Subject Module Information

Subject: Business Studies

Module Title: Marketing and Advertising

Timing of Module: Year 10, Summer Term

Content
This module will show how the business develops and sells the products or services
which it provides. It will look at the development of the product or service from its
inception to the final point of sale.

The module will look at:

• the research and development of the product

• finding the market
• the marketing mix
• product life cycles
• pricing the product
• branding and packaging
• advertising and publicity
• selling
• distribution
• consumer protection

Homework/Student Independent Work

Students will be expected to complete the homework assignments set by the teacher.
In total, homework should average at least 1 hour per week.

At the end of the module, there will be a test covering all the work.

Extension work will be available for students who complete all of the above.

Performance in Module
Students will be assessed by means of the homework, and by a test to be held at the
end of the module.

1
Marketing is what companies do to discover products (or services) which the
customer will like, and will make them lots of money. The market itself can be
described as the potential buyers for any named product.

Every year, thousands of new products are launched all over the world. Companies
who do this must have a successful product. This is because they will spend a lot of
money, researching and developing the product. The only way to get this money back
is to sell the new product in large quantities!

Companies must continue to do this because the customer usually has a wide range of
each product to choose from e.g. the toys and games market. Where there is a very
wide range of products, this is known as a buyers’ market, where businesses are in
competition with each other. Where customers have very little choice, this is known
as a sellers’ market.

Launching a completely new product can be

very expensive. Waddingtons, the toy and
game company recently decided to adapt an
existing product; the jigsaw puzzle, and
make 3-D designs. The product was tried
out by a sample of people to see if they
liked it. Then, after being advertised widely,
the product went on sale and became
successful.

There are four main areas of marketing and these are known as the 4 Ps.

Product the product must be designed to meet customers’ needs and wants
Price the customer must be able to afford the price, but the business must
also be able to make a profit
Promotion making sure the customers know about the product
Place the product must be in the right place so that the customer is able to
buy it

Assignment 1
1. Why would a product like Waddingtons’ 3-D puzzles need marketing?
2. Why did Waddingtons choose to produce the 3-D puzzle shown above?
3. Would you buy the product featured on this page? Give reasons for your answer.
4. Think up a new type of 3-D puzzle for Waddingtons to make. Why do you think it
would be successful?

2
Market Segments
A market segment is a part of the market which contains customers who have certain
characteristics. These can generally be split into the following groups.

Age people from different age groups will tend to buy different
products
Gender male and female people will tend to buy different products
Income people will buy products, making allowances for how much
they can actually spend
Area people living in different areas of the country may have
different tastes
Ethnic Group people from different ethnic groups may have preferences
according to their culture
Occupation people involved in different lines of work may have different
tastes

Other ways of segmenting the market include:

Repeat Buyer someone who buys the same product over and over again
One-time Buyer someone who buys a product just once
Impulse Buyer someone who buys a product on sight without thinking about it
Planned Buyer someone who only buys what they plan to

Assignment 2
Give an example for each of the ways of Market Segmentation shown above.
Remember that it is very important in Business Studies to give examples of what you
are talking about. It shows that you understand the ideas!

Your business idea has been to grow Bonsai trees. A

friend of yours is an expert on these miniature trees
and knows all about growing them.

It is Autumn and you have decided to sell your

product (priced at £40) in two ways. You have run
off leaflets and given them to friends to take home.
Secondly, in November, there is a Christmas Bazaar
at the local church, which is always popular. You
have been allowed to set up a stall at this Bazaar.
Please answer the following questions.

Assignment 3
1. Describe the product you are selling.
2. Who are your customers likely to be? Are they men, women, old or young, people
with a high or low income?
3. Which method is most likely to result from sales to your targeted customers – the
leaflets or the Bazaar? Give reasons for your answer.
4. Write a report to the Marketing Director, explaining how you would adapt the
Bonsai Tree to appeal to a different market segment.

3
Social Grades
We can now look at the area of occupations, as mentioned above, in more detail.
Occupations can be split up into different Social Grades which gives an indication of
the spending power of each household.

Socio Economic Groups

35
30
25
20
%
15
10 Series1
5
0
A B C1 C2 D E
Groups

Assignment 4
Copy the following table into your exercise books.

Grade Description % Population

A Higher managerial, administrative and
professional
B Intermediate managerial, administrative and
professional
C1 Supervisory or clerical and junior managerial,
administrative and professional
C2 Skilled manual
D Semiskilled and unskilled manual
E Casual labourers, state pensioners and unemployed
Total 100 55m

Fill in the above table with the percentages from the graph (as close as you can!).
Assuming the population of the UK is 55 million people, calculate the population
figures within each Social Grade, using the % figures as a guide. Your teacher will
help you here.

Assignment 5
1. Why is it important for a business to know at which segment of the market to aim
its products?
2. Explain what type of person (age, gender, income) is likely to want the following:
clothes from Miss Selfridges, a pint of beer in a pub, a copy of the Financial
Times, a Lego set, a month’s holiday in Spain in February, a Porsche car.
3. Social Grade E is not normally a sales target for business. Why not?
4. A person in Group B might go touring in France for a holiday. A person from C or
D might go to Benidorm on a package tour. Why is there a difference in the
destination of the two people?

4
Stages of Market Research

The diagram shows the process of market research. This market research must find
the answers to questions a business might have about its market.

What is the What What method

question to information is of market
which the
business wants
needed to research will
to find an answer this be used?
answer? question?

Analyse the data, draw Collect

conclusions and make
recommendations the data

Assignment 6

Pick any product you like and write down how the stages of market research would
apply to that product. It would be best to choose a product you are interested in,
which will make it easier!

Types Of Research

Desk Research
This involves the use of data which is already available. This can come from inside
the business, e.g. information on sales, costs and other trends. It can also come from
outside the business, e.g. information from other companies’ research, trade journals
or government statistics. This data is known as secondary data.

This type of information is useful, as someone else has already collected it, but it may
not be in the correct format for a particular business’ needs. The data may have to be
looked at and presented in other ways in order for it to make sense.

Field Research
This is information which has not been collected before by anyone, and is done by a
business specifically for its own purposes. This data is known as primary data.

The advantage of this type of research is that the business can carry out the research in
any way it likes. However, it can also be an expensive process, as the business has to
do everything itself, or use companies who specialise in research.

5
Field Research can take various forms.

Observation where someone watches the behaviour of potential customers e.g.

people watching traffic flows, looking at why certain aisles in
supermarkets are popular

Surveys asking questions of people to find out what they think about products

There are many different forms of surveys. The main types are:

Telephone surveys telephoning people at home

Postal surveys sending questionnaires through the post
Newspaper surveys asking people to fill in and return questionnaires in the press
Consumer panels groups of people who review products, or who get observed
themselves in group situations

Assignment 7
Discuss each of these types of survey in class and see if you can come up with
advantages and disadvantages of each of these types of sampling.

Questionnaires
You must be careful when using questionnaires if your results are going to mean
anything. The main areas of concern are the people whom you ask and the questions
you ask.

You cannot possibly ask everyone in the country (or the world!) your questions, so
you have to select certain people. These people should be representative of all
consumers and this is known as a sample. There are different types of sampling
which can be used:

Random sample where everyone potential customer has a chance of response

Systematic sample where every 100th person is chosen from a list of people
Quota sample e.g. if 50% of people drank milk, you would ask 50% of your
sample, questions about milk

There are two types of questions – open and closed questions. Closed questions are
those to which the answer can only be “Yes”, “No” or another one word answer.
These can be useful for basic information, such as finding out peoples’ gender, or
where they live, but they have a limited use when trying to find out detailed opinions.

Open questions are better for this, where the answers are not restricted, e.g. “Why do
you like a particular product?”.

6
Assignment 8

Conduct a survey on crisps. There are several things you will need to consider.

1. Your questionnaire needs to cover items such as:

• How many packets people eat
• What are their favourite flavours and brands
• From where do they buy crisps
• What influences their choice of crisps

2. You need to decide what type of sample to use (age, gender).

3. Analyse your findings. You could use graphs to help you here.

4. Write a short report. This need to include:

• Outline of the questionnaire
• What influenced your choice of sample
• Were there any problems with the survey
• Present main findings from the survey
• What would your survey suggest if a new company wanted to break into the
market?

