Teaching guide: Decision making to improve marketing performance (podcast)

These podcast teaching guides cover topics from our AS and A-level Business specifications. You can download them below.

Podcast 3: Decision making to improve marketing performance

This podcast covers the specifications' third subject area, ‘Decision making to improve marketing performance’. It includes: Setting marketing objectives; Understanding markets and customers; Making marketing decisions: segmentation, targeting and positioning; and Understanding the marketing mix.

Transcript

Hello and welcome to the AQA AS and A-level Business podcast, supporting your teaching of our new specifications, available from September 2015.

We believe that our holistic approach to the study of business equips students with the academic as well as the practical skills they need to succeed – and helps the students of today develop the fundamental skills needed by the business leaders of tomorrow.

This podcast is the third of six, and covers the third subject area of the new specifications, ‘Decision making to improve marketing performance’ in which we cover the following topics:

* Setting marketing objectives;

* Understanding markets and customers;

* Making marketing decisions: segmentation, targeting and positioning; and

* Understanding the marketing mix.

Topic one: Setting marketing objectives

In this section students will focus on decision making in relation to marketing. Having studied decision making in general they are now applying it to a particular functional area. The decision making cycle is still relevant and should be referred to in the teaching of this section.

As ever the effectiveness of decision making can only be assessed in relation to the objectives that have been set. A useful starting point is to identify typical marketing objectives - these may be set in terms of sales volume or value, the share of the market managers want to achieve or something less tangible like increasing brand loyalty.

Students need to consider what might influence these objectives. Some questions to ask include:

* why might the target be thousands of pounds versus millions of pounds?

* why might the business set a target of a 20% increase in sales instead of a 2% increase in sales?

* why might it aim for a 5% market share rather than a 20% market share?

This may involve a discussion of factors such as capacity, competitiveness and market size and growth.

Topic two: Understanding Markets and Customers

In order to know what marketing objectives to set, how to achieve these objectives and how to measure the success of the decisions taken, managers will need lots of different types of information.

We have referred to marketing research rather than market research to flag that there is a whole range of marketing data that managers might be interested in: for example, they might review the performance of different sales teams or different types of outlets, alongside more general performance in the overall market.

Students will need to understand the differences between primary and secondary research, and the advantages and disadvantages of each in any situation. Once again, students need to understand that context is key – in what situation would primary research be worth undertaking? What sort of information is easily available from secondary research? If a business is going to undertake primary research does it need to sample? Students will also need to consider issues such as the budget available, timescales and the degree of accuracy required.

The data gathered by marketing research activities will need to be analysed to turn it into useful information. Students will need to think about what the data may show and how it can be used in the decision making process.

Some techniques you can use to explore this topic include:

* market mapping: a useful way to help a business identify the positioning of its products relative to competitors, and decide whether it needs repositioning or not

* correlation: explore the possible relationships between variables which may help identify what effect changes of a given variable might have on a situation

* price and income elasticity: look at the effect of changes in price and income on sales and revenue.

Students will need to be able to calculate market share and market growth and interpret their findings in a meaningful way. They need to be able to interpret elasticity data but will not be expected to calculate these values or use specific values of elasticity in calculations.

By analysing data, managers can plan how to achieve their objectives, make appropriate marketing decisions. In turn they can use this data to assess the effectiveness of any decisions that have been taken.

Students need to be aware that technology is enabling businesses to gather more data and to analyse this faster and more effectively. This supports better decision making, more targeted marketing and a better measurement of results.

Topic three: Making marketing decisions: segmentation, targeting and positioning

Marketing research enables managers to have a better understanding of their customers, helping them to identify different groups of needs and wants.

Students need to understand both the meaning and value of segmentation. They should explore different methods of segmenting the market such as demographic, geographic, income and behavioural segmentation. Students should appreciate that businesses are likely to select only some segments to target.

For example, they should appreciate that selling more does not necessarily mean more profits and that focusing its marketing efforts may help a business thrive. This is an ideal time to consider the benefits and disadvantages of targeting a niche as opposed to mass marketing.

They should also consider why a business might target one segment rather than another: what is the size of the segment and the likely returns? Does the business have the necessary skills and resources to compete effectively in this segment?

Once a target market is chosen the business must decide how to compete within it. Market mapping might be useful here to help decide where to compete in the market relative to other providers. Students need to consider why a particular position is appropriate – and whether it will be successful.

For example, if a business wants to be a budget provider it must be able to achieve lower unit costs than competitors: how will it do this? What will enable it to do this more successfully than rivals? If its positioning is successful what is to stop others following and doing exactly the same?

This STP (segmentation, targeting and positioning) framework is useful to help students understand the marketing process. Managers need to understand the different needs in the market. They must select the needs they can meet effectively and profitably, and then decide how best to compete.

These decisions should be considered both in the context of what competitors are doing, and the resources, strengths and competences of the business.

Topic four: Using the marketing mix

The marketing mix is the combination of marketing activities that influence a customers’ decisions to buy. Students need to be familiar with the 7Ps model: product, price, promotion, place, people, process and physical evidence.

To choose the right marketing mix, a business needs to be clear who is being targeted and how the product is to be positioned. Targeting high income, older buyers with a premium proposition requires a very different marketing mix than targeting a younger audience with a budget offering.

The focus of the analysis here is why a particular mix is chosen. As ever the answer depends on the context.

* How is the product or service being positioned?

* What are the features of the targeted segment?

* How big is the marketing budget?

* What are the competitors doing?

* What is regarded as ethical by the business?

Another key factor is the type of product. For example, is it an industrial product or targeted at consumers? If it aimed at consumers, is it a convenience item, a shopping good or a speciality product. The marketing mix for chewing gum (a convenience item) differs from that of a washing machine (a shopping good), which differs from that of a Ferrari (a speciality product).

Students need to think how the combination of marketing mix factors will vary for different markets, different products and in different situations. This is a great opportunity to look at the various stages of the product life cycle, and explore the benefits of a balanced product portfolio by looking at the Boston Matrix.

Students will need to know the specific items in the specification such as price skimming, price penetration and multi-channel distribution. More generally, they should be able to consider what might affect the price of a product in a given situation (for example what might make a business increase its price) or whether it is distributed directly to the customer through outlets.

Students should also understand the importance of digital marketing and the impact of e-commerce on marketing activities. For example:

* how will using digital marketing affect the way businesses promote themselves?

* how will e-commerce impact on the nature of the distribution channel?

* what influences will these factors have on their approach to pricing?

Thank you for listening to this AQA business podcast. You can find information on the specifications and the resources available to support your teaching of them on the AQA website: just visit aqa.org.uk/business