WEBVTT 00:00:00.500 --> 00:00:03.955 Welcome to GCSE Edexcel Business revision. 00:00:04.105 --> 00:00:07.574 Unit B U S 7: Making marketing decisions. 00:00:10.233 --> 00:00:13.707 The design mix balances function, aesthetics and cost. 00:00:13.857 --> 00:00:20.650 Function is what the product does, aesthetics how it looks or appeals, and cost the resources required to produce it. 00:00:20.800 --> 00:00:22.272 The design mix 00:00:26.933 --> 00:00:28.939 These elements can conflict. 00:00:29.089 --> 00:00:36.661 A stronger material may improve function but increase cost; a cheaper design may reduce durability and damage reputation. 00:00:39.333 --> 00:00:43.404 The appropriate balance depends on customers and the business's positioning. 00:00:43.554 --> 00:00:50.016 A budget household item and a premium fashion product may place different emphasis on the same three elements. 00:00:52.667 --> 00:00:58.280 The product life cycle describes development, introduction, growth, maturity and decline. 00:00:58.430 --> 00:01:03.081 Sales over time are a model, not a guaranteed timetable for every product. 00:01:03.231 --> 00:01:05.087 The product life cycle 00:01:09.767 --> 00:01:13.240 During development, costs are incurred before sales begin. 00:01:13.390 --> 00:01:20.162 Introduction may involve low sales and heavy promotion; growth brings rising sales and can attract competitors. 00:01:22.833 --> 00:01:27.135 At maturity, sales growth slows and competition can intensify. 00:01:27.285 --> 00:01:33.023 Decline means falling sales, perhaps because preferences change or newer alternatives appear. 00:01:35.700 --> 00:01:43.399 An extension strategy aims to maintain sales, for example through a redesign, new uses, new markets or refreshed promotion. 00:01:43.549 --> 00:01:46.715 Its cost may exceed the extra revenue it generates. 00:01:49.367 --> 00:01:54.279 Differentiation can involve features, design, quality, branding or service. 00:01:54.429 --> 00:01:59.781 It helps customers distinguish alternatives and may support loyalty or a higher price. 00:02:02.433 --> 00:02:08.181 Fictional case: a mature reusable-bottle range could add replacement parts and new designs. 00:02:08.331 --> 00:02:15.349 This may attract existing customers, but the business should check whether demand justifies extra stock and design costs. 00:02:18.000 --> 00:02:21.197 Pricing strategy is an approach to setting prices. 00:02:21.347 --> 00:02:28.926 Select it by costs, customer response, competition, market segment, technology, product life cycle and business objectives. 00:02:31.600 --> 00:02:34.415 Cost-plus pricing adds a mark-up to cost. 00:02:34.565 --> 00:02:41.369 It is straightforward but does not establish whether customers will pay the resulting price; the cost measure must be clear. 00:02:44.033 --> 00:02:49.942 Worked example: a product costs 20 pounds per unit and has a 25 percent mark-up on cost. 00:02:50.092 --> 00:02:54.046 Mark-up equals 5 pounds and price equals 25 pounds . 00:02:54.196 --> 00:03:03.751 This is not a 25 percent profit margin on selling price: 5 pounds divided by 25 pounds multiplied by 100 equals 20 percent. 00:03:06.433 --> 00:03:09.951 Competitive pricing takes rivals' prices into account. 00:03:10.101 --> 00:03:16.521 It may help the business remain attractive, but copying a rival with lower costs can make trading unprofitable. 00:03:19.200 --> 00:03:24.989 Penetration pricing starts with a low price to attract customers or establish market share. 00:03:25.139 --> 00:03:29.341 Margins may be low, and customers may resist later increases. 00:03:32.000 --> 00:03:38.293 Price skimming starts high, often for a new distinctive product, to earn more from customers willing to pay. 00:03:38.443 --> 00:03:41.640 It depends on demand and can attract competitors. 00:03:44.300 --> 00:03:49.792 Promotional pricing temporarily lowers prices or uses offers to stimulate sales. 00:03:49.942 --> 00:03:56.926 It can encourage trials or clear stock but reduces revenue per unit and may train customers to wait for discounts. 00:03:59.600 --> 00:04:02.840 Online comparison makes prices easier to compare. 00:04:02.990 --> 00:04:10.604 Technology can also enable rapid price changes; a price change needs to fit the rest of the marketing mix and customer trust. 00:04:13.267 --> 00:04:17.060 A premium segment may accept a higher price for valued benefits. 00:04:17.210 --> 00:04:25.070 Life-cycle stage matters: a new distinctive product may support skimming, while a declining product may need offers to clear stock. 00:04:27.733 --> 00:04:30.773 Price cuts do not always increase total revenue. 00:04:30.923 --> 00:04:36.075 Compare the percentage change in price with the effect on volume, costs and contribution. 00:04:38.733 --> 00:04:44.247 Worked example: at 10, pounds selling 100 units generates 1,000 pounds. 00:04:44.397 --> 00:04:49.849 At 8, pounds selling 130 units generates 1,040 pounds . 00:04:49.999 --> 00:04:55.587 Revenue rises by 40, pounds but extra variable costs may still reduce profit. 00:04:58.267 --> 00:05:03.258 Promotion informs customers, persuades them to buy and reminds them about the offer. 00:05:03.408 --> 00:05:07.745 Its method should fit the target segment, budget, objective and product. 00:05:10.400 --> 00:05:13.950 Advertising uses paid messages through suitable channels. 