7
Product Range & Product Mix
A company’s product range is the different varieties of one product that the company
sells. For example, Golden Wonder produces a range of crisps.

However, Golden Wonder also produce other products, so that the crisps are only a
small part of the product mix.

Golden Wonder produce a wide variety of products in order that they can maximise
their share of the snack food market. The company is more likely to have more
consumers for its products if it produces such a variety, rather than just one product.

Product Differentiation

Each of the products Golden Wonder produces are different. The crisps are sold in a
variety of flavours, there are special large catering packs sold to pubs and there are
children’s snacks made into different shapes. This is important because different
products satisfy different customer needs. There are a number of ways in which a
company can differentiate its products.

Design/Formulation where different ingredients are used e.g. for Golden Wonder,
they have different flavours as well as low fat products.

Name different products have different names e.g. Golden Wonder

have “Lights” and “Peparami” which give the potential
customer essential information. The name must at least get the
customer to look at the product.

Packaging important for promotion (colours) and information, but also for
ease and safety of handling.

8
Assignment 9
1. How are these newspapers differentiated from each other?
2. Which consumer needs does each product satisfy?
3. A publisher is thinking of producing a quality newspaper completely devoted to
sport. Explain whether or not you think this newspaper will sell well.

Branding
A branded product is one which is seen by customers to be different from other
similar products. For example, Coca Cola is regarded as being different from other
brands of cola drink. Coca Cola is a very strong brand due to it’s popularity and
because of this, the company can charge a premium price for the product. The
consumer is willing to pay extra for this product because:
• the product is usually thought of as being of better quality
• the product tends to be more heavily advertised than other brands

However, many of these brand names are now faced with strong competition from
own brand products. These are products carrying the brand labels of well-known
retailers, such as Sainsbury, Tesco, Asda or Dixons. They are often cheaper than the
regular branded products, but they are getting a better reputation for quality.

Generic Product
The opposite of a branded product is a generic product. These are products which are
not regarded as being different from other products on the market. Examples of these
include milk, bread, bananas and sugar – you don’t tend to ask for these products
using a company name.

Assignment 10

Product Leader 1. Why do you think they are still popular

Canned Fruit Del Monte products?
Chewing Gum Wrigley’s 2. How have their manufacturers kept them so
Soft Drinks Coca Cola popular?
Soup Campbells 3. What do you think is the brand leader for each
Toothpaste Colgate of the following products in Britain today?
Trainers, crisps, children’s shoes, digestive
biscuits, cat food.
The table above shows brand 4. Do you buy these brands and why?
leaders in certain products from
the 1920s up until the present.

9
The Product Life Cycle is a model that shows the stages through which a product
passes in time.

Development
This stage would actually appear before the introduction of the product. Here, there
are no actual sales as the product is not yet ready. A firm will spend lots of money in
this stage on researching and designing how the product will look.

Introduction
This is where the product appears on the market, backed by a huge advertising
campaign and other types of promotion.

Growth
Here, sales and profits will (hopefully!) be rising steeply and the production of the
product will be in full flow.

Maturity
At this point, the sales of the product will have slowed down and stopped. Firms will
try and keep this stage going as long as possible, by employing extension strategies,
which may include:
• changing the product slightly
• bringing out special editions
• bringing out new versions of the product

Just after the peak, as sales begin to fall, is known as the saturation point, where the
market just cannot buy any more of the product. Think of yourself at the end of a
large meal!

Decline
This is the stage when there is nothing further that can be done with the product and
the number of sales drops sharply.

10
Assignment 11

Each new Lego kit takes between 2 and 3 years to develop before it can be introduced
on to the market.

1. Think of a new product which you think Lego could successfully produce.
Describe its product life cycle, using the stages shown on the previous page, and
say what happens at each stage.
2. Why does Lego change its kits every 2-3 years?

11
In deciding how to price its products, a business must consider:
• what prices are charged by competitors?
• can price be used to increase the sales of the product?
• will the price charged to customers cover the costs of production?

Competition Based Pricing

An example of this would be when firms producing chocolate bars bring out a new
product and considers its rivals before deciding on a price. If they charge much lower
than their competition, then the new bar may sell well because people are attracted by
the low price. However, the product may also be seen as inferior, which may put
potential customers off!

If the firm charges much more than the competition, then the product may appear
superior to the rivals, but the increased price may put buyers off! The firm must find
the correct balance between the two.

Market Orientated Pricing

This is where firms analyse the characteristics of the market before deciding on a
price for the product. There are different strategies within this form of pricing.

Discounts and Sales

Special offers eg ‘three for the price of two’ and sales of goods at reduced prices to
get rid of excess stock are usually popular with customers.

Price Discrimination
Where the same product can be sold to different segments of the market for different
prices. If consumers in Canada were willing to pay a higher price for a particular
chocolate bar, then the manufacturing company would put up the price.

Penetration Pricing
A new entrant to a market may charge a lower price in order to get noticed by
consumers. Once the product is more well known, then the price can then be raised to
be more in line with the competition.

Creaming/Skimming
This is the opposite to Penetration Pricing. The product price is set high to begin
with, making it appear as a ‘top of the range’ model. People who want the product
badly enough will be prepared to pay the price. Later in the product’s life, the price
will be lowered to be within the reach of a larger part of the market. This happened
with products such as hi-fi equipment and video recorders.

Loss Leader
This is the name given to a product which is sold for a price less than its cost. For
example, a can of beans may cost a manufacturer 10p to make, but the selling price to
the customer may only be 6p. Although the manufacturer makes a loss on the
product, it encourages more customers to come into the shop who are then likely to
buy other (full-priced) products. The loss made on the original product should then
be more than covered by these other sales.

12
Assignment 12
Travel Agents Cut Prices By 11%
Dateline: December
The two largest travel agency chains recently signalled the start of a post-Christmas
price battle. They announced holiday discounts averaging 11%.

The price cutting campaign is not likely to last more than a few weeks. This is
because the discounts mean that the chains will be giving away virtually all of their
profit.

The aim of the companies is to win market share from one another. They also want to
encourage holidaymakers to book earlier in the year, so improving the companies’
cash flow. A third aim is to sell all their holidays by the summer. They don’t want to
be left with holidays which they then have to sell at a large discount one or two weeks
before the holiday takes place.

1. A holiday for four was £1,000 at the full price in November. How much was it
likely to have cost with the discount announced in December?
2. Thomas Cook first offered the discount. Within 24 hours, other large travel
agency chains matched Thomas Cook’s offer. (a) Why did Thomas Cook decide
to offer the discount? (b) Why do you think the other chains followed with their
offers?
3. Why is it better for a travel company to sell a summer holiday at a 10% discount
at Christmas rather than at a 10% discount in August when it remains unsold?

Cost Based Pricing

Some companies base their selling prices on the amount of money it cost to make the
product. They may use the formula:

PRICE = PROFIT MARGIN + COST

cost = amount of money it cost to make the product

profit Margin = amount of profit the company wants to make on each product
price = the price charged to the customer

For example, it costs a company £8 to make a sweatshirt. The company wants to

make £6 profit on each sweatshirt it makes, so it charges £14 (£8 + £6) to the
customer.

13
Assignment 13
The Delicious Cake Company
The Delicious Cake Company is a mini enterprise company. The board of directors
has decided that its business will make cakes and gateaux and offer a free delivery
service to the door of the customer.

The board is now meeting to decide what

price the company should charge for its
cakes. The first cake on their list is a
gateau with icing on top. Ingredients for
one gateau cost £1.36. The box to put it in
will cost 15p. The school is charging the
company a flat £20 fee for the use of rooms
etc, whilst the company is operating.
Parents have agreed to lend baking tins and
other equipment free. Parents have also
agreed not to charge for the use of ovens to
bake the cakes. It is estimated that a cake
would take an hour to make. They haven’t
quite worked out how they will arrange the
door step delivery.

1. What price do you think the delicious cake company should charge for its gateau?
Explain your reasons carefully.
2. The company sends out a price list for its cakes to parents. It also advertises in
local shops. It finds that its cakes aren’t selling well, but it is making a substantial
profit on each cake. Do you think that the company should reduce its prices?
Consider as many arguments for and against as possible.

