Unit 1: Marketing and People

A market brings buyers and sellers together. A mass market serves a large, broadly similar customer base; a niche market targets a smaller segment with specific needs that mainstream offers may not meet.

Market size is total sales in the defined market; market share is the proportion controlled by one business or product. Compare like units and the same time period.

A dynamic market changes rapidly as technology, customer behaviour, competitors and external conditions alter what is bought and how it is sold.

Online retailing can widen geographic reach, provide convenience and reduce some store costs. It also increases price transparency, delivery and platform costs, cyber risk and competition. Innovation can create a new product, process or channel; if it attracts customers, the market may grow and invite new entrants.

Competition exists when businesses seek the same customer spending. Rival pressure changes price, quality, choice, innovation and service across a market.

If a rival enters with a better-value offer, existing firms may reduce prices, improve features, advertise more or redesign service. Customers can gain choice and quality, while inefficient firms may lose market share. The same response can raise costs: repeated promotion and innovation may reduce profit margins, and weaker firms may exit or merge.

Risk describes a decision where possible outcomes and their probabilities can be estimated from evidence. Uncertainty describes a future where outcomes, probabilities or both cannot be predicted reliably.

A business can reduce some risks through information and control, but it cannot remove all downside. Under uncertainty, delaying, piloting or preserving cash may be more valuable than one apparently precise forecast.

Primary and secondary identify the source of data; quantitative and qualitative identify its form. A business chooses both dimensions to answer a specific decision.

A launch decision might use secondary industry sales to size the market, a primary survey to estimate purchase intention, and interviews to understand objections. Triangulation is useful when sources answer complementary parts of the question.

Primary research is designed for the business's present question. The best method balances depth, comparability, realism, cost and the stage of development.

Start with the decision and target population, select a sample, pilot the instrument, standardise collection and compare findings with other evidence. A method is useful only if it measures the behaviour relevant to the final market.

Secondary market research uses information already collected, often for a different purpose. It is usually faster and cheaper than new primary collection, but fitness for the present decision must be tested.

Check authority, collection purpose, methodology, geography, definitions, units, sample, date and conflicts with other sources. Competitor websites can compare visible prices and features; official demographic data may support location choice; neither directly proves what target customers will buy.

A sample is a subset of the target population. Its selection method affects bias, cost and how confidently research can represent the wider market.

If customers are 60% adults and 40% teenagers, a stratified sample of 100 selects 60 and 40 respectively, using random selection within both groups. A quota sample could reach the same totals without random selection.

Product orientation begins with what a business can design or produce well; market orientation begins with researched customer needs and adapts the offer to them.

Product orientation can suit novel technology or a distinctive capability; market orientation becomes especially valuable as rivals and customer knowledge grow. Many businesses combine both: develop from expertise, then test usability, willingness to pay and changing needs.

Market mapping plots competing products, brands or businesses on two customer-relevant dimensions, such as low-to-high price and basic-to-premium quality.

1. Define the market and target customer. 2. Choose two independent, meaningful axes and label both ends. 3. Place existing offers using consistent evidence. 4. inspect clusters, relative positions and possible gaps. 5. investigate whether a gap contains sufficient demand and whether the business can serve it profitably.

A map can clarify positioning, compare rivals and reveal crowded areas. It may suggest an opportunity—such as a premium service at a mid-range price—or show that a proposed offer is indistinguishable from established competitors.

Market segmentation divides customers into groups with similar characteristics or behaviour so a business can select targets and tailor its offer.

A clear segment can make research, product design, advertising and distribution more relevant, improving conversion and loyalty. It can reveal underserved demand and help focus resources on segments with suitable size, growth and profitability.

Competitive advantage is a feature or capability that makes a business's product or service more attractive than rivals to the target customer.

Ask whether the advantage is valuable to customers, distinctive relative to competitors, difficult to copy and deliverable at a sustainable cost. If it increases repeat purchase or permits a premium without losing too much demand, it can protect market share and profit.

Product differentiation makes an offer meaningfully distinct from competitors through design, quality, features, service, convenience, packaging, brand or another valued attribute.

A clear unique selling point gives target customers a reason to choose the product, reduces direct price comparison and can support premium pricing, loyalty and market share. Differentiation may also open a new segment or make promotion more memorable.

