4.

2 Marketing planning
BM Year 2 Unit 4
Learning objectives

• The learning outcomes (or assessment objectives) for this section of the IB Business
Management syllabus are:

• The role of marketing planning (AO2)

• Segmentation, targeting (target market) and positioning (position maps) (AO2,
AO4)

• The di erence between niche market and mass market (AO2)

• The importance of having a unique selling point/proposition (USP) (AO2)
• How organizations can di erentiate themselves and their products from
competitors (AO3)
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The role of marketing planning
The role of marketing planning

• Marketing planning refers to the structured process of formulating marketing

objectives and appropriate marketing strategies to achieve these goals.

• For example, businesses will typically aim to increase their market share.
Marketing planning is about formulating the various marketing strategies to
achieve this goal. A marketing plan is devised to facilitate this.

• The role of marketing planning for a business is to identify the needs and
desires of its customers and devise approaches to meet these. Hence, it
helps to improve the rm’s overall marketing and its chances of success.
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 The role of marketing planning

• A marketing plan shows the marketing objectives and marketing strategy of a particular
business.

• Marketing objectives are goals that help to give marketing teams a sense of purpose and
direction. They also help senior managers to hold the marketing department accountable for
their contribution to the overall organization.

• The marketing objectives of a particular organization depends on the type of business under
consideration.

• A for-pro t organization will strive for marketing objectives that help to achieve improved
pro tability.

• A non-pro t organization might focus on social marketing in order to promote a particular

social cause.
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 Elements of a marketing plan:

• an executive summary outlining the main points of the marketing plan

• a situational analysis outlining the internal and external factors a ecting the organization
• a market analysis outlining the intensity of competition in the market
• marketing objectives
• market research
• identi cation of target market(s) and market segments
• the marketing mix: details of the product, price, promotion and place
• marketing strategies, and
• marketing budgets, including the resources required to execute the marketing plan.
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 Advantages of marketing plans:
• Marketing planning helps marketing managers to formulate more e ective marketing
strategies in order to meet the needs and wants of the rm’s customers.

• It enables marketing managers and marketers to have a better sense of direction and
purpose. This helps to improve employee motivation and labour productivity.

• As a decision-making tool, it helps marketers to identify potential problems and plan

appropriate solutions to these issues.

• It helps marketing managers to align their marketing plans and marketing strategies
with the rest of the organization. This improves the rm’s overall chances of success
in meeting their aims and objectives.

• It can inform and improve nancial decision-making. Marketing budgets can be more
appropriately set to ensure that resources are used in the most cost-e ective way.
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Disadvantages of marketing plans
• Time and money are used to ensure the marketing plans are prepared in a
comprehensive way. This comes at an opportunity cost, i.e. the money and resources
could have been better spent on other areas of the business.

• Marketing planning might not be realistic for smaller rms to use due to their very
limited marketing budgets. Hence, the value of marketing planning is somewhat
questionable for such rms.

• Changes in the external environment requires changes to be made to the marketing

plan, i.e. it needs to be exible enough to adapt to change.

• Even the best prepared and most thorough of plans are used only as a guide in
business decision-making. The marketing plan can become outdated very quickly, and
is unlikely to be followed too rigidly, as the organization will need to adjust its
strategies as unforeseen opportunities and threats in the external business
environment arise.
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 Business Management toolkit

• Examine the importance of SWOT analysis for e ective marketing planning.

• Examine the importance of the external environment (STEEPLE analysis) for
e ective marketing planning.
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Segmentation, targeting, and
positioning (STP) (AO2, AO4)
Segmentation, targeting, and
positioning (STP) (AO2, AO4)

• A market is the collective term for

the buyers and sellers of a
particular good or service.

• A market can occur in a physical

form (such as retail shops) or
online (via e-commerce platforms).

• The characteristics of a market in

which an organization operates
include market size, market
growth, types of products sold,
and target markets.
Segmentation

• Market segments are the individual sub-groups of a large market, consisting

of customers who share common or similar characteristics.

• Market segmentation describes the process of dividing a market for a product

into smaller or distinct groups of customers in an e ort to meet their speci c
desired needs and wants.