14
Promotion can be defined as the process of businesses communicating with their
customers in order to:
• make customers aware that their product is available
• explain to customers what the product is
• explain to customers why they need the product
• persuading the customers to buy the product for the first time, or a repeat purchase

Businesses do this through the use of media, which can take many different forms.
The type of media chosen depends upon it’s cost and the type and size of target
audience the business wants to reach. Generally, if a business wants to aim at a wider,
national audience, then this will be more expensive than looking at a more local
market. The different types of media include:

Television
This is known as a mass medium, because it reaches huge numbers of potential
customers all over the country. It is, however, very expensive, as it costs thousands of
pounds to make and screen an advertisement on any of the ITV channels. During
what is known as peak-time viewing e.g. Coronation Street, the cost of screening
alone is upwards of £30,000.

Radio
This can also reach wide audiences, but would not cost as much as television.
Independent Local Radio stations can be used to reach smaller audiences in a
particular area.

Newspapers
Advertising in national newspapers is very expensive and is usually only done by the
bigger firms. However, local newspapers are a relatively cheap way of reaching
smaller target audiences. Specialist newspapers and trade journals covering certain
types of business are also a good way of reaching your target market.

Directories
Telephone directories can be used to advertise your business as well as allowing
people to find the telephone number! Have a look in the Yellow Pages or Thomsons
to see examples of the types of advertisements available.

Posters and transport

Have you noticed bill board posters at the side of the road, or advertising on the sides
of buses or lorries? If you have then that indicates how successful these are!

Firms must be careful to use the correct type of media advertising for their product.
By its nature, advertising is an expensive business. An advertising manager who
spent a lot of money on a campaign which resulted in no sales because the wrong
market segment was targeted would not last long.

15
Displays
Within shops, there may be displays of other products where you are paying for
goods. This is known as Point Of Sale advertising. This encourages impulse buying,
for example, in newsagents, you often see sweets next to the cash till where you are
paying for your goods.

Advertising can be described as informative or persuasive.

Informative advertising gives clear and unbiased information about the product.

Persuasive advertising informs the customer that the product is available, but also
uses subtle (or, sometimes, not so subtle) techniques to persuade the customer to buy.
Hidden persuaders may be used to achieve this and these include:

• Ambition – it is implied that the user of a product will be successful as a result.

E.g. aftershave advertisements.
• Romance – the advertisement claims that the user of the product will find
romance, excitement or adventure!
• Personality appeal – famous people are used to promote the product to make it
more acceptable to the user. E.g. Michael Owen and Walker’s Crisps.

Assignment 14

The following companies want to advertise their products. Explain which of the
advertising media shown in the photographs (billboard, television, newspaper) would
be suitable, taking into consideration:
• the cost of advertising
• the target audience
• the impact of the advertisement on the potential customer

1. A brewery wishing to launch a new brand of beer

2. A discount store trying to sell hi-fi equipment
3. A local person who fixes washing machines

16
Some businesses use outside help with their advertising.

ADVERTISING AGENCIES

These are companies which specialise in organising the advertising of other

businesses (their customers). With their specialist knowledge, they can:
• organise market research and collect data
• devise the advertisements
• buy suitable “slots” within advertising media through which to promote the
product

Advertising agencies are useful in that they have all this specialist knowledge.
However, their services do not come cheap, so the decision to use one must be taken
very carefully.

Companies may use other ways of promoting their product.

Direct Mail
Promotional information such as leaflets and brochures can be sent directly to your
home. Companies can target you from electoral registers, telephone directories or
they can share information with other companies.

Packaging
The appearance of a product can make it easy to recognise. Examples are the red and
white of Coca Cola, or the distinctive pattern of Tango. We will look at company
logos later. The packaging should reflect the image of the product, but it must also
now provide information on the ingredients or materials used.

Personal Selling
Door to door salespeople are a popular way of promoting a product, double glazing
and building work are examples.

Public Relations
The department which deals with this is responsible for getting good news about the
company into the media. This will keep the company, or one of its products, in the
public’s eyes. They will also deal with customer letters, which may be complaints.
Customers must be dealt with carefully and quickly, so that they feel satisfied after
dealing with the company.
There are various types of sales promotion on products which companies can offer to
boost sales.

Money Off
This would include the “buy one get one free” or “three for the price of two” offers
which you may see while shopping.

17
Discount Vouchers
A product may have a voucher attached, which allows you to make your next
purchase of the same product cheaper. It may also allow you to purchase another
product from the same manufacturer at a reduced price.

Free Gifts
This is often seen at petrol stations which reward you with points each time you buy
petrol. These points can then be exchanged for store vouchers or gifts. In recent
times, supermarkets have also offered this type of promotion in order to reward their
loyal customers.

Competitions
Competition entries may be attached to products, which give you the chance of
winning a prize. This encourages the customer to buy, as this is the only way to have
a chance of winning the competition.

These are all ways in which companies try to persuade customers to buy their
products!

LOGOS AND SLOGANS

Logos are symbols and designs used by a company so that its adverts and products are
instantly recognisable. Law protects both logos and trademarks once a company has
registered them. No one else can use or reproduce them without the company’s
permission.

Slogans are often employed because they are memorable. The benefit of a short,
punchy slogan is that it is easily remembered. Slogans become associated with the
product (or company) and can be used on billboards and posters, with good effects.

Assignment 15
Can you identify these logos?

18
Assignment 16
Can you identify the companies behind the following slogans?

Where good food costs less

The ultimate driving machine
The best a man can get
Your flexible friend
Why have cotton when you can have silk?

SPONSORSHIP

This is another way in which a company can raise public awareness about its name.
Commercial sponsorship is concentrated mainly in two areas – sports and the arts.
Roughly £2million per year is spent by large companies on sports sponsorship alone
(although there are larger deals – e.g. Vodafone UK are paying Manchester United
£30million over 4 years to become their new principal sponsor).

Events being sponsored get money from promoters. Some sponsorship has been
made illegal e.g. from cigarette companies. Formula 1 Racing can still, however,
advertise cigarettes in certain countries up until the year 2006, although this might
change – watch this space!

Assignment 17
Can you name the companies which sponsor the following:

The Grand National

The World Professional Snooker Championship
Rushden & Diamonds FC
Liverpool FC
County Cricket Championship
The new ITV dramas

19
Even the most successfully marketed product in the world is not going to sell if the
customers are unable to buy the thing. Essentially the product is going to have to be
in the right place at the right time. Either the customer must be able to travel easily to
get the product/service or the product/service has to be taken to the customer.

The way in which the product reaches the customer is known as a CHANNEL OF
DISTRIBUTION and there are many different types of these.

Manufacturer  Retailer  Customer

This is where the product is made and then travels to a retailer which can hold the
stock in large warehouses. The customer visits these warehouses and then buys the
product. Examples of this would be the large DIY chains e.g. Great Mills, or large
furniture warehouses e.g. Courts.

Manufacturer  Wholesaler  Retailer  Customer

This is where the retailer does not have very much storage space. The goods have to
go to a wholesaler, who acts as a ‘breaker of bulk’. This means that the large
quantities of goods are broken down into smaller quantities. The retailer can then
visit the wholesaler to carry a smaller load to the shop, which can be stored more
conveniently. Examples of this would be your local newsagent.

Manufacturer  Agent  Customer

There are two main examples of this type of chain. The first is when a company is
selling goods abroad and requires the specialist knowledge of an agent with
experience of that country. This agent will then make sure that the product is given
the best possible chance of selling well.

The second example is when a company uses agents to visit customers at home. The
agent can then engage on a one to one basis with the customer, to build up a good
working relationship. Some small household goods companies use this method, as
well as insurance and double glazing firms.

Manufacturer  Customer

20
More and more manufacturing companies are opening shops on site. Customers can
then visit these factory shops and buy goods cheaper. Because there are no further
handling costs to the manufacturer, they can sell goods at a discount. Examples of
this are shoe manufacturers (Griggs who make the Doctor Marten range), Gallones
Ice Cream in Northampton and Triumph (women’s underwear) in Swindon.

21
Assignment 18

Book Distribution
How do your school textbooks get to you? Publishers use two main channels of
distribution. One method is through bookshops. Schools and colleges place orders
for textbooks with bookshops, who then order the books from the publisher. Some
bookshops give a discount to schools and colleges on orders for textbooks to
encourage them to buy from them.