Added value is the difference between the selling price of a product or service and the cost of the bought-in inputs used to provide it.

Businesses can add value through design, quality, convenience, service, speed, customisation, packaging, brand, location or an experience customers prefer. If customers perceive the benefit, the business may charge more, attract demand or reduce direct price competition.

A coffee shop can add value to beans and milk through preparation, a reliable service, comfortable work space and mobile ordering. These benefits may support a higher selling price, but premises, technology and staff raise costs and only improve profit if extra contribution exceeds them.

Demand is the quantity consumers are willing and able to buy at each price in a given period. A change in the product's own price causes movement along demand; a non-price factor shifts the whole demand curve.

State the changed factor, identify which customers become more willing and able to buy, shift demand right or left, then explain the likely effect on equilibrium price and quantity after considering supply.

Supply is the quantity producers are willing and able to offer at each price in a given period. A change in the product's own price causes movement along supply; production conditions shift the curve.

Higher input, wage or energy costs make each unit less profitable, so producers offer less at every price: supply shifts left. An indirect tax has a similar cost effect. A subsidy lowers the effective cost and shifts supply right.

Productive technology can shift supply right when it lowers unit cost or expands output capacity. A favourable external event can improve access to labour, materials or transport; a disaster, shortage or disruption can remove capacity and shift supply left.

Identify the changed production condition, explain its effect on cost or capacity, and only then give the shift direction. Read the new equilibrium against the unchanged demand curve.

Market equilibrium occurs where quantity demanded equals quantity supplied. At that price, buyers' planned purchases match sellers' planned output.

A shift changes the old balance. Increased demand creates a shortage at the original price, normally producing a higher equilibrium price and quantity. Increased supply creates a surplus at the original price, normally producing a lower price and higher quantity.

A valid market diagram uses price on the vertical axis and quantity on the horizontal axis, with downward demand and upward supply. Their intersection is the original equilibrium.

1. Label axes P and Q and curves D₁ and S₁. 2. Mark the original equilibrium E₁, price P₁ and quantity Q₁. 3. Decide whether the cause changes demand or supply—not the product's own price. 4. shift only that curve right for an increase or left for a decrease, labelling D₂ or S₂. 5. Mark E₂ and project P₂ and Q₂ to the axes. 6. explain the causal chain in words.

Price elasticity of demand (PED) measures how responsive quantity demanded is to a change in the product's price.

Calculate each percentage change from its original value, retain the signs, divide, and report the coefficient. Example: price falls from $10 to$8, a −20% change; weekly sales rise from 2,500 to 3,500, a +40% change. PED = +40% ÷ −20% = −2.0.

The negative sign reflects the usual inverse price-demand relationship. For responsiveness, compare the absolute value: |−2.0| = 2, so demand is elastic and the percentage quantity response is twice the percentage price change.

PED's magnitude compares the percentage response of quantity demanded with the percentage change in price.

If PED = −1.5 and price falls 8%, estimated quantity demanded changes by (−1.5) × (−8%) = +12%. State direction, size and the assumption that other demand factors remain unchanged.

Demand is more price elastic when customers can readily alter or postpone purchase; it is more inelastic when alternatives and adjustment are limited.

Branding and differentiation can reduce substitutability, while online comparison can increase it. The relevant PED belongs to a particular product, customer group, price range and period—not to the entire industry forever.

PED helps estimate how a price change may affect sales volume and revenue, but a profitable pricing decision also depends on costs, capacity, competitors and strategic aims.

Revenue is price × quantity, not profit. A cut that raises revenue can still reduce profit if the extra units have high variable cost or capacity is constrained. A price rise may damage loyalty or invite entry even when short-run demand is inelastic.

Total revenue (TR) equals price multiplied by quantity sold. PED predicts whether the quantity response is proportionally large enough to offset a price change.

A price rises 8% and PED is −0.5. Estimated quantity falls 4%, so the proportional price increase is larger than the volume loss and revenue is likely to rise. This is a directional estimate; exact revenue can be calculated only with actual prices and quantities.

Income elasticity of demand (YED) measures how quantity demanded responds to a change in consumer income.

