and cultural misunderstanding.

Ethics in marketing

Ethical issues include misleading advertising, marketing to children, unhealthy products, data privacy, false green claims and unfair supplier terms. Ethical practice helps reputation and trust; breaches risk fines, boycotts and loss of sales. Regulation and codes of practice limit abuses.

International marketing strategy

Globalisation and economic collaboration (trade blocs, lower tariffs, e-commerce) make it easier and more necessary to market abroad: it offers new customers, growth and spreading risk, but also more competition. International markets are identified and selected by researching market size and growth, income, culture, competition, legal and political conditions and entry barriers. A business can use pan-global (standardised) marketing, with one product and message for all countries (lower cost, a consistent brand but may ignore local tastes), or keep local differences by adapting the mix (better fit, higher cost). Choosing the strategy depends on the product (a global brand or a product suited to local tastes), cultural differences, costs and legal rules. The method of entry (exporting, licensing, franchising, joint venture, direct investment) depends on cost, risk, control wanted, speed, the size of the market and government rules.