Bookshops may also choose to have a few copies of the most successful books on
their shelves. Customers will come into the shop to buy a single copy.

Alternatively, schools and colleges may place orders directly with the publisher. This
cuts out the bookshop. Publishers sometimes give a discount on books ordered
directly from them.

1. What channels of distribution are used by publishers?

2. A book publisher could sell a single copy of a book either to a bookshop, a school
or a college directly. Why do you think it prefers to sell class sets of books?
3. Supermarkets sell some books and magazines. Write a report to a book publisher,
explaining the advantages and disadvantages of using supermarkets to distribute
books. Your conclusion at the end should state whether or not you think it is a
good idea.

How to choose the channel of distribution

If the product is likely to go off quickly e.g. foodstuffs, then it must get to the
consumer as soon as possible. A fast channel must therefore be chosen.

If the product is a complicated one e.g. double glazing, then it is often sold direct to
the consumer. The manufacturer would want to deal directly with the consumer in
this case.

Products which are costly to transport e.g. steel also tend to go straight to the
consumer. The manufacturer does not want to spend too much money on transporting
their goods for long distances.

A product which is low-priced but sells in large quantities would not be delivered
directly to consumers – this would be too expensive. Retailers such as supermarkets
are the best channel to use in this case.

22
Assignment 19

Bank Loans
Banks sell loans to customers directly. However, within this, they have a number of
different distribution channels:
• when customers visit branches of the bank
• direct mail advertising – customers are posted the information through the use of
leaflets
• advertisements in newspapers and magazines

1. What are the advantages and disadvantages of each of these methods?

Banks are now selling loans through shops such as clothes shops and supermarkets.
Shops sell loans to their customers and in return are paid a commission.

2. Do you think this is a good business idea? Consider whether or not the banks
benefit and whether shops find it worthwhile to take part.

23
Businesses have to be careful about how they market their product.
• The product may be dangerous to the customer or to the environment
• Claims made about the product may be untrue
• The product may not meet the description which has been made

Businesses must be sure that they are not causing offence to the general public who
see their advertisements. Main areas, which can give offence, include:
• violence
• images which degrade or exploit women
• nudity or sexual images
• material which may give offence to people’s race or religion
• material which uses current issues in an offensive way e.g. animal testing, famine

Assignment 20

The Holiday From Hell

A Gloucestershire couple who endured a fortnight’s holiday

hell in Morocco have been awarded £750 by a court. John
and Erica Frome now call tour operators First Rate a second
rate company, and claim they caught food poisoning in a
hotel complex that they say “had everything wrong with it”.

They arrived at the resort last July to discover that there

were more than double the number of apartments promised
in the brochure. The supposedly quiet location was actually
extremely noisy said the couple. “We caught food
poisoning because the hotel was so dirty. We weren’t the only ones – the holiday rep
actually ran out of complaint forms”.

A judge at the Gloucester Small Claims Court awarded them a total of £750
compensation for the two week holiday which cost them £1,100, after First Rate
admitted failing to indicate adequate information about the hotel. Earlier this year, a
Wiltshire family won £1,000 compensation after experiencing trouble at the same
hotel.

1. What complaints did the Fromes make against the holiday company?
2. The company was sued under the Supply Of Goods And Services Act. How does
this Act protect customers?
3. Why did the couple win their case?
4. Think of a genuine situation where you felt you were badly treated by a company.
Write a letter of complaint, explaining why you should be eligible for
compensation.

24
25
CONSUMER PROTECTION

Businesses would claim that if their promotion were to give offence, then the general
public would not purchase the product in that promotion. This would lead to the
business having a poor reputation with potential customers.

However, this could still lead to some businesses getting money from lots of
customers, admitting the product was faulty, declaring themselves bankrupt and the
customers then losing out, or worse still, becoming injured through use of the product.

To help protect customers, laws have been passed to try and make sure businesses do
not take advantage of such situations. The main ones are:

The Consumer Credit Act 1974

Customers must be given full information on the credit sale. If a customer signs a
credit agreement at home, they have 15 days in which to change their mind and cancel
the agreement. This avoids people being ‘pressurised’ by door to door salesmen.
This does not apply to credit agreements signed on the trade premises.

If a mortgage offer is not taken up within six months, then the broker can only charge
£1 for their services.

The Trade Descriptions Act 1968

Traders must give an accurate description of their goods and services. For example,
beefburgers described as ‘100% beef’ must not contain anything else. Services should
be completed to a reasonable quality within a reasonable period of time.

The Weights & Measures Acts

All products sold must be in the correct weight or quantity as described on the
packaging. You may see on boxes of washing powder or cereals the statement
“contents may settle during transit”. This helps companies to comply with these Acts.

The Food & Drugs Act 1968

Food contents must be up to the standard described on the packaging and conform to
the hygiene regulations imposed by the food industry. This Act makes it illegal to
offer for sale, food which is ‘unfit for human consumption.

Sale Of Goods Act 1979/Supply of Goods & Services Act 1982

The sale of a good or service from one person to another is a contract between those
people. These acts give the buyer extra rights by stating that a good must be fit for
the purpose which it has been sold. Any defects should be pointed out at the time the
good is sold. This also applies to goods bought at sales at reduced prices.

Goods must match the description they have been given. You may also take note that
a trader cannot remove the buyer’s rights by displaying notices such as “No
Refunds Given”.

There are official bodies which have been set up to help you, the consumer, if you
have a problem with any kind of promotion

26
The Advertising Standards Authority
The ASA supervises all advertisements, except those on television and radio, and
gives detailed guidance about what should and should not be said in the
advertisements. It monitors adverts by regularly checking samples to see if they
comply with the rules of the British Code of Advertising Practice.

The Independent Broadcasting Authority

The IBA is responsible for vetting advertisements on television and radio. All
advertisements on television and radio should comply with the rules in the IBA code.

.
Assignment 21

Consumer Protection
In each of the four scenarios below, you have to decide who is correct – the business
or the customer and why.

A. You buy a jacket in a sale, but find that it has a rip in one of the sleeves. When
you take it back, the shop assistant refuses to give you your money back and
points to a notice on the wall which says “No refunds on sales goods”.

B. You order some fresh broccoli in a restaurant as part of a meal, but you are sure
that it is frozen. The waiter denies this and says that it was freshly cooked that
evening.

C. A woman signs an agreement at home to buy some double glazing at a cost of

£8,000. Three weeks later she goes back to the shop and says she’s changed her
mind. The firm refuses to cancel the order and insists she has to pay.

D. A man asks a broker to get him a mortgage and pays a deposit of £100.
Eventually, he gets a mortgage on better terms somewhere else.. Six months later,
he asks for the broker for his money back, but she refuses to give it to him.

27
Your project is to organise a marketing campaign for a music artist of your choice.
You may find it easier to split the project into tasks.

1. Choose a music artist (individual or group). You will find it more helpful to
choose someone you are interested in.

2. Find out as much information about the singer as you can.

3. Carry out some market research to find out what other people think. You must
decide on the sample of people you want to ask. Questions you may want to
consider:

• Have they heard of the artist

• Where/how they first heard of them
• Do they like/dislike the artist and why
• Do they buy the artist’s music
• Where do they buy the music
• Would they go to a concert
• How much would they pay for a ticket

4. Display the information you have found graphically. You should now be able to
decide on the market segment you want to target.

5. Draw up a plan for your marketing campaign; how are you going to appeal to the
chosen market segment; which media you are going to use.

6. Produce an advertisement for the music artist, based on the information you have
found.

28
HOMEWORK 1 – ANALYSING THE MARKET

Supermarket Loyalty Cards

In February 1995, Tesco launched Clubcard, a loyalty card for shoppers at Tesco. For
every £1 that customers spend, they get 1p back on the card. The cards were highly
successful and soon all the large supermarket chains had launched cards.

Their main purpose was to encourage customers

to shop with only one supermarket and to spend
more money. However, they can serve another
purpose. The supermarkets can now get
information about the spending habits of every
individual loyalty card shopper if they want. If
you buy two bottles of wine every week, or three frozen pizzas, then the supermarket
will know because your itemised bill is recorded on its computer system along with
the information of your loyalty card. It can know where you shopped and whether
you paid by cash or card.