Calculate both percentage changes from their original values, keep their signs, then divide. Example: income rises 4% and weekly sales rise from 1,000 to 1,120, a 12% increase. YED = 12% ÷ 4% = +3.0.

A positive result indicates a normal good; +3.0 means demand is income elastic and rises three times as fast as income in this estimate. A negative result indicates an inferior good because demand moves opposite to income.

A normal good has positive YED: demand rises when income rises. An inferior good has negative YED: demand falls as customers switch to preferred alternatives when income rises.

The classification belongs to a product for a particular consumer group. Basic transport may be inferior for higher-income commuters who switch to private travel, yet normal for another group. Evidence must show the actual income-demand relationship.

YED's sign classifies the income relationship; its magnitude shows how strongly demand responds.

If YED = +0.6 and income rises 5%, estimated demand rises 3% because 0.6 × 5% = 3%. If income instead falls 5%, the same estimate predicts demand falls 3%, assuming other demand conditions remain constant.

Income responsiveness depends on how customers rank the product as purchasing power changes. It is therefore shaped by the product, consumer group, income level and available alternatives.

YED helps businesses forecast how economic growth or recession may change demand, then align capacity, product mix, inventory, finance and marketing with plausible scenarios.

A multi-product business can combine offers with different income responses, target regions with different growth and stress-test forecasts. The coefficient converts an income forecast into an estimated percentage demand change, not an exact sales total without a baseline.

A marketing objective is a measurable goal pursued through marketing activity. In this topic the three required objectives are increasing market share, increasing revenue and building a brand. The objective should state what success means before the business chooses its marketing strategy.

Objectives can conflict. A low introductory price may grow share and revenue volume but weaken short-run margin; brand investment costs money before its effects appear. Judge a strategy by the stated objective, time horizon, baseline and available evidence.

The product life cycle tracks sales volume over time through development, introduction, growth, maturity or saturation, and decline. Each stage suggests different cash-flow and marketing pressures rather than a fixed timetable.

Extension strategies aim to postpone decline, for example product modification, finding a new use or market, rebranding, relaunching, changing promotion or adjusting price. They can create another rise in sales but also consume cash and may fail if the underlying need has disappeared.

The Boston Matrix classifies products using relative market share and market growth. It helps a business compare cash needs and strategic priorities across its product portfolio.

Map each product using evidence, then consider whether cash from established products can fund promising ones. The matrix can focus promotion, development and discontinuation decisions, but a label is not the decision itself.

The marketing mix is the coordinated set of product, price, promotion and place decisions—the 4Ps—used to attract a target market. Each element changes how customers interpret the others.

Start with the target customer and objective, then test alignment. A premium product needs credible quality, a price that supports its position, promotion that communicates difference and distribution that preserves availability and experience. A change to one P may require changes to the others.

A marketing strategy is an overall plan for reaching a target audience and persuading it to buy. Market type changes the scale, message, channel, buying process and service needed.

Choose the mix from evidence: customer number and needs, order size, buying criteria, competition and distribution. A business moving from niche to mass may gain volume and economies of scale but face higher promotional cost, broader distribution and more direct competition.

Customer loyalty is the tendency of customers to continue buying from a particular seller or brand. A business develops it by understanding what customers value and delivering that value consistently.

Better experience can raise satisfaction, repeat purchase and recommendations, supporting revenue and lowering the cost of repeatedly acquiring new customers. Measure retention and repeat purchasing rather than assuming participation in a scheme equals loyalty.

The design mix combines function, aesthetics and cost or economic manufacture. The best balance depends on the target customer, product purpose and competitive position.

Improving one element may help or harm another. Premium materials may improve appearance and function but raise unit cost; simplifying a design may cut cost but weaken differentiation. Select priorities from evidence about customer needs, price sensitivity, brand position and production capability.

Concern about resource depletion and working conditions can change what customers, employees and investors expect from product design. The specification focuses on waste minimisation, re-use, recycling and ethical sourcing.

A credible change connects the claim to materials, process and supplier evidence. It may strengthen reputation, loyalty and a USP, yet raise price or reduce convenience. Judge success against target-customer concern, willingness to pay and operational feasibility.

Promotion communicates with customers to inform, persuade or remind them. Pearson groups the required methods as personal selling, direct marketing, advertising, public relations, sponsorship, sales promotion and digital communication.