• Understanding the di erent needs of these customer sub-groups within a

market enables marketers to target their customers better.
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Segmentation

• Examples of market segments • Gender

include:
• Geographic location
• Age
• Income
• Cultural background
• Lifestyle
• Educational attainment
• Occupation (profession)
• Ethnicity
• Religion
• Family size
• Social status
 Activity: Who are your customers?

• With a partner in class, discuss the 5. Fresh owers

possible or likely (typical) consumer
pro le of someone who might buy 6. Horse saddles
the following products:
7. Household plants
1. Tottenham Hotspur football club
shirt 8. IB Business Management
textbook
2. Audi Q7 SUV car
9. Kellogg’s Rice Krispies
3. Chanel beauty products
10. Rolex watch
4. Ferrari car
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Segmentation

• A market can be segmented in four broad ways:

• (1) demographic segmentation,
• (2) geographic segmentation,
• (3) psychographic segmentation, and
• (4) socio-economic segmentation.
1. Demographic segmentation
• Demographic segmentation involves splitting consumers according to statistical characteristics of the population,
such as age, gender, family size, religion, ethnicity and income.

• Age – for example, di erent movies ( lms) are produced to appeal to young children, teenagers and adults. In many
markets, people’s tastes change with age, such as the types of food they eat, the books they read, and the cars
they drive. Hence, many businesses segment their markets by age.

• Gender – for example, females typically spend far more money on cosmetics, haircuts, personal hygiene products,
home furnishing, and pets. By contrast, men tend to spend more money than money do on dining out, travel,
investments, sports, gambling, electronics and cars.

• Family size – for example, all theme parks use some form of price discrimination, such as o ering various family
tickets. There is no ‘typical’ family, so theme parks and leisure parks o er a variety of these as discounted prices for
families, e.g. one adult and two children, two adults and two children, or two adults and three children, and so forth.

• Religion – this can have a major impact on businesses, such as McDonald’s being unable to sell beef products in
India or pork products in Jewish and Islamic countries.

• Ethnicity – for example, rice is a very popular staple food product for people from China, India, Indonesia,
Bangladesh and Vietnam (the top 5 countries for rice consumption). Jewish people buy Kosher food products.
Chinese residents have a preference for foreign luxury brands, such as Apple, BMW, Chanel, Gucci, Moët &
Chandon, and Rolex.
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2. Geographic segmentation
• Geographic segmentation splits consumers according to their di erent
geographical locations.

• Geographical factors include population density, climate (weather), and

geographical locations.

• For instance, customers in rural areas of a country may have slightly di erent
needs and wants from those in urban areas. In many countries, the climatic
conditions vary in di erent parts of the country. Clothes retailers such as GAP and
H&M can therefore divide (segment) their markets based on climate or cultural
preferences of customers, for example.

• Another example is McDonald’s, which incorporates local food preferences in

their menus served at di erent locations. McDonald’s serves beer in Germany, rice
products in China, sh products in Portugal, banana pies in Brazil and McVeggie
burgers (without beef) in India.
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 2. Geographic segmentation
• Geographic segmentation goes beyond domestic borders, so can include areas
such as countries and international regions.

• Geographic segmentation enables marketers to localize their products to better

suit customers in di erent areas or regions of the world. This helps marketing
e orts to be more focused to meet geographic di erences in customer needs
and wants.

• Geographic segmentation is important in marketing, especially for multinational

companies with global brands because a successful marketing mix in one part
of the world does not guarantee success in other regions of the globe.

• However, it should be noted that the needs and preferences of all customers of
a particular geographic area is unlikely to be exactly the same. Globalization,
for example, has led to a convergence of tastes across the world.
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3. Psychographic segmentation
• Psychographic segmentation splits the market according to people’s
lifestyle choices and personal values:

• Lifestyle choices include people’s personal interests, such as their hobbies

and other pursuits. For example, publishers of consumer magazines use
psychographic segmentation to cater for a range of interests, such as
sports, motoring, home improvement, fashion, consumer electronics, health
and beauty, cinema, and weddings.

