Cambridge IGCSE0450

Marketing strategy

Business Studies 0450 Chapter Notes

What this chapter covers

Marketing strategy - Justify marketing strategies appropriate to a given situationMarketing strategy - The nature and impact of legal controls related to marketingMarketing strategy - The opportunities and problems of entering new foreign markets
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Marketing strategy notes

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In this chapter

  1. 1What is a Marketing Strategy?
  2. 2Setting Clear Marketing Objectives
  3. 3Using the Marketing Mix Strategically
  4. 4Planning the Marketing Budget
  5. 5Adapting to a Dynamic Market

1. What is a Marketing Strategy?

A marketing strategy is the business's overall game plan for reaching potential customers and turning them into loyal customers of their brand. It's a detailed plan that outlines exactly how the business will achieve its marketing goals. The strategy starts by identifying a specific group of customers (the target market) and then develops a coordinated 'marketing mix' (Product, Price, Place, Promotion) to appeal directly to them. Think of it as a roadmap: it shows the destination (the marketing objective) and the specific route the business will take to get there.

Key term

Marketing Strategy: A plan detailing the marketing objectives of a business and the actions and resources needed to achieve them.

Examiner insight

Examiners look for students who can connect the marketing strategy to a specific target market, showing they understand that marketing is not just about advertising to everyone.

Fun fact

The 'Got Milk?' campaign was a marketing strategy for an entire industry (dairy farmers), not a single brand. It successfully increased milk consumption across the US by focusing on the problem of running out of milk when eating cookies or cereal.

Worked example 14 marks

A new start-up, 'Eco-Clean', plans to sell environmentally friendly cleaning products to young, eco-conscious families in urban areas. Identify two elements of its likely marketing strategy.

  1. 1
    1. Identify the Target Market: The business has clearly identified its target market as 'young, eco-conscious families in urban areas'. This is the first step of any marketing strategy.
  2. 2
    1. Develop the Marketing Mix (Product): The 'Product' element of its strategy is 'environmentally friendly cleaning products'. This feature is specifically designed to appeal to its target market's values.
  3. 3
    1. Develop the Marketing Mix (Place): The 'Place' element could involve selling products online and through health food stores in cities, which is where its target market is likely to shop. This ensures the product is accessible to the right people.

Recap

  • A marketing strategy is a plan to achieve marketing objectives.
  • It always starts with identifying a target market.
  • The strategy combines all elements of the marketing mix: Product, Price, Place, and Promotion.
  • It details the actions and resources required for success.
  • A good strategy provides a clear direction for all marketing efforts.

Quick check

  1. What are the two core components of a marketing strategy?2 marks

2. Setting Clear Marketing Objectives

Before creating a strategy, a business must decide what it wants to achieve. These goals are called marketing objectives. They should be specific, measurable, achievable, relevant, and time-bound (SMART). Common objectives include growing sales of a product, increasing market share (the business's slice of total market sales), entering a new niche market, or simply maintaining the current position in a competitive market. In some cases, if a product is failing, the objective might even be to exit the market smoothly.

Key term

Marketing Objectives: The specific, measurable goals a business aims to achieve through its marketing activities.

Common pitfall

Students often state an objective as 'to increase profits'. While this is an overall business aim, a marketing objective is more specific, such as 'to increase sales by 10% in the next year', which then contributes to profit.

Worked example 13 marks

A well-established chocolate bar, 'Choco-Bite', has seen its sales remain flat for two years while new competitors have entered the market. Suggest and explain a suitable marketing objective for the business.

  1. 1
    1. Suggested Objective: A suitable objective would be to 'maintain market share' or 'maintain the status quo'.
  2. 2
    1. Justification: The product is in the maturity stage of its life cycle, indicated by 'flat sales' and 'new competitors'. At this stage, trying for aggressive growth can be very expensive and may not succeed.
  3. 3
    1. Further Justification: The key goal is to defend its current position against the new rivals. Therefore, an objective focused on maintaining its existing sales level and percentage of the market is the most realistic and strategic choice.

Recap

  • Marketing objectives are the specific goals of a marketing strategy.
  • A key objective is to grow sales of new or existing products.
  • Another common objective is to increase market share by taking sales from competitors.
  • Businesses may aim to dominate a small niche market.
  • Sometimes, the objective is simply to maintain the current position or exit a declining market.

Quick check

  1. List three different marketing objectives a business could have.3 marks

3. Using the Marketing Mix Strategically

The marketing mix is the set of tactical marketing tools that a business blends to produce the response it wants in the target market. It is often referred to as the '4 Ps': Product, Price, Place, and Promotion. A successful strategy requires these four elements to be consistent and work together. For example, a high-quality, premium 'Product' (like a luxury watch) should have a high 'Price', be sold in exclusive locations ('Place'), and be advertised in high-end magazines ('Promotion'). A mismatch, like selling a luxury watch at a low price in a supermarket, would confuse customers and damage the brand.

Key term

Marketing Mix: The combination of Product, Price, Place, and Promotion used to implement a marketing strategy and satisfy a target market.

Examiner insight

Top marks are awarded to answers that explain *why* the chosen elements of the marketing mix are suitable for the specific business or product in the question, showing clear links between them.

Worked example 16 marks

A business is launching a new budget airline. Recommend a suitable marketing mix for this new service.

  1. 1
    1. Product: The service will be 'no-frills' flights. This means basic seating, no free meals, and charges for extra luggage. The core product is simple, low-cost transport.
  2. 2
    1. Price: A penetration pricing strategy should be used. This involves setting very low prices to attract a large number of customers quickly and build market share. Prices must be visibly lower than competitors.
  3. 3
    1. Place: Tickets should be sold primarily online through the airline's own website to keep costs down by avoiding travel agent commissions. This direct distribution channel fits the budget model.
  4. 4
    1. Promotion: Promotion should focus on the low prices. Use online advertising, social media campaigns, and price comparison websites to reach cost-conscious travellers. The key message is 'value for money'.

