113 Market Positioning AS Edexcel New Specification 2015 Business By Sarah Hilton for

From the specification Market mapping b) Competitive advantage of a product or service c) The purpose of product differentiation d) Adding value to products/services

Guidance from Edexcel

Guidance from Edexcel

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 In teams come up with as many new product ideas for dairy milk as you can in 3 minutes: This is not as easy as it sounds, but they may come up with cake bars, ice cream, drinks etc Some ideas on next slide

How did Mars spot a gap in the market?

Market mapping

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

Market Map High Price Low Quality High Quality Low Price

Create a market map… Create a market map for these clothes shops (add others that you know) George Dorothy Perkins Peacocks Chanel Sports Direct Marks & Spencer Lipsy Next Topshop Matalan Primark Debenhams

Market Map: Clothing retail UK High Price Dior Next Low Quality Top Shop High Quality Matalan George Peacocks Sports Direct These are just suggestions Primark Low Price

Market map in a company report – Radley bags:

See the full report here

Competitive advantage of a product or service

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 Porter link is to Website with printable CA information if you want to do this in more detail. The Ryanair link is to an article about Ryanair removing toilets to save on costs.

The purpose of product differentiation

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 (Marks and Spencer) Through value for money (ASDA, Lidl, Aldi) Through product features (Cars, mobile phones) Link is to trip advisor – what is best restaurant in town> Then put town in and see what Trip advisor suggests. Would customers go based on a resturant being high on the list – probably.

Adding value to products/services

Adding value definition Added value is the difference between the price that is charged to the customer and the cost of inputs required to create the product or service This can be achieved through the product itself or the way that consumers perceive the product

How can a business add 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) Aspirational product – name a prestige watch brand – did you say Rolex? Is that customer perception?

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. Watch the video here: Cost of a potato is pence but a tube of Pringles can cost £1 - £2

Benefits of adding value Added Value: Sectors of Industry Charge a higher price – increase profit Protection against competitors offering lower prices Customer loyalty Radley have added value to leather, these bags cost £300 Input for handbags Mr Mercer's notes 26

Value is added by: Raw materials 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 Raw materials Finished goods

Sample questions

Sample question 1 6 mark question Case study on next slide This is a levelled question to get 5 or 6 marks you will need to provide a two sided argument and an evaluation This question is NOT taken from the sample exam papers (as there was not one relevant question that Edexcel provided, sorry about that). This question comes from the unit 1 Edexcel A Level Business June 2012

Answer question 1 Level Marks Suggested answer 4 5-6 Markets change because of changes in consumer tastes and preference or incomes or because of new entrants, in which case the variables which determine the product positioning of cakes are no longer valid. EVALUATION PLUS TWO SIDED ANALYSIS 3 3-4 Anna can make sure she prices her wedding cup-cakes appropriately at the high-end of the market given the endorsement by Vogue magazine. ANALYSIS (ONE SIDED) 2 Anna could use market mapping to compare her cup-cakes in relation to rival bakeries APPLICATION (CONTEXT) 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 answer Note it asks for two ways (4 marks per way) Case study on next slide This question is NOT taken from the sample exam papers (as there was not one relevant question that Edexcel provided, sorry about that). This question comes from the unit 1 Edexcel A Level Business Jan 2013

Answer question 2 Level Marks per way given Suggested answer 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 of unemployment. EVALUATION PLUS TWO SIDED ANALYSIS 3 Handmade sofas will make the client experience more enjoyable which may therefore lead to customer loyalty ANALYSIS (ONE SIDED) 2 Offering waiting clients Italian handmade sofas; wide range of hair services available, David’s reputation APPLICATION (CONTEXT) 1 How a business differentiates itself; by providing a better quality service, 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 This question is NOT taken from the sample exam papers (as there was not one relevant question that Edexcel provided, sorry about that). This question comes from the unit 1 Edexcel A Level Business June 2009

Answer question 3 Level Marks per way given Suggested answer 3 5 For example because the customers at the Fold are quite discerning or have higher disposable incomes and so more likely to expect to buy a product which has been made with care and attention ANALYSIS (ONE SIDED) 2 3-4 For example when the chef at the ecoCafe prepares soups he/she uses 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 a customer’s utility/experience OR changing inputs in a way that consumers see as beneficial and attractive. KNOWLEDGE (NO CONTEXT)

How to get level 4 –top marks 6-8 marks Such as that in order to ensure that customers continue to buy the products it is important that they consider their purchases to have been carefully crafted since it is not price competitiveness which appears to be important but the nature of the product itself, for example muffins at the ecoCafe are likely to be made with fair trade bananas. However, value-added might not be important to all customers, particularly during a recession or in areas where disposable incomes are low in which case low value added is likely to be necessary as this will enable low prices to be charged. 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