113 Market PositioningAS Edexcel New Specification 2015 Business

By Sarah Hilton for

From the specification

a) Market mapping

b) Competitive advantage of a product or service

c) The purpose of product differentiation

d) Adding value to products/services

Lesson Objectives To be able to identify how market mapping might be used

by a business To be able to describe how a business could gain

competitive advantage To be able to discuss the purpose of product

differentiation To be able to identify ways that a business can add value

to products or services

To be able to answer exam questions based on the topic area

Starter

• Mars Bar have come up with many new products

Now its your turn• In teams come up with as many new product

ideas for dairy milk as you can in 3 minutes:

How did Mars spot a gap in the market?

Market mapping

• In order to identify a gap in the market, it may be useful for a business to construct a diagram of where competitors are on two axis (for example price and quality):

• Jimmy Choo

Premium Price• Nike

•Clarks

•Primark

Luxury (a treat)

Functional

Budget Price

• Ugg

High Quality

High Price

Market Map

Low

Quality

Low Price

Create a market map…• Create a market map for these clothes shops

(add others that you know – add in at least 5 of your own ideas)

George Dorothy PerkinsPeacocks ChanelSports Direct Marks & SpencerDior NextTopshop MatalanPrimark Debenhams

High Quality

High Price

Market Map: Clothing retail UK

Low

Quality

Low Price

Dior

Topshop

Primark

George

Sports Direct

Peacocks

Next

MatalanDorothy Perkins

Chanel

Marks and Spencer

Debenhams

Competitive advantage

• A way that the business can makes its products or services appear superior to the competition to the target market.

• When a business achieves profits that are above average for that industry it has competitive advantage.

• Competitive advantage is achieved by using resources to achieve either:

• Cost advantage (Porter) – a business has skilled worked force and efficient operations to provide low cost value to consumers e.g. ASDA, Nissan, Nike, Ryanair

• Differentiation advantage (Porter) resources are used by a business to create superior value for the consumer

Competitive advantage

• Product design • Product quality• Promotion • Customer service• Delivery times• Economies of scale• Flexibility• Ethical stance• Focusing on a particular market segment

How do you think all of these could help a

business gain a competitive advantage

Product differentiation

• Where a product is different from the competition in some way.

• Consumers must be able to perceive this difference and may be willing to pay a premium price for the product.

Bugatti veyron – website here which outlines its features, including 1200 bhp (average car is about 104)

Article of cost of a Veyron here

Methods of differentiation• Through reputation (hair salon, restaurant)• Through customer service or after sales service

leading to a good reputation (Marks and Spencer)

• Through value for money (ASDA, Lidl, Aldi)• Through product features (Cars, mobile phones)

Methods of differentiation• Flexible pricing – if a business can demonstrate clear physical

differences between their products and those of rivals, it may be able to charge a higher price

• Extend product range – businesses can serve more than one market by offering more than 1 product, e.g. cruise ships offer a range of classes to appeal to a range of people

• Brand development – a business that can differentiate its product successfully (like Coca-Cola) can develop a strong brand

• Overcome competition – a business will differentiate to outcompete rivals – by creating real or perceived differences businesses can attract new customers and win large market shares

Adding value

• Design – develop new technology/design features to make their product unique (differentiation advantage)

• Production – achieving quality and efficiency adds value. – Quality will ensure a higher price can be charged

(differentiation advantage)– Efficiency helps cut costs of the input (cost advantage)

• Marketing – creating an image that makes the product more desirable, a brand differentiation advantage)

Adding value

• Bundling – a business might be able to add value by putting together a ‘package’ of benefits or services that make up the whole product – e.g. holidays

• Customer Service – staff that come in direct contact with customers can add value. Attentive staff create a good image and means people will be happier buying from you – meaning you can charge more without loosing customers

• Speed of response to customers – people don’t like waiting – if you can serve them quicker, they are often willing to pay a premium

Adding value

• Packaging – the packaging of products can add value. Many businesses make an effort to present products in attractive packaging.

• Frequent buyer offers – it might be possible to add value by rewarding customers for repeated purchased – this will encourage them to continue to shop with you, building brand loyalty

• Customisation – customising products might involve including customers brands or logos on the product, or by offering personalised design options for the customer.