• Personal values are the moral beliefs held by particular market segments.
Examples include vegans, vegetarians and environmental activists. It can
also include people’s views or beliefs regarding animal testing, fair trade,
and sustainability (such as reducing, recycling and reusing of products).
4. Socio-economic segmentation
• Socio-economic segmentation splits the market according to consumer or
household income levels. This is often linked to their type of profession and/or
their level of educational attainment. Businesses then devise focused
marketing mixes, targeted at each market segment based on their income
level of social status

• For example, segmentation by income level is used by many businesses. For

instance, airline carriers o er di erent ticket prices for their airline services,
such as economy class, premium-economy class, business class, and rst
class air travel.
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Segmentation

• However, it should be noted that market segmentation often creates a limited

number of customer groupings, which are potentially contain bias,
generalizations and stereotypes. Many customers may not t neatly into these
market segments. In addition, limited marketing budgets may not enable all
identi ed market segments to be speci cally targeted.
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Segmentation quiz
• For each of the statements below, identify the correct category of segmentation: demographic
segmentation, geographic segmentation, psychographic segmentation, or socio-economic
segmentation.

1. This method of segmentation splits the market according to people’s lifestyle choices, individual values,
and personal attitudes, e.g., businesses might use this to cater for a range of personal hobbies and
interests or to cater for customers with speci c morals and beliefs, such as the provision of organic
produce or fair trade products

2. This method of segmentation splits the market according to statistical characteristics of the population.
Examples include categories such as age, gender, marital status, family size, religion, and ethnicity.

3. This method of segmentation splits the market according to di erent locations. Such factors include
population density, the natural environment, climate (weather), and the area where di erent customers
live or work. Businesses often nd it useful to target these di erent markets as they may have di erent
preferences based on their location.

4. This method of segmentation splits the market according to the income level of individual consumers or
households. This is often linked to their type of profession and/or their level of educational attainment.
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Targeting (target market) (AO2, AO4)

• The target market is a clearly identi able group of customers that an

organization focuses its marketing e orts on, i.e. it is the segment(s) of the
market that the business aims its marketing strategy at. Customers in the same
target market have unique needs, tastes and preferences.

• Targeting is the systematic process of marketing to a speci c target segment.

Market segmentation is a prerequsite to targeting.

• Once a particular target market is identi ed, marketers can create and use a
suitable marketing mix and appropriate marketing strategies to achieve the
organization’s marketing objectives. Segmentation enables businesses to have
greater knowledge about their customers in order to have more focused
marketing.
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Targeting (target market) (AO2,
AO4)

• For example, Ford’s marketing strategy

aimed at customers of its best-
selling Fiesta models in Europe will be
very di erent from the company’s
marketing mix for its Mustang models in
North America.

• Karlmann King, the world’s most

expensive SUV (sports utility vehicle) will
have a completely di erent marketing
mix targeted a very wealthy customers.
The Karlmann King has a 6.8-litre V10
engine, and a price tag of over $2.2
million, and comes with the optional
extra of having the car bullet proofed(!)
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Targeting

• Establishing suitable target markets enables the business to know which

customers to aim the rm's goods or services at. The target market can apply to
both existing and potential customers. For example, some businesses operate
in:

• Mass markets – businesses operating in mass markets supply products to

cater for a broad range of target markets, e.g., smartphones, breakfast cereal,
and washing detergents.

• Niche markets – businesses operating in niche markets supply highly

specialised products to cater for a small and select target market, e.g., a
newspaper or magazine that targets readers with a particular interest such as
snowboarding, antique model toys, or classic cars.
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Activity: Who to target?

• Consider appropriate target markets

for the following product. Be
prepared to share your reasoning
with the rest of the class.

• Coca-Cola carbonated soft drinks

• Ice hockey equipment
• iPhones smartphones
• Paper clips
• Tesla electric cars
Positioning (position maps) (AO2, AO4)

• A product position map (sometimes referred to as a perception map) is a

graphical illustration of customer perception of a business, its products or
brands in comparison to other rms in the industry.

• The contrast is based on two pre-determined criteria, such as price and

quality.

• It shows the perception of customers by positioning the organization, product

or brand relative to the positions of rivals in the same market.
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Positioning
• Position mapping can help a business to identify potential gaps in the market.
• For example, both Mercedes Benz and BMW traditionally produce cars in the ‘premium products’
quadrant of a position map. This meant it was not catering for customers who preferred ‘economy
products’, which led both manufacturers to produce smaller cars, such as the Mercedes A class
and BMW 1 Series, to cater for a di erent target market.

• Note: the position map only shows the perceptions of customers surveyed at one point in time. These
views are not necessarily representative, but can give businesses insight to what customers think of
their brands and products.

