Marketing
Domain 3 covers market research, segmentation, positioning, the marketing mix and marketing strategy. Questions often require you to interpret market data, calculate elasticity or market share, and then recommend a mix that is internally consistent.
Core rules
- Market share = firm sales ÷ total market sales × 100. Market growth = (current market size − previous size) ÷ previous size × 100.
- Segmentation may be demographic, geographic, psychographic or behavioural. Targeting follows segment size, growth, competition and fit with resources; positioning maps show perceived price against quality or another key attribute.
- Market research may be primary or secondary, qualitative or quantitative. Sampling saves cost but introduces bias; the sample must be representative and the question unambiguous.
- The 4Ps must reinforce one another: product features, price, promotion and place. A premium product with penetration pricing sends conflicting signals.
- Product life cycle stages are development, introduction, growth, maturity and decline; extension strategies include rebranding, new markets and product updates. The Boston matrix classifies products as stars, cash cows, question marks or dogs by market growth and share.
- Price elasticity of demand = percentage change in quantity demanded ÷ percentage change in price. Demand is elastic if the value is greater than 1 in absolute terms.
Worked example
A firm cuts price from $20 to $18, a 10% fall, and sales rise from 5,000 to 5,600 units, a 12% rise. PED = 12 ÷ −10 = −1.2, so demand is elastic. Revenue rises from $100,000 to $100,800, but profit may fall. Variable cost is $10, so unit contribution falls from $10 to $8. Total contribution falls from $50,000 to $44,800; with fixed costs of $30,000, profit falls from $20,000 to $14,800. Reasoning: elasticity tells you about revenue, not contribution. The price cut is only justified if the higher volume reduces unit variable cost or builds a market for future sales.
Traps
Equating revenue maximisation with profit maximisation is the classic error. Do not ignore the negative sign or confuse elastic with inelastic. A cash cow is a high-share, low-growth product, not necessarily a failing one. The Boston matrix uses market growth and relative share, not profit. Marketing is wider than advertising. Inconsistent 4Ps - luxury image with cut-price distribution - lose application marks.