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 may use a limited introductory offer, but the price, timing and channel should be consistent with its positioning.
- 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 proposal needs a defensible broader benefit, such as future repeat purchases, strategic learning or sufficient operating cost savings, because the supplied current contribution falls.
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.