• A reposition strategy is required if the business does not like how it is currently positioned (perceived)
by customers. It can do this by creating an improved marketing mix, possibly targeting di erent
market segments.

• Position maps enables marketing managers to improve their product portfolio management. Having a
better picture of the way customers perceive a particular organization, product or brand helps a
business to adjust its marketing mix and improve its marketing strategies in order to increase sales
revenues and pro ts.
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Positioning
• Several categories of products can be identi ed from a typical position map that uses price and
quality as the axes labels:

• Premium products are those perceived by customers to be of high quality and high price.
Examples include the iPhone, Bugatti Veyron, Rolex watches, and Hermes handbags.

• Cowboy products are those perceived by customers to be of low quality but high price. This
strategy is not sustainable, as customers regard these as ‘rip o ’ products. However, it is
sometimes used by rms to maximize sales in the short term,

• Bargain products are those perceived by customers to be of high quality but sold at a low
price. Again, this strategy is unlikely to be sustainable due to the low pro t margins, but can be
a method to increase sales and brand awareness in the short term.

• Economy brands are those perceived by customers to be of low quality and sold at a low
price. Examples include supermarket own-label products, such as Walmart branded wines,
pasta, shampoos, and canned food products. Other examples include low-cost
accommodation (such as youth hostels) and and budget airlines.
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To see a real-word example, watch how Steve Job used position maps as part of his infamous launch of the iPhone,
back in 2007 (skip to 4 minutes to see this):
Activity: Creating position maps

• Instructions
1. Go to the following link: https://www.tiermaker.com/

2. Search for any product you are interested in, e.g., motor cars, cereals, cookies, video
games, fast food restaurants etc.

3. Click on “Alignment chart”.

4. Create your own position map for your chosen category of products.

5. Be prepared to share your work and make sure you can justify the positions of the
brands placed in your position map.

• This activity also works well with they key concept of creativity.
Difference between niche & mass
market
The difference between niche market and mass market (AO2)

• Niche and mass markets are alternative approaches to marketing.

• Niche marketing is an approach that involves businesses focusing on a
relatively small segment or a speci c segment of the market.

• By contrast, mass marketing is an approach that involves businesses

targeting all customers (all segments) in the market for a particular product. It
focuses on selling standardized (homogeneous) products to the generic
public or a large and broad group of customers.
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Niche market

• Businesses operating in niche

markets supply highly specialised products
to cater for a small and select target market.
The target market is a clearly identi able
group of customers who have unique needs,
tastes and preferences. It is usually a subset
of a larger market.

• The following are examples of niche market

sports: Cli diving, Curling, Drag racing,
Horse riding, Korfball, Snowboarding,
Synchronised Swimming, Ultimate Frisbee,
and Wakeboarding.
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Niche market

• For example, the IB o ers some niche • Fijian Studies

subjects at Standard Level within the
overall IB Diploma Programme. • Food Science & Technology
Examples of such subjects include:
• Human Rights
• Asian Arts
• Marine Science
• Astronomy
• Nature of Science
• Brazilian Social Studies
• Turkey in the 20th Century
• Drama
• World Arts & Cultures
• Electronics
• World Religions
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Niche market
• As the target market is clearly identi able, rms operating in niche markets tend to have lower marketing
costs as resources are more directed to the speci c product to meet the demands of the targeted
customers.

• Niche markets often create business opportunities for small rms to compete with larger companies that
may have an established customer base and large market share. Prices in niche markets tend to be
relatively high because:

• There is limited, if any, direct competition.

• The lack of direct competition also means that customer loyalty is likely to be high. This is also
because customer relationships tend to be stronger in niche markets.

• The lack of substitutes mean that premium prices can be charged in order to gain high pro t margins.
• As markets are small and focused, there are few opportunities for economies of scale.
• As a niche market speci cally targets certain segments of a market, businesses can tailor-make their
marketing to appeal to the intended audience. This helps businesses to avoid wasting time and money
on marketing activities that are not relevant to the market segment.
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Mass market

• Businesses operating in mass markets supply goods and services to cater for
large and undi erentiated target markets.

• Mass marketing is the marketing strategy aimed at all customers in a

market, without having split them into separate market segments as the
business provides goods and services that appeal to wide-ranging groups of
customers.