The supermarkets are faced with information overload at the moment. How do they
make best use of all this information which is available to them? Tesco, for instance,
has experimented with identifying different types of shopper. Big spending customers
in some stores who regularly shop for wine have been invited to wine and cheese
evenings. It has also sent mailshots targeting vegetarians, diabetics, students,
pensioners and others identified from the Clubcard data.

In future, supermarkets may pinpoint customers who are irregular shoppers with
them. They might be targeted with money off vouchers to bring them more regularly
into the store. Or they may target pensioner customers who are shopping at times of
the week when the store is very crowded. They may be offered a reduction on their
shopping bill if they shop at times when the store is less crowded.

KEY TERMS
Spending habits Irregular
Itemised Targeted
Loyalty Voucher
Mailshot Reduction

1. What is a supermarket loyalty card?

2. How can supermarkets know whether or not you bought a packet of cornflakes
this week if you have a loyalty card?
3. Loyalty cards can be used to provide information about different segments of the
market e.g. average age of shoppers. Give four examples of other information
which loyalty cards can give.
4. For each example, explain how a supermarket could target these shoppers to
persuade them to spend more money.
5. A supermarket offers to give extra points to shoppers who always shop in off peak
hours. What would be the advantages and disadvantages of telling all shoppers
about this offer?

29
HOMEWORK 2 - PRODUCT

Sellotape
Before the mid-1990s, Sellotape Ltd had a problem. In the UK, Sellotape is not just a
brand name for a single sided, sticky clear tape produced by Sellotape Ltd. It is the
name consumers tend to give to any clear, sticky tape produced by any company. For
your brand name to become the name of the product in general should be a dream
come true. But in this case, too many consumers were buying ‘Sellotape’ which was
not made by Sellotape Ltd. Also, the company was finding it difficult to get
consumers to buy other products made by the company and sold under the Sellotape
name. Consumers tended to think that anything with Sellotape on the packet would
contain sticky, clear, tape.

To get around these problems, the company has adopted a number of strategies. It has
changed the name from Sellotape Ltd to The Sellotape Company. This aims to show
that it makes more than just clear, sticky tape. Different coloured packaging is to be
used for non-Sellotape products, with much bolder lettering to emphasise the product.
The ‘Sellotape’ company logo on packaging is to given less emphasis except on
Sellotape packets. This was done on ‘Elephant Tape’, a grey cloth tape aimed at the
DIY market. It was the company’s fastest selling new product in 1995.

Sellotape Company products sold in the DIY market will have a completely different
design of packaging from office stationery products. A range of sub-branded products
for children called ‘Stick It!’ has also been produced.

KEY TERMS

Brand Generic Product

Ingredients Premium Price
Product Differentiation Product Mix
Product Range Packaging

1. Why did Sellotape Ltd have a problem differentiating its products?

2. How might (a) repackaging, (b) renaming and (c) new designs help to differentiate
Sellotape’s products?
3. Would total sales increase for the company if the name ‘Sellotape’ were removed
from all products other than Sellotape itself? Give reasons for you answer.

CONTINUED…

30
Biscuit Wars
Have you ever bought a Puffin biscuit from Asda? It is Asda’s own brand of the much
more famous branded Penguin biscuit. In 1997, United Biscuits, the makers of
Penguin, won a court case against Asda which declared that the packaging of Puffin
was too similar to that of Penguin. This could cause confusion amongst customers.
Someone could pick up a Puffin when they thought they were picking up a Penguin!

United Biscuits also wanted to ban Asda from using the Puffin name. But the court
decided that Puffin did not violate the Penguin trade mark and so Asda could continue
to use it.

The Puffin case highlights the problems of lookalikes. Supermarket chains have
increasingly been putting their own label products into packaging which looks like
that of a well known brand. Names are often very similar.

1. What is the difference between a brand and an own brand?

2. Choose three supermarket own label products which you think look similar to a
branded product. Describe the similarities.
3. Explain why (a) supermarkets produce lookalike own label products and (b) why
manufacturers object to this.

31
HOMEWORK 3 – PRODUCT LIFE CYCLE

Product Life Cycle – Computer Games

In the first half of the 1990s, the world’s number one games machine was the
Nintendo Super Famicon. It used 8-bit technology. By 1994, the product had reached
saturation point and was vulnerable to attack. It seemed that the battle might be won
by Sega, long rivals of Nintendo. They launched a superior 32 bit machine in 1994.
The Sega Saturn was capable of playing faster and better games than Nintendo’s 8 bit
technology.

But one month after the Saturn was launched, Sony launched its Playstation. Like the
Saturn, it used 32 bit technology. Sony, though, was able to take a clear market lead.
Much of this was due to a superiority in the games being offered. Most games are
produced by independent manufacturers who licence the technology of a games
machine. Sony offered much better terms than Nintendo or Sega with the result that
many independents started making games for the Playstation rather than the two more
established producers. When Nintendo leapfrogged Sony and Sega by offering a 64
bit machine, it found that lack of software was a crucial factor in its failure to regain
market leadership from Sony.

KEY TERMS

Decline Development
Extension Strategy Growth
Launch Market Leader
Maturity Segment

1. Describe, using a diagram, the likely product life cycle of the Sony Playstation.
2. Explain why a product like the Nintendo Super Famicon becomes vulnerable
when it reaches saturation point in the market.
3. Launching new software games can be seen as an extension strategy for the
Playstation. Explain why.
4. How might Nintendo regain market leadership of the game market in the future?

CONTINUED…

32
HOMEWORK 3 – CONTINUED

Beni’s Sandwich Bar

Beni’s Sandwich Bar specialises in producing sandwiches with exotic fillings. Beni
the owner is always experimenting with new combinations of flavours and
ingredients. Each month he puts a new sandwich or flavour onto his menu.
Preparation for the new sandwich starts the week before it goes on sale. Beni tries out
a number of new ideas before finalising the recipe.

One month it was Chinese Special. He combined beef with soya sauce, beansprouts,
chinese leaves and a few other special ingredients to fill a white baguette roll. The
new sandwich always sells well in its first month as people try it out. The Chinese
Special carried on selling well for the next five months but then sales tailed off.
Eventually it was the least popular sandwich on the menu. It was then replaced by the
new special – the Tandoori Chicken Sandwich.

1. Draw a diagram showing the product life cycle of the Chinese Special. Label on it
the various stages through which the sandwich passed in the cycle.

2. Why do you think that offering a new sandwich each month helped total sales at
the sandwich bar?

3. Beni decides to organise a competition. He will pay £50 for the best new
sandwich recipe that any of his customers hands in. He will also put that recipe
on the menu. Why would this help the sales at the sandwich bar?

33
HOMEWORK 4 – PRICING

The Car Insurance Revolution

Car insurance used to be a fairly sleepy business. Loyal motorists tended to renew
their insurance year after year without checking there were cheaper alternatives.

Peter Wood changed all that. He founded Direct Line. It revolutionised the insurance
industry in two ways. First, it competed on price, aiming to give the best deals to the
safest motorists. Second, it sold its insurance direct to the motorist over the
telephone. Before, insurance companies tended to use brokers – businesses in the
middle between customers and insurers, which usually had branches in the high street.

Direct Line could offer lower prices. It wouldn’t insure high risk motorists. It didn’t
have to pay a commission to brokers to sell its insurance to motorists. Its own
organisational costs were very low. With low costs, it could afford to charge a mark
up which allowed it to become highly profitable. Its competitors were forced to
change, cutting their costs and setting up their own direct selling organisations.

KEY TERMS

Competition Based Pricing Cost Plus Pricing

Creaming Market Oriented Pricing
Mark Up Penetration Pricing
Price Discrimination Profit Margin

1. What is the product that Direct Line sells?

2. Direct Line adopts a full cost pricing policy. What does this mean?
3. Other insurance companies have been forced to cut their premiums (prices) to
motorists. Explain what type of pricing policy they have adopted.
4. A very bad winter increases the number of accident claims by 30%. What
premiums should Direct Line now set? Explain your answer.

HOMEWORK 4 – CONTINUED

A magazine publisher is bringing out a 60 part series on the history of popular music.
It will be published in monthly instalments and sold through newsagents. Each issue
will include a free cassette of music in that issue of the magazine. Binders will also
be available. The readers can place each edition in the ring binder, so that the
magazine can be built up into a comprehensive guide to popular music.

