BUSINESS STUDIES Unit 1: Introduction to marketing Photo: Morguefile. com Pedro Fernández Sánchez INSTITUT Milà i Fontanals
1. 1 Marketing A. What’s marketing? B. Importance of marketing. C. Marketing mix. 2 Pedro Fernández INSTITUT Milà i Fontanals
A. What’s marketing? l l It is a management process. l 3 Detects customers’ needs and wants. Supplies customers with goods and services to make profit (mutually beneficial). Pedro Fernández INSTITUT Milà i Fontanals
B. Importance of marketing. l l sp_ _ _ There is a need for business specialization. l 4 sa_ _ _ There is a need for customer satisfaction. _ tion. Shows the de_ _ _ ment of an economy. development Pedro Fernández INSTITUT Milà i Fontanals
C. Marketing mix. l l It is a combination of elements that affects customers’ decision to buy. The elements are the 4 Ps: – – 5 Product. Price. Promotion. Place. Pedro Fernández INSTITUT Milà i Fontanals
Product l 6 Is the good or service that a company sells. Pedro Fernández INSTITUT Milà i Fontanals
Price l Quantity or amount of money a customer pays. Photo: Morguefile. com 7 Pedro Fernández INSTITUT Milà i Fontanals
Promotion l How customers are informed about the product. Photo: morgefile. com 8 Pedro Fernández INSTITUT Milà i Fontanals
Place l How the product will be distributed. Photo: http: //www. flickr. com/photos/grayconstruction 9 Pedro Fernández INSTITUT Milà i Fontanals
BUSINESS STUDIES Unit 2: Marketing mix Photo: creativecommons. org/ author: Grochim Pedro Fernández Sánchez INTITUT Milà i Fontanals
Unit 2. Marketing mix l l 2. 2 Price l 2. 3 Promotion l 11 2. 1 Product 2. 4 Place Pedro Fernández INSTITUT Milà i Fontanals
2. 1 Product A. Concept B. Types of products C. Product portfolio D. Product life cycle E. Packaging F. Brand (or Trademark) 12 Pedro Fernández INSTITUT Milà i Fontanals
A. Concept l l 13 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 Pedro Fernández INSTITUT Milà i Fontanals
B. Types of products a) Consumption goods: they satisfy people’s needs directly. There are two types. – Non-durable goods: they disappear when we use them. Morguefile. com Examples: ________________ 14 Pedro Fernández INSTITUT Milà i Fontanals
B. Types of products – Durable goods: we can use them many times. Morguefile. com For example: ______________ 15 Pedro Fernández INSTITUT Milà i Fontanals
B. Types of products b) Industrial goods: they are used to make other goods. They do not satisfy people’s needs directly. Morguefile. com For instance: ______________ 16 Pedro Fernández INSTITUT Milà i Fontanals
B. Types of products c) Services: are non-physical products or economic activities. Morguefile. com Examples: _______________ 17 Pedro Fernández INSTITUT Milà i Fontanals
ACTIVITY 3 – Classifying products GOODS Consumption Goods Non-durable Durable Wood Toothpaste Machine Clock Water Industrial goods Services Education Theatre ticket 18 Microwave Pedro Fernández INSTITUT Milà i Fontanals
ACTIVITY 3 – Classifying products GOODS Consumption Goods Non-durable Durable Belt Industrial goods Services Wash & Laundry Sheets of paper Tools Lorry Chalk Restaurant Meal Calculator 19 Pedro Fernández INSTITUT Milà i Fontanals
NESTLÉ Baby Food Cereals Chocolate Dairy Culinary & Frozen Food Ice creams Coffee Drinks Nestlé Chocapic Kit Kat La Lechera Buitoni Extreme Nestcafe Nestea Nativa Golden Grahams Crunch Sveltesse Litoral Nestlé Gold Nesquick Nidina Cheerios Caja Roja Ideal Solís Maxibon Bonka Eko Naturnes Crunch Cereals Nestlé Noir La Cocinera Nestlé Dolce Gusto Viladrau Pirulo Ricoré Dolca After Eight Aquarel San Narciso Vittel Perrier S. Pellegrino