00:05:14.100 --> 00:05:19.179 Broad reach can build awareness but may waste spending on people outside the target market. 00:05:21.833 --> 00:05:25.647 Sponsorship links the business to an event, team or activity. 00:05:25.797 --> 00:05:31.960 It can build awareness and associations, but the audience and the sponsored activity's reputation matter. 00:05:34.633 --> 00:05:37.641 Product trials let customers experience an offer. 00:05:37.791 --> 00:05:42.750 They may reduce uncertainty but cost money and do not guarantee later purchases. 00:05:45.400 --> 00:05:50.209 Special offers can encourage immediate sales, larger purchases or trials. 00:05:50.359 --> 00:05:55.735 Discounts reduce revenue per item and may mainly benefit customers who would have bought anyway. 00:05:58.400 --> 00:06:01.873 Branding helps customers recognise and remember the offer. 00:06:02.023 --> 00:06:07.507 A recognised name must be supported by the product and service if it is to sustain loyalty. 00:06:10.167 --> 00:06:14.549 Targeted online advertising can focus on interests or location. 00:06:14.699 --> 00:06:20.938 Its effectiveness depends on accurate targeting, appropriate messages and whether clicks become purchases. 00:06:23.600 --> 00:06:27.012 Viral promotion spreads through people sharing content. 00:06:27.162 --> 00:06:34.039 It can reach many people at low media cost but is unpredictable and the business cannot fully control responses. 00:06:36.700 --> 00:06:41.035 E-newsletters communicate offers or updates to an interested audience. 00:06:41.185 --> 00:06:46.165 Poorly targeted or excessive messages may be ignored and weaken relationships. 00:06:48.833 --> 00:06:54.683 Judge a campaign using relevant evidence: spending, reach, sales and profit, not views alone. 00:06:54.833 --> 00:06:59.961 A rise in sales could also result from seasonality or another marketing change. 00:07:02.633 --> 00:07:06.172 Distribution is the route through which products reach customers. 00:07:06.322 --> 00:07:10.750 Retailers sell to final consumers through shops; e-tailers sell online. 00:07:13.400 --> 00:07:18.189 A retailer can give customers product access, advice and immediate collection. 00:07:18.339 --> 00:07:24.343 The supplier may gain reach but share revenue with the retailer and lose some control over presentation. 00:07:27.000 --> 00:07:32.843 Selling directly online can reach a wider market and give control over the customer relationship. 00:07:32.993 --> 00:07:37.810 Delivery, returns, website costs and customer acquisition still need funding. 00:07:40.467 --> 00:07:45.088 Physical shops let customers inspect products or receive personal service. 00:07:45.238 --> 00:07:50.559 Location and opening hours limit access, and premises create substantial costs. 00:07:53.233 --> 00:08:02.415 An online route offers ordering convenience but may be unsuitable where customers need to try a product immediately or value a face-to-face experience. 00:08:05.067 --> 00:08:10.132 Using both channels can offer customers choice, such as online ordering with collection. 00:08:10.282 --> 00:08:15.459 Stock records and service must be coordinated to avoid selling unavailable products. 00:08:18.133 --> 00:08:24.389 Choose a route by customer needs, the nature of the product, delivery time, cost and available capacity. 00:08:24.539 --> 00:08:29.256 A perishable product has different distribution needs from downloaded software. 00:08:31.933 --> 00:08:42.770 Fictional case: a furniture maker selling online can display a large range, but customers may need a showroom to test comfort; the benefit must justify its rent and staffing. 00:08:45.433 --> 00:08:50.745 An integrated marketing mix has elements that support the same position and customer needs. 00:08:50.895 --> 00:08:54.977 Inconsistent choices make it harder for customers to understand the offer. 00:08:57.633 --> 00:09:04.256 A luxury product with high prices needs quality, suitable promotion and distribution that support its image. 00:09:04.406 --> 00:09:09.535 A budget offer may prioritise low costs, basic features and convenient access. 00:09:12.200 --> 00:09:22.310 Changing one element can affect others: a lower price may increase demand and require more distribution capacity; a new product may require different promotion and service. 00:09:24.967 --> 00:09:29.255 Competitive advantage gives customers a reason to prefer the business. 00:09:29.405 --> 00:09:36.870 The advantage can depend on a combination of features, price, convenience and reputation rather than one isolated change. 00:09:39.533 --> 00:09:42.889 Technology and competition can change the best mix. 00:09:43.039 --> 00:09:49.341 An online channel may extend reach but need different packaging, delivery pricing and digital promotion. 00:09:52.000 --> 00:10:00.659 Fictional judgement: a premium meal-delivery firm could reduce price, but cheaper ingredients that undermine quality may conflict with its position. 00:10:00.809 --> 00:10:06.983 A smaller portion or improved efficiency could be a better response if customers value quality most. 00:10:09.633 --> 00:10:15.424 Support recommendations with case evidence and a chain of effects on demand, costs and profit. 00:10:15.574 --> 00:10:19.275 Explain which assumption is most important to the likely result. 00:10:21.933 --> 00:10:24.557 That completes Making marketing decisions. 00:10:24.707 --> 00:10:28.053 Revisit the notes and test yourself on the revision website.