Adding value

• How can you add value to a potato?

Adding value

• Production processes add cost at each area but also add value to the raw material:

Benefits of adding value

1. Charge a higher price – increase profit

2. Protection against competitors offering lower prices

3. Customer loyalty

Radley have added value to leather, these bags cost £300

Input for handbags

Raw materials

Value is added by:Process e.g. cooking, slicing, canning

Additional ingredients e.g. cake mix

Convenience e.g. In supermarket

Packaging e.g. Handy cake slice in plastic

Finished goods

Sample question 1

Market mapping:

Case study on next slideThis is a levelled question to get 5 or 6 marks

students will need to provide a two sided argument and an evaluation

Case study for question

1

Answer question 1Level Marks Suggested answer

4 5-6 Markets change because of changes in consumer tastesand preference or incomes or because of new entrants, inwhich case the variables which determine the productpositioning of cakes are no longer valid. EVALUATION PLUS TWO SIDED ANALYSIS

3 3-4 Anna can make sure she prices her wedding cup-cakesappropriately at the high-end of the market given theendorsement by Vogue magazine. ANALYSIS (ONE SIDED)

2 2 Anna could use market mapping to compare her cup-cakes inrelation to rival bakeries APPLICATION (CONTEXT)

1 1 Market mapping is about positioning the products/service your business plans to provide KNOWLEDGE (NO CONTEXT)

Sample question 2

Competitive advantage:

This is an 8 mark answerNote it asks for two ways (4 marks per way)Case study on next slide

Answer question 2Level Marks

per way given

Suggested answer

4 4 However, if by providing a better quality experience through Shiatsu massage chairs adds significantly to the price of the hair treatments, then customers may be put off going to the salon when personal budgets are tight/incomes fall because ofunemployment.EVALUATION PLUS TWO SIDED ANALYSIS

3 3 Handmade sofas will make the client experience moreenjoyable which may therefore lead to customer loyaltyANALYSIS (ONE SIDED)

2 2 Offering waiting clients Italian handmade sofas; wide range of hair services available, David’s reputation APPLICATION (CONTEXT)

1 1 How a business differentiates itself; by providing a better qualityservice, value for money, customer after-sales care,marketing, advertising (word of mouth)KNOWLEDGE (NO CONTEXT)

Sample question 3

Added value

Case study is on next slide 8 marks, which means it’s a 4 level question and will need a

contextualised evaluation to get into 8 marks (Judgement needs to be specific to this case study)

Notice the question asks for ANY fold enterprise not just the one discussed in the case study

Answer question 3Level Marks

per way given

Suggested answer

3 5 For example because the customers at the Fold are quitediscerning or have higher disposable incomes and so morelikely to expect to buy a product which has been made with careand attentionANALYSIS (ONE SIDED)

2 3-4 For example when the chef at the ecoCafe prepares soups he/sheuses organically produced ingredients.APPLICATION (CONTEXT)

1 1-2 For example value added is when a business chooses to enhance the quality of a core product by providing extras to improve acustomer’s utility/experience OR changing inputs in a way thatconsumers see as beneficial and attractive.KNOWLEDGE (NO CONTEXT)

How to get level 4 –top marks6-8 marks

Level 4 Marks 6-8

Such as that in order to ensure that customers continue to buy the products it is important that they consider their purchases tohave been carefully crafted since it is not price competitivenesswhich appears to be important but the nature of the product itself,for example muffins at the ecoCafe are likely to be made withfair trade bananas. However, value-added might not beimportant to all customers, particularly during a recession orin areas where disposable incomes are low in which case low valueadded is likely to be necessary as this will enable low prices to becharged.EVALUATION PLUS TWO SIDED ANALYSIS

Revision Video

Glossary

• Market mapping: Market mapping is about positioning the products/service a business plans to provide

• Added value: value added is when a business chooses to enhance the quality of a core product by providing extras to improve a customer’s utility/experience

• Product differentiation: How a business differentiates its products; through reputation, service, features or value

• Competitive advantage: An advantage a business has over its competitors, allowing it to generate larger than average turnover for the industry