Width = 8 products lines Length = 40 products NESTLÉ Baby Foods Cereals Chocolate Culinary & Frozen Foods Dairy Ice creams Coffee Drinks Nestle Chocapic Kit Kat La Lechera Buitoni Extreme Nescafe Nestea Nativa Golden Grahams Crunch Sveltesse Litoral Nestle Gold Nestlé Gold Nesquick Nidina Cheerios Caja Roja Ideal Solís Maxibon Bonka Eko Naturnes Crunch Cereales Nestlé Noir La Cocinera Nestlé Dolce Gusto Viladrau Pirulo Ricoré Aquarel Dolca After Eights San Narciso Product line Line depth = Vittel 5 products Perrier S. Pellegrino 21 Pedro Fernández INSTITUT Milà i Fontanals
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. 22 Pedro Fernández INSTITUT Milà i Fontanals
D. Product Life Cycle (PLC) 23 Pedro Fernández INSTITUT Milà i Fontanals
PRODUCT LIFE CYCLE (PLC) S A L E S (€ ) Product Concept: It is the period of time from the introduction until the withdrawal of a product. Life Cycle Curve TIME (Years) STAGES PLC Introduction 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 24 Growth 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. Pedro Fernández Maturity Decline 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 INSTITUT Milà i Fontanals
E. Packaging a) l l l 25 PRODUCTS THAT WE CAN SELL QUICKLY AT RELATIVELY LOW COST. 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… Pedro Fernández INSTITUT Milà i Fontanals
E. Packaging Characteristics: BEFORE BUYING l Easy to identify (e. g. _______) l Attractive (encourages buying our product) l e. g. ________ a) 26 Pedro Fernández INSTITUT Milà i Fontanals
Packaging characteristics Inform about its content for non transparent packaging (e. g. _________) AFTER BUYING l Easy to open (e. g. _________) l Convenient to use (especially if we use often) e. g. _____________ l Ease of transportation and storage e. g. ________) l 27 Pedro Fernández INSTITUT Milà i Fontanals
F. Brand (trademark) a) 28 Concept: is a name (pronounced), symbol, logo (image), slogan or design that distinguishes a seller’s goods or services in the market. Pedro Fernández INSTITUT Milà i Fontanals
F. Brand (trademark) b) q q 29 Characteristics: Short Easy to remember Associated with product (e. g. ______) Sometimes we use brand to talk about product (e. g. ___________) Pedro Fernández INSTITUT Milà i Fontanals
Brand Strategies Global brands. Multibrands. I. II. Ø Ø Ø III. 30 Individual brands Product line brand Second brand Own-brands. Pedro Fernández INSTITUT Milà i Fontanals
I. Global brands l 31 When the company uses the same name for all the products. E. g. _________ Pedro Fernández INSTITUT Milà i Fontanals
II. Multi-brands l 32 Individual brands: we use a different brand for each product. E. g. Procter & Gamble, Henkel, Uniliver, Sara Lee Pedro Fernández INSTITUT Milà i Fontanals
II. Multi-brands l 33 Product line brand: we use the same brand for similar products. E. g. Pascual - Zumosol Pedro Fernández INSTITUT Milà i Fontanals
II. Multi-brand l 34 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 Pedro Fernández INSTITUT Milà i Fontanals
III. Own-brands l 35 When big supermarkets sell their own products, made by other companies, at a lower price. E. g. Dia, Mercadona, Carrefour Pedro Fernández INSTITUT Milà i Fontanals
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 36 Pedro Fernández INSTITUT Milà i Fontanals
A. Price concept l Price tells us the money that a company can earn selling its product (revenue).
B. Fixing prices MARKET BASED PRICING l It uses the market demand to calculate price. l Demand is the quantity of goods a consumer wants to buy. l Supply is the quantity of goods that a company wants to produce and sell.