• For example, supermarkets typically sell a range of mass-market products,

such as: bottled water, canned foods, wine, soft drinks (see infographic
below), confectionery, toothpaste, and tissue paper. Any segment of the
market can purchase these products, so there are no speci c target markets.
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Mass market

• Mass markets products are standardized products, usually made using mass
production techniques, to cater for large consumer markets. Hence, there are
opportunities to have economies of scale, but the pro t margin of each unit
of output is relatively low.

• Similarly, there are cost savings per unit if businesses market their goods or
services using above the line (ATL) promotional strategies to large and broad
target audiences. By contrast, it is more economical for businesses to use
below the line (BTL) promotional strategies for niche market products. (See
section 4.5 - promotion)

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 Mass market

• As mass market products are undi erentiated, rms use the same marketing mix to target all potential and
existing customers. In some cases, the target markets may even include most of the population, such as
bottled water, smartphones, and Internet services.

• Mass marketing can lead to very high quantities of sales for a business. For example, according to
its website, the Coca-Cola Company sells over 1.9 billion drinks each day (see ATL Activity 2 below).

• Due to their large size and global presence, large rms operating in mass markets companies are likely to
use above-the-line promotion, such as television advertising. Coca-Cola, for example, is a major sponsor
of major sporting events such as the Olympic Games, NASCAR, the NBA, and the FIFA World Cup.

• Quite often, niche market products become so popular that they evolve into mass market products.
Examples of formerly niche market products that are now mass market products include mobile phones,
at screen televisions, and electric cars. However, the size of mass markets often means there is intense
competition, which can harm sales, market share, and pro t margins unless the business is able to
establish brand loyalty and a unique selling point.
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Business management toolkit

• Discuss how knowledge of Porter's generic strategies might help a

business to decide between pursuing a niche or mass market approach.
The importance of having a USP
The importance of having a unique selling point/proposition (USP) (AO2)

• A unique selling point (USP) refers to any exclusive feature or aspect of a business,
its products or brands that makes it distinct from others in the same industry.

• Having a USP means a business, product, or brand has a distinctive factor that
makes it one-of-a-kind and stand out in a positive way from the competition.

• It is the ultimate purpose of product di erentiation.

• Product di erentiation refers to the process by which rms attempt to make their
goods and services di erent from those provided by other rms in the market in order
to increase their own sales revenue.

• Examples of product di erentiation strategies include product quality, branding,

physical appearance, colors, packaging, and after-sales services.
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 USPs

• A USP has several interrelated basic components:

• Bene ts - what attracts customers to the organization, its products, or its brands
• Emotive - what attracts people to the organization, its products, or its brands on an
emotional level

• Key selling point(s) - what makes the organization, its products, or its brands better than
others

• Key di erence(s) from competitors - what makes the products or brand stand out from
the competition

• Competitive advantage - what makes the organization attractive to customers, such as

its reputation or area of expertise in a particular market.
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USPs

• The unique selling point (or unique selling proposition) explains why
customers choose a particular business, product or brand over another.
Increasingly, businesses need to di erentiate themselves from rival rms.

• For example, Apple’s USP has been its intuitive and innovative products.
Tesla’s USP is its visually appealing, high-performance electric cars.

• A business can have a USP in any aspect of its marketing mix. Examples
include price, memorable slogan, high-quality product, convenience, value for
money, business location, distribution networks, and customer experience.
Having a USP can go a long way in establishing market share and customer
loyalty.
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The importance of USPs

• Having a unique selling point (or unique selling proposition) can be important for several
reasons:

• It can makes the product or brand stand out from the competition in the market, i.e. it
helps to attract customers by drawing attention to its competitive advantage, leading to
higher sales.

• It can lead to greater customer loyalty as customers identify something distinctive and
superior about the product over rival ones. Again, this can lead to increased sales.

• It can help entrepreneurs to determine if a new commercial project or idea is likely to

succeed. The business needs to determine if it can establish a USP to compete
successfully in the market, by o ering customers something di erent from what is already
available in the market. This happens before the rm needs to commit any nancial
resources to developing and launching the project.
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 The importance of USPs

• The most e ective USPs are those

that add value for customers and
are di cult for rivals to copy.