1. What pricing strategies might the publisher use when fixing a price for the
magazine and why?
2. How should the binders be priced?

34
HOMEWORK 5 - PROMOTION

HOOVER

Some years ago, Hoover, the makers of vacuum cleaners, washing machines and other
electrical appliances, ran a promotion. It offered two free return tickets first to
various destinations in Europe and later to America. To qualify, the customer had to
buy products worth at least £100. The promotion was enormously successful. A
number of customers went out and bought Hoover products when they didn’t really
want them, just to qualify for the free offer. After all, two return trips to America cost
at least £400 at that time.

What customers did not realise was that the small print of the offer
meant that only a fraction of customers ever boarded a plane to
their dream destination. Customers could express a preference for
when they went but Hoover rarely offered flights then. Instead,
they said that flights were unavailable at that time and offered
flights at times which usually proved impossible for the customers.
Customers could also only get tickets if they had proof of purchase
of accommodation at their destination. The Hoover travel agents
offered accommodation. The problem was that usually the cost of
the accommodation was more than an all-in package tour from an
ordinary travel agent.

Customers were furious once they realised what was going on.
Hoover was taken to small claims courts. One angry customer
attacked a Hoover service van. Newspapers, radio and television
carried many stories from angry customers who felt deceived.

Questions
1. How did Hoover promote the sale of its products?
2. Why did customers find the deal so attractive?
3. Was the offer good for public relations at Hoover?
4. Three top managers at Hoover were sacked once complaints started to pour in.
You have been appointed to sort out the problem. What will you do? In your
answer, think about the costs and benefits to Hoover of any of the solutions you
put forward

CONTINUED…

35
HOMEWORK 5 – CONTINUED

KEY TERMS

Advertising Agency Direct Mail

Discount Media
Packaging Persuasive Advertising
Point of Sale Public Relations

You need to collect information about any promotions which are currently on offer.
You can do this by:

• looking through local newspapers (including free ones)

• noting down any promotions offered on television or radio commercials
• checking through food, particularly tins and packets, which you have at home
• visiting local shops, such as your nearest supermarket, and noting down products
and promotions on offer

1. Give EIGHT examples (at least ONE from each of the above) of different
promotions that you have found. You can include cutting and pasting them from
newspapers, if you wish.
2. For each promotion, explain why you think it could increase sales of the product
on offer.
3. Which ones are the most effective in your opinion and why?

LOGOS AND SLOGANS

Find out and draw (as best as you can!) the logos for each of the following:

Audi cars
British Telecom
London Weekend Television
Legal and General (insurance)
Visa
National Westminster Bank
Boots
Jacob’s (cream crackers)

36
HOMEWORK 6 – PLACE

Oysters
Stephen Mallan loves oysters, but in London they have traditionally been very
expensive compared to France. He became determined to sell oysters to the public at
French prices.

He researched the market and came across the phrase ‘transit retailing’. It means
selling to customers in train terminals and airports. The idea appealed and he
approached his local railway company. They negotiated with him to buy a market
barrow and site it at Fenchurch Street Station in London. This is a very busy station
and is used by many workers who have high powered jobs in the City of London.

The barrow started trading in December. Sales have been good, with the weather
being the main factor in determining how many oysters are being sold each day.
Stephen plans to expand the idea by taking a mobile barrow and setting up in other
busy locations such as sports grounds and other railway stations.

KEY TERMS

Agent Break Of Bulk Point

Channel Of Distribution Outlet
Retailer Transport
Warehouse Wholesaler

1. What is a ‘market barrow’?

2. Stephen gets his oysters from an oyster fishery near Belfast in Northern Ireland.
Describe the channel of distribution for the oysters.
3. Why do you think he decided to locate his barrow at Fenchurch Street Station in
London?
4. Suggest why the weather has an effect on sales of oysters.
5. Do you think that Stephen will be successful in expanding his business to other
locations? Explain your answer carefully.

Bank Loans

Banks sell loans to customers directly. However, they have a number of different
distribution channels within this route:
• When customers visit the bank for another purpose
• Through direct mail advertising
• Through advertisements in newspapers and magazines

1. What do you think might be the advantages and disadvantages to a bank of selling
loans in these ways?
2. There has been a suggestion that your bank should sell loans through shops and
supermarkets. Do you think this is a good idea? Give reasons for your answer.

37
HOMEWORK 7 - CONSTRAINTS

The Great Film Company

The Great Film Company is run by Abnash, Steve, Gary and Suk Lin at their school.
They got 100 people to their first Thursday lunchtime showing in a run-down lecture
theatre. But they had problems!

Gary was supposed to bring in his parents’ Nicam video recorder, an amplifier and
some hi-fi speakers, but he didn’t ask his parents whether he could borrow them till
the night before. They refused, saying that they were afraid that it might get stolen or
damaged. Suk Lin was supposed to have asked the teacher in charge of audio-visual
equipment if they could borrow the large screen television, but she forgot. In the end,
they had to show the film on a small screen school TV and a school video recorder
with mono sound.

Steve was in charge of buying the chocolate bars. He bought 30, so 70 people didn’t
get one. Abnash, who was in charge of hiring the copyright film, didn’t book the film
in advance. When she got to the video shop on Thursday, someone had already
borrowed Death Squads 3. Instead she borrowed Death Squads 2 (an 18 certificate).

The forgot that afternoon registration for the school was at 2pm and the film lasted 90
minutes. So they said they would show the rest of the film on the next day. Abnash
suddenly realised that they would have to pay for two days’ rental, so she shouted out
as everybody was leaving, that there would be an extra 20p charge to see the rest of
the film.

The good thing was that after they had paid 20p each for the chocolate bars and £4 to
rent the film, they had made a profit. 50 people came back (amazingly!) to see the
rest of the film on Friday.

KEY TERMS

18 Certificate Bankrupt
Constraints Copyright
Degrading Hygiene Regulations
Pressure Group Reputation

1. Calculate how much profit The Great Film Company made on the showing of the
film.
2. Explain FIVE ways in which you think the company acted in an unfair way.
3. Suggest TWO ways in which the company actually broke the law.
4. Abnash is very excited by the profit made in the first week. She wants to book the
film ‘Horror City ‘ for next Thursday. What do you think might be the customer
response if the showing went ahead and why?
5. The Great Film Company has had organisational, legal and ethical problems in its
first week. What do you think the company should do now? In your answer,
discuss whether or not the company can get around these problems.

38
EXTENSION WORK 1

Coca Cola launches £4m UK campaign

Coca Cola has embarked on a £4m television campaign – one of the biggest ever seen
in Britain – in what will be seen as a direct attack on supermarket copycat brands.

The six week campaign, which opened recently, is part of an attempt to boost the size
of the £6 billion per year UK soft drinks market. Fierce competition from brands such
as Sainsbury’s Classic Cola and Virgin Cola has dented sales at certain sales outlets.

The drinks giant denies the new advertisements are a response to the recent ‘cola
wars’ that have raged in supermarkets, but admits to localised damage. George Bradt,
consumer marketing director for Coca Cola in the UK and Ireland, said: “We have a
108 year old brand that is doing very nicely thank you but needs to do better. Our
mission is to grow our business.” Mr Bradt is one of 30 executives recruited to key
posts around the world as part of a drive by Coca Cola to focus on regions.

The company claims sales are up 21% on last year. Sales did fall sharply when
Sainbury’s Classic Cola was launched.

Coca Cola is not the only drinks giant to embark on an expensive marketing drive.
Moet et Chandon, the world’s best selling champagne label, is launching a campaign,
it’s first, at a cost rumoured to be around £1m.

1. Why is Coca Cola launching a £4m advertising campaign?

2. What is meant by the term “cola wars”?
3. How is the new advertising campaign different from previous campaigns?
4. What strategies might Coca Cola use in promoting its product against the
competition?
5. Why have Moet et Chandon launched their £1m advertising campaign?

39
EXTENSION 2

The White Goods Sector

An electronics company is considering entering the white goods sector of the market
(deep freezers, washing machines, dishwashers, etc.).