Select the method from the objective, target audience, budget, product complexity and ability to measure response. A coordinated blend can cover reach, persuasion and feedback better than one channel.

A brand is a name, symbol or other feature that distinguishes an offer from competitors. Pearson identifies three branding types for this topic.

The choice affects who owns customer recognition, how marketing cost is spread and how reputation transfers across the portfolio. Compare benefits and risks for both producer and consumer, including trust, choice, price and quality signals.

Strong branding makes an offer recognisable and meaningfully differentiated. It can add value—the gap between customers' perceived benefit and the business's input proposition—without requiring the physical product to be unique.

A trusted name and consistent experience can reduce perceived risk and substitutability. Customers may become loyal, recommend the brand and continue buying after a price rise. This supports premium pricing and makes demand less price elastic; if the higher price exceeds the extra branding cost, profitability may improve.

Brand building creates a distinctive, trusted identity in customers' minds. The required routes are a USP or differentiation, advertising, sponsorship and social media.

Define the desired position, make the product experience support it, communicate consistently and measure awareness, preference and repeat purchase. A combination can be stronger: differentiation supplies the claim, while promotion makes the target audience notice and remember it.

Viral marketing, social media and emotional branding respond to customers who share content, participate in networks and connect choices with identity and feeling.

Set the intended behaviour, identify why the target audience would engage or share, and ensure the product and conduct support the message. Track meaningful responses such as qualified visits, sentiment, repeat purchase or conversion—not only views.

A pricing strategy is a method for setting price. The appropriate method depends on the objective and market conditions, not on the label alone.

For each strategy, trace price to demand, revenue, cost and the objective. Skimming can recover development cost for a differentiated launch; penetration can build share in a contestable market; competitive pricing suits close substitutes.

The most appropriate pricing strategy is conditional. Use the specification's six factors to test whether the business has room to set price or must respond to cost and competition.

Define the objective, rank the factors using case evidence, select a strategy and trace its effect on quantity, revenue, contribution and longer-run position. Then test the strongest alternative and the likely competitor response.

Online sales let customers search and purchase across a wider set of sellers. Price comparison sites organise those prices side by side, reducing search cost and making price differences more visible.

Greater transparency can make customers more price-conscious and more willing to switch, increasing competitive pressure and making demand for an individual seller more elastic. Businesses may respond with competitive prices, online-only offers or faster updates. Higher-priced sellers may instead stress product range, service, delivery, convenience or loyalty to reduce direct comparability.

A distribution channel is the route a product takes from producer to consumer. Pearson counts stages by the parties in that route.

Choose using product characteristics, market spread, order size, customer convenience, business scale, desired control and logistics capability. Perishable or specialist products may value speed and control; many small retailers may make a wholesaler efficient.

Businesses change distribution when technology, customer habits, product needs or strategy alter the best route to market. Common moves include direct e-commerce, apps, fewer intermediaries, selected retailers, own stores and combining online with physical channels.

Compare the old and new route against sales reach, customer experience, speed, control, investment and total operating cost. Pilot where possible and watch whether extra online sales are genuinely new or merely shifted from another channel.

Treating staff as an asset means valuing their skills and competencies as resources that can add value. Treating staff as a cost focuses on the expenditure required to employ them. Both views describe real effects, but they lead managers towards different decisions.

Investment is justified when its added output, quality or customer service exceeds its cost over the relevant period. Treating people only as a cost may reduce spending quickly, but weaker skills or commitment can lower productivity and raise labour turnover, creating new recruitment and training costs.

Workforce flexibility lets a business change what work is done, when or where it is done, or who performs it as demand and employee needs change.

Judge each arrangement for both employer and employee. It may reduce idle labour, cover peaks, attract people with other commitments or lower premises cost. It may also raise administration, turnover, monitoring or service risk.

Dismissal is termination of employment by the employer against the employee's will, normally connected to that employee's conduct, capability or another employment reason. Redundancy occurs because the business no longer requires the job or needs fewer employees, including when it contracts or closes.

Ask first whether the business still needs the role. If it does but removes one employee for poor conduct, that points to dismissal. If technology or falling demand removes the role itself, that points to redundancy.