• For example, Apple uses patents

to protect its innovative products
from being copied by rival
companies. Coca-Cola claims to
have created the red and white
out t worn by Santa Claus – the
same colors as its iconic logo; no
one has been able to successfully
dispute Coca-Cola’s claim.
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The importance of USPs
• USPs are often used in conjunction with business slogans and catchphrases.
• Examples of USPs:
• DeBeers - “A diamond is forever.” This famous slogan has been by DeBeers since
1948, and was named by Advertising Age magazine as the best corporate slogan of
the 20th century. The association of diamonds (from DeBeers) lasting forever made its
products the perfect symbol for eternal love.

• Domino’s Pizza - “You get fresh, hot pizza delivered to your door in 30 minutes or less
or it’s free.” This slogan makes the company's USP clear as it spells out a guarantee
with absolute clarity for customers.

• IKEA - "To create a better everyday life for the many people." The Swedish company's
global USP is its ability to maximise economies of scale to o er high-quality furniture
at low prices - arguably the ultimate bene t any business can provide for its
customers.
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The importance of USPs
• Patagonia’s USP isn’t a product, a quality, or feature, but their reason for existing
(its mission) - “We’re In Business To Save Our Home Planet.” This mission
establishes the company as more than just a clothing brand, with 1% of its sales
revenues being pledged to the preservation and restoration of the planet.

• TOMS Shoes - “Shoes for Moving Forward”. Despite being a for-pro t

company, the American rm was one of the rst shoe companies in the world to
use a "buy one, gift one model". For every pair of TOMS shoes sold, the
company gifts another pair to a child in need, helping to make customers feel
good about their purchases.

• Note: Do not confuse unique selling propositions with business slogans or with
mission statements (although they can be directly linked). Having a catchy slogan
or a memorable mission statement does not, on their own, automatically give a
business a unique selling proposition.
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Potential drawbacks
• Creating and sustaining a unique product is likely to require substantial investments in research,
development, manufacturing, and/or technology. It might also necessitate intellectual property protection
(IPP).

• While a unique product might be popular with a speci c group of customers, it might not attract a larger
market. This can limit the organization's growth if it relies solely on its uniqueness.

• When a successful unique selling point is created, competitors might simply copy, tweak, or enhance it. This
can weaken the business's advantage over time, resulting in more competition and possible price wars.

• If a business's special feature relies on a particular trend, technology, or customer demand, it can become
outdated if preferences change or new tech emerges. The business will therefore need ongoing innovation to
stay up-to-date.

• When a business has a strong unique feature, customers expect it. If the business needs to change its
product o ering for any reason, this could disappoint customers, making it challenging to retain customer
loyalty.

• To mitigate these potential drawbacks, businesses need to continually assess changes in the market, monitor
the competition, continually innovate, and build strong customer relationships in order to add value beyond the
USP.
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Activity: The humble potato (or egg)

• "Whatever you do, be di erent that was the

advice my mother gave to me, and I can’t
think of better advice for an entrepreneur. If
you’re di erent, you will stand out.”

• - Dame Anita Roddick (1942 - 2007),

Founder of The Body Shop

• Create a marketing plan that includes a unique

selling point for the sale of an egg or potato.

• Be prepared to share your recommendations

with the rest of the class.
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How organizations can
differentiate themselves and their
products from competitors (AO3)
 How organizations can differentiate themselves

• Di erentiation is the process of distinguishing an organization’s products

from those of other rms in the same industry.

• For example, branding can be used to enable customers to easily identify

and distinguish a product from its rivals. Without e ective product
di erentiation, customers do not gain a perception that the organization’s
product is di erent, distinctive or unique. Having clear di erentiation helps to
add value, thereby improving the business’s chances of success.
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How organizations can differentiate themselves
• Businesses can di erentiate themselves and their products by using any feature
or aspect of the marketing mix. For example:

• Product – There are lots of ways that businesses use to di erentiate their
products, e.g. creating innovative products (such as Apple products), adding
new special features (such as used by car manufacturers), or focusing on
quality (such as Ti any & Co. jewellery).

• Price – Di erent pricing strategies can be used to appeal to di erent market

segments and target markets. For example, cinemas and restaurants often
charge lower prices on Tuesdays and other o -peak periods. Some
businesses choose to use very low prices as part of their di erentiation
strategy (e.g., supermarkets such as Walmart and low-budget airlines such as
Ryanair) or a high-price strategy (such as Porsche cars and Ray-Ban
sunglasses).
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How organizations can differentiate themselves
• Place – Businesses can broaden their distribution
channels to attract more customers, such as Coca-
Cola’s vast placement strategy (how many places
can you think of where Coca-Cola is sold?)
Increasingly, businesses are using the Internet as a
distribution channel to promote and sell their
products.