Percentage of Households with white goods

A B C D E F
Deep Freezers 89 92 86 88 79 70
Washing Machines 95 96 91 93 88 77
Tumble Driers 65 67 53 54 44 28
Microwaves 68 69 57 63 50 29
Dishwashers 36 33 14 10 4 4

Socio-Economic Groups Key

A. Professional
B. Employers and Managers
A. Other non-manual
C. Skilled and semi-skilled manual
D. Unskilled manual
E. Economically inactive

1. The table above shows that 93% of skilled manual workers own a washing
machine. Give THREE other facts that the table shows.
2. The design of the product and its advertising have been aimed at professional
people, employers and managers. Do you think this is a good strategy? Give
arguments for and against, using evidence from the table.
3. One manager has suggested that the company should target unskilled manual
workers and households where the head of the household is unemployed. Why do
you think this has been suggested?
4. Explain whether or not you think this idea (above) is a good one.

40
EXTENSION 3

The Price Of Petrol

Recently, a full blown petrol price war was set to erupt following calls from
motorway service companies such as Granada and Forte for lower prices. The
companies feared that much lower prices at supermarkets have encouraged motorists
to fill up before joining motorways. This means that motorists are less likely to spend
on sales of food and other items provided at motorway service stations.

The gap between motorway and supermarket prices had reached as much as 10p per
litre before a recent price cut of 4p a litre by the oil companies. The price is still
about 2p a litre more than is charged by supermarkets.

In the last few years, supermarket giants like Tesco and Sainsbury’s have built up a
22% share of the UK petrol market from a zero start. Pricing is increasingly used as
the main tool in a highly competitive market. Esso have launched an aggressive price
promotion called ‘Price Watch’. This promotion led to immediate reactions by Shell
and Mobil, who also cut their prices.

UK Petrol - % Share of Market

Esso
7% 20% Shell
22%
BP

Texaco

Mobil
18%
9% Superm arkets
11% 13%
Other

Esso’s strategy study managers have established that customers are prepared to drive
further and further in search of cheaper petrol. Small petrol stations are closing at the
rate of 1,000 a year as the larger groups with larger sites cut prices.

1. Why is the price of petrol so important to the motorway service owners?

2. What does the report suggest is happening to the price of petrol generally?
3. Why are price cuts the major way of competing in the battle to sell petrol?
4. What effect is this having on the market for petrol?

41
EXTENSION 4

Hollywood Marketing
For every $3 that it costs to make a film, a Hollywood studio expects to have to spend
$2 promoting its release. Films have very short lives. Most of the revenue to cover
these costs will be earned in the first six months of release.

Box office receipts are important. But royalties on product licences can be even more
important for big blockbuster films. For instance, Disney received $135m from other
businesses on its 1996 version of 101 Dalmatians.

McDonalds alone paid $35m for the right to advertise the film on television with its
name attached. It then promoted the film in its restaurants.

Dreamworks, makers of Jurassic Park spent two years signing up licensees before the
sequel, The Lost World, was launched. 800 businesses paid royalties to sell food,
t-shirts, toys and burgers associated with the film.

1. Why does a film like 101 Dalmatians or Jurassic Park need marketing?
2. How does McDonalds use films as part of its marketing?
3. Why is McDonalds willing to pay film studios for the right to use films in
promoting its food?
4. A toy manufacturer has won the right to sell toys featuring in the film Antz.
Discuss, using the 4 Ps, how it might market its range of products.

42
EXTENSION 5

Royal Dutch Shell

Royal Dutch Shell is one of the world’s biggest oil companies. Motorists are very
happy to put Shell petrol in their tanks. Businesses see no problem with buying Shell
to burn in their boilers to use as lubricants in their machines.

However, motorists and company directors might also belong to Greenpeace, the
environmental organisation. When they are not driving around or running a company,
they may be actively campaigning to have the use of all fossil fuels, including oil,
reduced or phased out. This is partly because oil is a non-renewable resource. Once
all the world’s reserves of oil have been used up, they cannot be replaced.

We should use up as little oil as possible today, so that our future generations will be
able to use oil too. Burning oil also results in increases in emissions of greenhouse
gases. This, so some scientists argue, is leading to global warming. Climate changes
could lead to huge costs for agriculture and the flooding of low lying areas of the
world as the icecaps melt.

In 1997, Shell responded to these concerns by announcing a £300m investment

programme in research and development in renewable energies spread over five years.
It will focus mainly on solar power and biomass, generating electricity from burning
plants and trees. It will also spend some money on wind power.

Critics point out that £300m spread over five years is only a fraction of what Shell
will continue to spend on finding and developing new oil fields.

1. Why do environmental groups want to see less oil being burnt?

2. Why do you think Shell don’t want to stop oil production?
3. Suggest TWO reasons which the oil companies might give as to why abandoning
oil as a fuel would be bad for businesses.
4. Suggest TWO reasons why Shell is investing £300m in alternative energy
research.

43
Marketing Word Search 1 - Product
A B C D U N F E H R M L I N E
N A B E M A R K E T E D Y L C
S K A L L O A A T H W L E T I
A L P I C D U N Y D E O P E E
T M A E A D O W T N K B R A N
U K L I H A N M I I L T O G O
R N K A R C O A R D E M D I C
A A C L S E I T U E N H U O U
T S A E M U T I T R E A C S T
I S P T I R A A A L I N T G S
O H A I R E I I M N V E R N E
N S C S C A T D L E L D O N I
A N K T H I N S T L E E R O S
S C A O U A E N T Y C L B A C
H N G A R C R U D D I N N A I
R N I B C O E L C Y C E F I L
U N N T Y A F B E R E E D N X
B E G R W I F C K R A N G E R
S F A L K I I R K S T I R L I
N G A L B I D O N R O V E R S

Find the words below which are all connected with PRODUCT
in the square

BRAND DIFFERENTIATION
GROWTH LABEL
LIFECYCLE MATERIALS
MATURITY PACKAGING
PRODUCT SATURATION

44
Marketing Word Search 2 - Promotion
A B C G E N O A B L A S P A L
D S S A L C L A I C O S T M A
V S D U N F E R M L I N E A T
E H L E T I C Q U N E O R T H
R A M P T P O N T M O N W N P
S E T E R O B R G S O R O U G
E H C H E I L E T N E N H A M
T O A W N N S M S O H E F T F
I E D E L T D U U I N I O E T
E V V D E O L S I T V H E V R
P I E K O F O N L A S T E I N
E S R R I S F O E L H E R T C
U A T L E A S C I E A T F A T
M U I F O L R A T R U N A M D
U S S S S E M E L C A D O R R
F R I A Y R U N I I T E D O F
A E N L K I R K D L E A S F T
S P G T R I G E C B A R L N H
U N T H I B M E R U N I A I N
D U N D E E U N I P T E D Q O

Find the words below which are all connected with

PROMOTION in the square

ADVERTISING CONSUMER
INFORMATIVE MAILSHOT
MARKET SEGMENT MEDIA
PERSUASIVE POINT OF SALE
PUBLIC RELATIONS SOCIAL CLASS

45
MODULE 5 – KEY TERMS
18 CERTIFICATE – a rating given to a movie, video, etc which has a nature suitable
for adults only, because of scenes of sex or violence.

ADVERTISING AGENCY – a firm which produces advertisements for other firms

or organisations. There are over 300 advertising agencies with annual turnovers of
more than £1m.

AGENT – a person who specialises in a certain field, or country, who helps a

company to sell its product.

BANKRUPT – to be unable to pay your debts eg a business will be this if it is unable

to pay all its bills from the money it has.

BRAND – a registered name for a product, which can be used only by the
manufacturer, retailer or wholesaler.

BREAK OF BULK POINT – the repacking of goods which have been bought in
bulk, or very large quantities, into smaller packages for re-sale to small retailers.
Cash and Carry warehouses often do this.

CHANNEL OF DISTRIBUTION – the method by which products are distributed

from the producer to the consumer.

CLASSIFIED ADVERTISEMENT – an advertisement in small type which is

charged according to the number of lines.

COMMISSION – a payment based on a percentage of the value of goods sold eg an

estate agent who sold a £100,000 house for a 2% commission, would make £2,000.

COMPETITION-BASED PRICING – where the price of a product is determined

by close examination of what other businesses in the same industry are charging.

CONSTRAINTS – an advertisement must not claim that a product can do something

which it cannot, or to give offence against someone. These are examples of
constraints placed upon these advertisements.