An individual approach means one employee negotiates pay and working conditions directly with management. Collective bargaining means employee representatives—often a trade union—negotiate with the employer for a group.

Collective bargaining can save management time and create consistent terms, but stronger employee power may increase labour cost and failure to agree can disrupt operations. Individual negotiation offers personalisation, yet outcomes may be unequal and the employee may have less influence.

Recruitment identifies a vacancy and attracts suitable applicants. Selection compares those applicants and chooses who best fits the job description, person specification and business needs.

A coherent process defines the role and required skills or attitude, chooses internal and/or external recruitment, communicates the vacancy, receives applications, shortlists candidates, uses interviews or other selection procedures, checks evidence and offers the role.

Choose from the role and evidence. A scarce specialist skill may require external reach; a leadership role needing deep organisational knowledge may suit an internal candidate. A growing business may combine both.

Recruitment, selection and training use money and employee time before a new worker reaches expected performance. The full cost is wider than the advertised fee.

High labour turnover repeats these costs and can remove experienced staff. Effective recruitment can reduce poor fit; effective training can raise skill, quality, service and productivity. Compare the expected improvement and retention period with the initial and continuing costs.

Induction familiarises a new employee with the business, role, policies and health and safety. Further training may occur on the job or away from the normal work environment.

Match method to the task and learner. Routine practical work may benefit from supervised practice; complex or risky knowledge may need specialist off-the-job learning. Many programmes combine both.

An organisational structure shows roles, responsibilities and reporting relationships. Its features determine where decisions are made and how information travels.

More hierarchy usually lengthens the chain of command and narrows spans; fewer layers often widen spans. Centralisation can support consistency and scale, while decentralisation can use local knowledge, motivate managers and speed decisions near customers.

Tall and flat structures differ mainly in hierarchy and span of control; a matrix overlays project or team responsibility across functional departments.

The appropriate form depends on size, complexity, employee skill, required control and pace of change. A project-based innovator may value matrix collaboration; routine high-risk work may need clearer authority.

Organisational structure affects efficiency and motivation by changing communication distance, management cost, workload, autonomy and access to promotion.

Trace the mechanism and time horizon. Restructuring may disrupt work, lose experience and lower morale in the short run before lower cost or faster decisions appear. Skill, leadership, systems and clarity of responsibility determine whether the promised gains occur.

Employee motivation is the force that increases interest, effort or commitment towards work and business objectives. It matters when that changed behaviour improves useful performance.

A motivated employee may apply more effort, use initiative, cooperate, attend reliably and provide better service. This can raise labour productivity and quality, reduce unit cost, strengthen customer satisfaction and support revenue. Greater loyalty can also reduce absence and labour turnover, avoiding repeated recruitment and training costs.

Motivation theories are lenses for explaining why employees respond differently. They guide questions and methods; none proves that every worker is motivated in one way.

Use the job and employee evidence. Stable pay may remove dissatisfaction without creating challenge; participation may motivate a skilled team but slow urgent decisions. Compare rather than merely name theorists.

Financial motivation methods use monetary rewards, but each links pay to a different unit of performance or business outcome.

Match the measure to behaviour the business actually wants. A clear, controllable target can raise effort, attract or retain staff and improve productivity. Add quality, service and safety safeguards where quantity is rewarded.

Non-financial motivation methods aim to improve autonomy, involvement, variety, relationships or work-life fit rather than paying a direct monetary reward.

These methods can reduce boredom, build skill, meet social or esteem needs and increase commitment. Their success depends on employee preference, training, trust, job design and operational coverage.

Management is the day-to-day organisation and control of business resources, including staffing. Leadership develops and communicates a vision, provides direction and inspires people to pursue it.

A business needs both. Vision without resource planning may not be delivered; orderly operations without direction can preserve the wrong activity. One person can perform management and leadership roles at different moments.

Leadership style describes how authority, employee input and decision-making are distributed. The required styles differ mainly in who decides and how much freedom employees receive.

Fit style to urgency, risk, workforce skill, business size and need for innovation. Crisis may justify faster control; expert creative work may benefit from participation or autonomy. Leaders can adapt style across decisions.