• Promotion – Di erentiating products by using

intellectual property rights such as logos,
trademarks, slogans, and brands. Businesses can
also use packaging to make their products stand
out, such as the McDonald's Happy Meal box.
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 Advantages of differentiation
• Di erentiation enables businesses to charge higher prices due to the distinctive features or
aspects of the products they are selling.

• Di erentiation creates brand awareness and can help to create customer loyalty.
• Successful di erentiation improves product placement (distribution channels) as more
distributors (such as wholesalers and retailers) choose to sell the product.

• It adds value to a good or service, creating better value for money from the perspective of
customers. This can help a business to increase sales and establish customer loyalty.

• It can help to hinder or prevent new entrants in the market, thereby maintaining the
business’s market share as customers remain loyal to their preferred brands.

• Ultimately, successful di erentiation creates competitive advantages for a business, such

as market leadership and dominance. Hence, successful di erentiation can give the rm
strategic advantages.
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 Disadvantages of differentiation
• Di erentiation, especially the ability to create a unique selling point, can be highly
expensive. Furthermore, di erentiation strategies are often easily copied by rivals
businesses (see task below).

• Similarly, it is cheaper for rms to make mass-produced goods for mass market,
rather than to cater for specialised (di erentiated) niche markets. This is because
businesses can bene t from economies of scale from mass production, but are
less likely to be able to gain cost-saving bene ts by using a di erentiation strategy.

• Di erentiation can create unnecessary or wasteful competition, such as excessive

packaging and marketing clutter (such as spam advertising).

• As di erentiation can prevent new entrants from succeeding in the market, it can
be anti-competitive. This limits the choice and price competition for customers in
the market.
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Product design as differentiation

• Many businesses use product • McDonald's Happy Meal box

design and distinction packaging
as a form of di erentiation. Some
examples include:
• The Coca-Cola glass bottle
design
• Dr. Martens shoes
• Dyson vaccuum cleaner
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• The MINI motor car
• Polaroid camera
• Post-it Notes
• Pringles potato chips
• Tabasco sauce bottle
• Toblerone chocolate
Branding
World’s top brands, measured by brand value
Business slogans quiz
• Impossible is nothing
• The Ultimate Driving Machine
• Have It Your Way
• It’s the real thing
• Where Dreams Come True
• Beanz Meanz Heinz
• The World’s Local Bank
• Snap! Crackle! Pop!
• Finger Lickin’ Good
• Have a Break, Have a Kit Kat
• Because You’re worth it
• I’m lovin’ it
• Just do it
• Ideas for Life
• Taste the Rainbow
 Activity: Packaging as a differentiation strategy

• Explain why packaging can be

an important aspect of an
organization's marketing
strategy. Use the Internet (and
any other appropriate sources)
to nd real-world examples of
how businesses use packaging
as part of their di erentiation
strategy.
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Activity: Packaging as a differentiation strategy

• Explain Possible examples could include:

• Packaging is an important aspect of product di erentiation, e.g., product packaging can
contain the brand name and logo.

• Similarly, packaging helps customers to identify and recognise the brand or product. Some
products have a unique or distinct design to grab the attention of buyers, e.g., Toblerone
chocolate bars, Tabasco sauce, Pringle’s potato chips, McDonald's Happy Meal boxes, and
Coca-Cola’s glass bottle.

• Packaging helps to shape customers’ perception of a brand.

• Packaging has a protection of the product (physical, hygiene, and transportation protection).
• It plays an important role in promoting a product, e.g., visual appeal such as the texture and
quality of the packaging, which can alter customers’ perception of the product or brand.

• Aside from the value to a business, there are legal requirements for a product's packaging,
e.g., nutritional information.

• packaging can be an important aspect of an organization's marketing strategy. Use the

Internet (and any other appropriate sources) to nd real-world examples of how businesses
use packaging as part of their di erentiation strategy.
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Homework

• Kognity quiz for 4.2

• Product position maps
• Read BMT: Porter’s generic strategies (HL only)