Recap

  • The marketing mix consists of the 4 Ps: Product, Price, Place, and Promotion.
  • All four elements of the mix must be integrated and consistent with each other.
  • The mix is designed to appeal to a specific target market.
  • Product refers to the good/service itself.
  • Price is what the customer pays.
  • Place is how the product is distributed to the customer.
  • Promotion is how the customer is told about the product.

Quick check

  1. What are the 4 Ps of the marketing mix?2 marks

4. Planning the Marketing Budget

A marketing budget is a financial plan that allocates money for all marketing activities over a specific period. It's not just a limit on spending; it's a crucial management tool. The budget must cover costs like market research, advertising campaigns, staff salaries, and creating promotional materials. Setting a budget forces a business to think about how to be cost-effective – spending the minimum amount of money necessary to achieve its marketing objectives. It also provides a benchmark to measure performance: did the business achieve its sales goals with the money it spent?

Key term

Marketing Budget: An estimate of all the likely costs involved in implementing a marketing strategy.

Common pitfall

A common mistake is thinking a bigger budget always means a better strategy. A well-planned, cost-effective strategy with a small budget can be more successful than a poorly planned one with a large budget.

Worked example 14 marks

A small bakery wants to increase local awareness of its new range of vegan cakes. Explain why setting a marketing budget is important for the bakery.

  1. 1
    1. To ensure affordability: The bakery is small and likely has limited funds. A budget ensures it does not overspend on marketing and risk its financial stability.
  2. 2
    1. To plan activities: By allocating funds, the bakery can decide which promotional activities it can afford, for example, running a social media ad campaign versus printing flyers. It helps to prioritise spending.
  3. 3
    1. To measure success: After the campaign, the bakery can compare the increase in vegan cake sales to the amount spent on marketing. This helps them see if their marketing was cost-effective and provides valuable information for future campaigns.

Recap

  • A marketing budget is a financial plan for all marketing costs.
  • It helps a business plan what marketing activities it can afford.
  • The budget is used to monitor spending and prevent overspending.
  • It allows a business to measure the cost-effectiveness of its strategy.
  • Typical costs include advertising, market research, and salaries.

Quick check

  1. Identify two costs that would be included in a marketing budget.2 marks

5. Adapting to a Dynamic Market

Markets are not static; they are constantly changing. This is what 'dynamic' means. Consumer tastes evolve, new technology creates new opportunities and threats, competitors enter and leave, and the economy can change spending habits. A rigid marketing strategy will quickly become outdated and fail. Businesses must be flexible and ready to adapt. For example, as a product gets older and enters the 'maturity' or 'decline' stage of its life cycle, a business might need to use extension strategies like updating the product, reducing the price, or finding new markets overseas to keep sales going.

Key term

Product Life Cycle: The stages a product goes through from its introduction, through growth and maturity, to its eventual decline.

Fun fact

Netflix started as a DVD-by-mail rental service. It adapted its entire business and marketing strategy to the rise of high-speed internet, pivoting to streaming and eventually becoming a global production powerhouse. A failure to adapt would have made it obsolete.

Worked example 14 marks

Sales of a popular smartphone model have started to fall as newer, more advanced models have been launched by competitors. Identify and explain two ways the business could adapt its marketing strategy.

  1. 1
    1. Adapt Price: The business could use a price reduction strategy. By lowering the price of the older model, it can become more attractive to price-sensitive customers who don't need the very latest technology, helping to clear remaining stock.
  2. 2
    1. Adapt Product/Promotion: The business could create an 'updated' version, for example, 'Classic Edition', with minor software tweaks or new colours. This could be promoted to create renewed interest and extend the product's life, preventing a steep decline in sales.
  3. 3
    1. Adapt Place: The business could start selling the phone in developing countries or new geographical markets where it would still be considered a new and desirable product. This opens up a new source of sales.

Recap

  • Markets are dynamic, meaning they are always changing.
  • Marketing strategies must be flexible to adapt to these changes.
  • Changes can be caused by new technology, competition, or changing consumer tastes.
  • As products move through their life cycle, the marketing strategy must change.
  • Extension strategies are used to prolong the life of a product in the maturity stage.

Quick check

  1. State one reason why a business might need to change its marketing strategy.1 mark

End-of-chapter exercise

Test yourself on the whole chapter. Work through these before moving on.

  1. What is meant by the term 'marketing strategy'?2 marks
  2. Identify two possible marketing objectives for a business.2 marks
  3. Explain how two elements of the marketing mix must be coordinated for a luxury brand of clothing.4 marks
  4. A business has a limited marketing budget. Explain two reasons why it is still important for the business to create a budget.4 marks
  5. A company's product is in the maturity stage of its product life cycle. Explain one pricing strategy and one promotion strategy it might use.4 marks
  6. Do you think it is more important for a business to attract new customers or keep existing ones? Justify your answer.5 marks
  7. An energy drink company wants to increase its market share from 15% to 20% in the next year. Recommend a suitable marketing strategy to help it achieve this objective. Justify your answer.6 marks
  8. Explain the difference between a mass market strategy and a niche market strategy. Use examples in your answer.4 marks
  9. A new restaurant is opening in your town. It wants to target families with young children. Recommend a suitable marketing mix for the restaurant.6 marks
  10. Explain why a marketing strategy must be flexible and able to adapt to changes in the market.3 marks

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