An entrepreneur creates a business and accepts risk; a leader aligns and motivates other people to achieve its objectives. As the business grows, success depends less on the founder doing or approving every task.

Failure to change can overload the entrepreneur, delay decisions and demotivate skilled employees. Successful transition distributes responsibility while keeping objectives, information and accountability clear.

An entrepreneur is a person who identifies or develops an idea, takes the risk of setting up a business and organises resources to make the offer available. Creation is a sequence of decisions, not only the act of registration.

The entrepreneur commits time, income or capital before the result is certain. Market research and testing can reduce avoidable risk, but cannot remove it. The role also involves choosing objectives and ownership arrangements within the available resources.

After launch, the entrepreneur must keep the business operating while deciding how it should improve, expand or adapt. Running protects current delivery; development builds future capability.

Growth can create revenue and scale economies, but it also requires finance, working capital, recruitment and control. The entrepreneur must compare demand evidence and capability with the extra risk, rather than treating expansion as automatic success.

Intrapreneurship is entrepreneurial behaviour by an employee within an established organisation. The employee identifies and develops an innovation while the business supplies much of the finance, assets, brand and operating platform.

Autonomy, time, recognition and access to decision-makers can turn employee ideas into new products or processes. This may diversify revenue and strengthen competitiveness, while the business retains experienced people who want to innovate.

A barrier to entrepreneurship is a condition that makes starting a business harder or less likely. Pearson highlights entrepreneurial capacity, access to finance, lack of training or know-how, and fear of failure or low confidence.

Competition and brand-building cost can intensify these barriers, but the exact constraint depends on the person, idea and market. A partner may supply missing skill while also sharing control and reward.

Risk exists when possible outcomes and their probabilities can be known, estimated or consciously considered. Uncertainty arises when unexpected external change makes the alternatives or probabilities unreliable.

An entrepreneur identifies what is exposed—income, savings, assets, time or reputation—then tests assumptions and limits a failure's impact. Scenario planning can prepare responses to uncertainty even when it cannot assign a dependable probability.

Characteristics are personal qualities that influence how an entrepreneur responds; skills are learned abilities used to perform tasks. Both can support success, but neither works independently of the idea, resources and market.

Evidence should connect the quality or skill to a decision and then to an outcome—for example, creativity produces a differentiated offer only if execution and customer demand support it.

An entrepreneurial motive is a reason for setting up a business. Financial motives concern income or profit; non-financial motives concern the way the entrepreneur wants to work or the change they want to create.

Motives can reinforce or conflict. An ethical proposition may differentiate the business and increase demand, or raise cost and reduce margin. Independence may be valuable but also places responsibility and risk on the owner.

Survival is the objective of continuing to operate and meet obligations. It is often the immediate priority for a start-up, a business facing weak demand or a period of cash-flow pressure.

Survival can take priority over profit maximisation in the short run because a profitable-looking business can fail if cash arrives after payments are due. Once secure, the business may shift towards growth, welfare or social objectives.

Profit maximisation is the objective of achieving the greatest feasible profit, not merely earning a positive profit or increasing revenue.

The business can pursue the objective by changing price and volume to raise revenue, improving the mix of products, or reducing costs without damaging the value that sustains demand. Profit can finance replacement, innovation, expansion and returns to owners.

Beyond survival and profit maximisation, the specification requires six objectives. Each directs attention to a different outcome and can support or conflict with the others.

Priorities depend on ownership, stage, finances, stakeholder values and market conditions. Objectives may form a chain: welfare can improve service, satisfaction and repeat demand; cost efficiency can fund competitive prices.

Opportunity cost is the value of the next-best alternative given up when a choice is made. Scarce time, finance or capacity creates it even when no cash payment occurs.

1. Define the decision and resource constraint. 2. List realistic alternatives. 3. Rank them using the decision-maker's objective. 4. Identify the best rejected alternative. 5. State the benefit sacrificed—not every rejected option and not simply the money spent.

A trade-off occurs when two outcomes cannot both be fully achieved with the available resources or conditions. Choosing more of one requires accepting less of another or a different disadvantage.

A real trade-off requires a mechanism. Higher ethical cost may reduce profit if customers will not pay more, but differentiation may raise demand so that both social impact and profit improve. State the conditions and time horizon before deciding severity.