Demand & Supply Law l - The basic law of demand 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 € 10 Pe Price (€ - Euros) m Supply (curve) As price falls Equilibrium (40 units, € 10 ) Quantity of demand falls Quantity of demand goes up 40 units (Qe) Demand (curve) QUANTITY (units)
B. Fixing prices COST BASED PRICING l l 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 l 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: SOLUTION: Cu = € 20/unit Selling price = Cu + Mark-up = 15% o/Cu Sell. price = € 20/unit + 0. 15 (€ 20/unit) Sell. price = € 20/unit + € 3/unit = € 23/unit
COST BASED PRICING: Exercise l 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: SOLUTION: CFu = € 10/unit Selling price = Cu + Mark-up CVu = € 5/unit Selling price = (CFu + CVu) + Mark-up Cu = (€ 10 + € 5)/unit Sell. price = € 15/unit + 0. 3 (€ 15/unit) Mark-up = 30% o/Cu Sell. price = € 15/unit + € 3. 5/unit = € 18. 5/unit
B. Fixing prices COMPETITION BASED PRICING Sets price based on competitors’ prices. There are three possibilities: l Similar price (for similar products’ features). l Lower price (we earn more selling big quantities). l 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: l Follow the leader (similar prices) l Set independent price (it can provoke a price war)
C. Price strategies l Price skimming or creaming l Penetration pricing l Psychological pricing
C. Price strategies l 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. ______) Iphone 4)
C. Price strategies l 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 l
C. Psychological pricing (TYPES) TYPES: l Regular price (daily used product such as milk, tea, sugar…) e. g. __________) l Premium prices (or prestige pricing, for luxury products; (e. g. _________) e. g. Ferrari limited edition) l Price on customers’ expectation (depending on customer satisfaction) l Critical price point (e. g. _______) (e. g. € 99. 99 or € 4. 95)
PRICE Mind Map (Grid) ________
Supply (curve) m Equilibrium (40 units, € 10) € 10 Pe Price (€ - Euros) GRAPH: Demand - Supply Law & Equilibrium Demand (curve) 40 units (Qe) QUANTITY (units)
3. Promotion (or promotion-mix) A. ADVERTISING B. SALES PROMOTION C. PERSONAL SELLING D. PUBLIC RELATIONS
A. Advertisement a) b) c) d) e) Concept. Basic objectives (AIDA Model). Principles. Advertising media. Stages to design an advertisement message.
Concept of Advertisement l It is a message that companies (firms) send to inform customers and/or to persuade them to buy a product. l It uses a channel of communication or media so you need to pay (cost).
Basic objectives of Advertising (AIDA Model) l l 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 l l 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 TV -Can Radio -It CONS reach a lot of people -It is very expensive and target customers -Good for mass-market products -It is profitable is short, dynamic & very repetitive -Low cost -Can target listeners (only sound) -Small audience
Advertising Media (II) TYPES The Press PROS -It CONS is easy to target effectively. Poster & -Have high visual Billboards impact. -Many people see them -It Internet -Security -Global coverage -Low costs is silent and static. -Only see them for a few seconds. -Limited information problems -Great competition
Stages to design an advertisement message 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. 1.
Stages to design an advertisement message 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. 3.
B. Sales Promotion a) Concept. Businesses use it to produce a short-term increase in sales. Reasons: - Increase market share - New product or new use b) - Cash needs - Stock surplus
B. Sales Promotion 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)
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) b) Purpose. It is to improve and keep good relations between company and the public. 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. B. C. D. E. CONCEPT FUNCTIONS INTERMEDIARIES CHANNELS STRATEGIES
A. Place concept l The product needs to be at the right time, in the right amount and in the right market. l 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: _______ Customer Channel 1. Producer _______ (e. g. ______, (e. g. jewellery, it is important to give customer’s ______) (____ advice) §
D. Place Channels b) § § Types: _______ Channel 2. Producer Retailer Customer (e. g. ______) _______ (e. g. Supermarkets) _______ Channel 3. Producer Wholesaler Retailer _______(e. g. FMCG – _______ Customer (e. g. _______ traditional distribution)
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 ____ the franchisor (e. g. Pan’s & Company) ___________ pay
D. Place Channels c) § § Alternative channels: Teleshopping. Goods are bought on the _______ phone with credit card. _____________, Vending machines. E. g. tobacco, _______, theatre… soft-drinks, cinema, _____. . .
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 3 Product FMCG or impulsive purchase product Examples Chocolates, soft drinks, … Channel 2 Important to give Computers, customers’ TVs, … advise Bang & Olufsen, Computers: i. Pod, … Media Markt, PC City, …
E. Place Strategies a) c) Intensive distribution. Selective distribution. Strategies a) and c) require selecting an _________, intermediary which has experience, credibility _____. and is known by the target audience.
BUSINESS STUDIES Unit 3: Merchandising Photo: Morguefile. com Pedro Fernández Sánchez INTITUT Milà i Fontanals
1. Elements of merchandising. A. B. CONCEPT _______ It is a way of attracting consumers to a ____. product and persuading them to buy it. POINT-OF-SALE (POS) material ______ It is the most important form of merchandising. __________.
Examples of POS _______ Display stands and cases ______ l Moving or illuminated in-store displays l ______ models, such as palm tree in Pavement summer l _______, like those that store packets of Wire racks, crisps l Show _______, _______. . . cards, posters… l
Examples of POS High quantity of products (especially for dairy (___________________) products to show they are fresh) (_____________ l Pile presentation (no need to have a perfect __________________) look, untidiness) l Hypermarket displays (height levels 1 -2 -3, _____________, well known impulse purchase products, _________, _____________, brands…) l
POS Hypermarket displays (examples) Height levels 3 -2 -1 Level 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
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