CONSUMER CREDIT ACT – this introduced licences for businesses which give
credit or hire facilities to consumers. The Act made it compulsory to give full details
of the charges for credit and regulated advertisements, contracts and doorstep selling.

CONSUMER PROTECTION LAWS – these laws protect customers in their

dealings with businesses and include: The Supply of Goods & Services Act, The
Trades Descriptions Act and The Weights & Measures Act.

COPYRIGHT – this is a law which prevents other companies from copying an idea,
an image or a logo from one company.

46
COST PLUS PRICING – where the selling price of a product is arrived at by
finding the cost of a product and then adding the required profit margin eg a
sweatshirt costs £8 to make, you want to make £5 profit on each one, so you would
sell it for £13.

CREAMING – charging a high price for a new product while it remains unique.

DECLINE – during the product life cycle, a product will eventually drop in sales as
less people want to buy it. This is known as decline.

DEGRADING – if an advertisement shows a person or group of people in a bad light

eg Scottish people classed as being mean, then this is degrading to that group of
people.

DEVELOPMENT – during the product life cycle, a product is tested to see if it

works. At this stage, there are no sales. This is known as the development stage.

DIFFERENTIATION – the ways in which a business makes its products differ from
similar products. Branding and packaging are important methods of doing this.

DIRECT MARKETING – selling direct to consumers on an individual basis

through the post, or other means.

DISCOUNT – where the consumer is given money off a product/service eg a “Buy

one, get one free” offer.

DISPLAY ADVERTISEMENT – a larger advertisement which is ruled off from

others, and charged according to the number of single column cm, or by the
proportion of a page it takes up.

ELECTRONIC DATA INTERCHANGE – a means of transmitting orders and

invoices between computers.

ELECTRONIC POINT OF SALE – a system of recording sales electronically by

scanning the barcode on goods. Computers can then analyse sales patterns and order
new stock.

EXTENSION STRATEGY – where eg a product is changed to meet different

consumer needs, or a special edition is brought out. A way of making the product life
cycle last longer.

FOUR PS – product, price, promotion and place, which go together to make up the
marketing mix.

GENERIC PRODUCT – a product which is often bought without reference to a

manufacturers name eg bread, milk, potatoes.

GROWTH – the part of the product life cycle when the product is new on the market
and is enjoying a period where sales are still rising.

47
HANDLING CHARGE – the cost of loading and unloading goods on vehicles.

HYGIENE REGULATIONS – a firm must comply with these standards of

cleanliness, especially when dealing with food products.

INGREDIENTS – by law now, all goods must contain a list of everything which
goes to make it up. Especially in foodstuffs (eg people with nut allergies need to
know if a product contains nuts), but also health and beauty products.

INVENTORY – the stock of either raw materials or finished goods held by a firm.

IRREGULAR – the buying pattern of a consumer who does not always display the
same shopping habits every time eg does not visit the same supermarket every week.

ITEMISED – most supermarkets now provide you with a computerised itemised bill,
which lets you know everything you’ve bought. It also records this for the shop too
(see Electronic Point of Sale).

LAUNCH – the part of a product life cycle where the product is first put on to the
market. Sales may be slow until the public get to hear of the product.

LOSS LEADER – a product which is sold at, or below, cost price (making a loss) in
order to attract customers inside. Once inside, the customers may buy other items.

LOYALTY – where a consumer always visits the same shops, or regularly buys the
same branded product.

MAILSHOT – an advertisement sent directly to customers informing them about a

product (see Direct Marketing).

MARK UP – the amount of profit required on a product, analysed during the pricing
process (see Cost Plus Pricing).

MARKET LEADER – a product which is the best known, or the biggest in its
particular field eg Coca Cola in the soft drinks market.

MARKET-ORIENTED PRICING – where market research is carried out to find out

what consumers want before starting production. A product is then made and priced
to suit the market.

MARKET RESEARCH – getting information about consumers by studying

statistics and reports and gathering new data by surveys of individuals or groups.

MARKET SEGMENTS – groups of consumers within a market who have similar

wants or desires in terms of buying goods/services.

MARKETING MIX – mixing the four Ps (see earlier) in the correct amounts in
order that the product appeals to consumers in the chosen market segment.

48
MARKETING PLAN – the plan by which a firm hopes to sell its product/service to
the chosen market segment.

MATURITY – in the product life cycle, this is where the quantity of sales of a
product first begin to slow down, after most of the potential customers have bought it.

MEDIA – companies use different forms of media to get their message across to
consumers eg television, radio, posters.

MULTIDROP – delivering goods to a number of shops by one vehicle.

OMBUDSMAN – an official appointed to investigate complaints by the public.

PACKAGING – the physical container or wrapping of a product which is also used

for promotion and selling appeal.

PENETRATION PRICE – a price which is set low enough to allow a firm to enter a
new market.

POINT OF SALE MATERIAL – physical objects designed to draw consumer’s

attention to a product or firm, displayed at the physical position where goods are sold.

PREMIUM PRICE – a high price which can be set for a top quality product.
Consumers are willing to pay the higher price in order to receive a quality product.

PRESSURE GROUP – a collection of people who get together and challenge

decisions made by companies e.g. people who object to building work spoiling the
landscape.

PRICE DISCRIMINATION – where the same product/service is available to

different consumers for a different price. Bus fares for the same journey are different
for OAPs, children and the ordinary customers for example.

PRICE PLATEAU – the level of price that consumers expect to pay for a particular
product.

PRIMARY DATA – first-hand information from market research surveys of the

consumers.

PRODUCT EVALUATION – judging whether a new product or process will be

practical, marketable and within the company’s budget.

PRODUCT LIFE CYCLE – the phases a product passes through from its
development; its introduction when the product is launched; through its growth, as
sales build up; through maturity, as sales reach their peak; saturation, when rival
products come on the market or consumers lose interest; to its final decline.

PRODUCT MIX – different types of product made by a business, such as suits,

raincoats and sports bags.

49
PRODUCT ORIENTED – when the product and its price are the most important
concerns. A manufacturer decides on a product, makes it, prices it and tries to sell it
without first investigating to see if a market exists for the product.

PRODUCT RANGE – similar products made by a business e.g. various kinds of suit,
different flavours of crisps.

PROFIT MARGIN – the amount of money made on a product sale, after all the costs
have been subtracted.

PUBLIC RELATIONS (PR) – distributing information about a firm or organisation

with the aim of improving its public image.

QUOTA SAMPLE SURVEY – interviewees are chosen by group e.g. age, sex or
social grade, in the same proportion as the number found in the total population.

RANDOM SAMPLE SURVEY – surveys where those being interviewed are picked
by taking names from a printed list, such as a telephone directory, at fixed gaps of say,
50 to 100 names.

REDUCTION – where the price of a product comes down e.g. if it is damaged, or

getting close to its sell by date.

REGIONAL DISTRIBUTION CENTRE – a large warehouse with the latest

computers and automated handling equipment, which distributes goods to all the
branches of a retail chain in one region.

REPUTATION – if a company is regarded by many as having a good quality

product, or a good quality after-sales service, then it can be said to have a good
reputation.

RESEARCH & DEVELOPMENT – scientific research into present and future

products, materials and production processes, which is then followed by their
practical application and development. Development usually takes longer, and costs
more, than the research.

RETAILER – seller of goods to the consumer, usually the last link in the chain of
distribution.

SALES PROMOTION – schemes which offer customers a special bargain in the

hope of increasing sales.

SECONDARY DATA (desk research) – information which already exists due to

other people’s research.

SKIMMING – charging a high price for a new product while it remains unique.

SPENDING HABITS – how consumers buy products e.g. how often do they shop,
how much do they spend, where do they shop.

50
SUB DEPOT – a small warehouse used to store goods for local delivery in country
areas.

SUPPLY OF GOODS AND SERVICES ACT – law which specifies that goods and
services must serve their intended purpose.

TRADE DESCRIPTION ACT – law which stops traders giving a false or

misleading description of goods or services.

TRADING STANDARDS OFFICER – employed by local councils to investigate

complaints from customers and generally keep watch on business activities.

VOLUNTARY CODE – standards of business behaviour which are established freely

by trade associations for all their members to follow.

WHOLESALER – the link between a producer and a retailer.

51