Influcences and Changes (AQA A-Level Business): Revision Notes
Influences and changes
Understanding the seven Ps of marketing
The marketing mix has evolved from the traditional four Ps to include seven Ps that businesses must consider when developing their marketing strategy:
- Product – design, technology, usefulness, convenience, value, quality, packaging, branding, accessories, warranties
- Price – strategies, skimming, penetration, psychological pricing, cost-plus, loss leader
- Place – retail, wholesale, mail order, internet, direct sales, peer-to-peer, multi-channel distribution
- Promotion – special offers, advertising, endorsements, user trials, direct mailing, leaflets/posters, free gifts, competitions, joint ventures
- People – employees, management, culture, customer service
- Physical environment – smart, run-down, interface, comfort, facilities
- Process – especially relevant to service industries; how services are consumed
The extended marketing mix (seven Ps) provides a more comprehensive framework for analysing all aspects of a business's marketing approach, particularly in service-based industries. This expansion from the original four Ps (Product, Price, Place, Promotion) recognises the growing importance of the service sector and the need to consider additional elements that affect customer satisfaction.
Exam tip: When answering questions about the marketing mix, focus on the most relevant elements rather than trying to cover all seven. Select the two most important elements for the specific business context and develop these points fully.
Key influences on the marketing mix
When designing a marketing mix, managers must consider several important factors that will shape their decisions. These influences determine which elements of the mix receive greater emphasis and how resources are allocated.
Finance
A business's financial position significantly impacts its marketing mix decisions, particularly regarding pricing and promotion.
Profit levels directly affect pricing flexibility. A profitable business can afford to reduce prices significantly in the short term because it has financial reserves to absorb lower margins. These reserves also enable the business to invest in extensive promotional campaigns that might be too costly for less profitable competitors.
Cash flow is equally important. A business with healthy cash flow can extend favourable trade credit terms to customers, effectively expanding its range of distribution outlets. This makes the product more accessible and attractive to retailers who value flexible payment terms.
Worked Example: Financial Influence on Pricing Strategy
A well-established supermarket chain with strong profits might launch a price war against competitors, knowing it can sustain lower margins temporarily. The chain's financial reserves allow it to:
- Reduce prices by 10-15% on key product lines
- Maintain extensive advertising to promote the lower prices
- Absorb short-term profit reductions
Meanwhile, a new entrant with limited cash flow would struggle to match these prices without risking financial instability.
The nature of the product
Different products require different marketing mix emphases. The type of product determines which elements are most critical to success.
An insurance firm typically spends heavily on advertising to generate large numbers of enquiries and win customers. For this business, promotion is the dominant element of the marketing mix because insurance is intangible and requires significant customer education and persuasion.
In contrast, a portrait painter may rely primarily on product quality and word-of-mouth promotion to achieve sales. Here, the product itself and the artist's reputation are the critical success factors, with little need for extensive advertising.
Product type also matters: Consider whether the business operates in a B2B (business to business) or B2C (business to consumer) market. Similarly, determine if the product is a convenience good or a speciality good. These classifications will significantly influence the marketing mix developed.
- Convenience goods (e.g., groceries) require wide distribution and competitive pricing
- Speciality goods (e.g., luxury watches) focus on exclusive placement and brand prestige
- B2B markets emphasise personal selling and relationship building
- B2C markets often rely more heavily on mass advertising and promotions
Technology
Technological developments affect multiple elements of the marketing mix in different ways.
Products that incorporate the latest technology often use advertising to inform potential customers about new features and benefits. These products typically have high prices initially to maximise short-term profits and recover research and development costs. This pricing strategy is called price skimming.
Technology has also transformed the place element of the marketing mix. Developments have enabled publishers of music and books to distribute their products using internet downloads, eliminating the need for physical distribution channels. This represents a fundamental shift in how products reach consumers.
Worked Example: Technology's Impact on Marketing Mix
When electric cars with improved battery technology first entered the market, manufacturers implemented a comprehensive marketing strategy:
Product: Highlighted advanced battery range and environmental benefits
Price: Set high initial prices (£30,000-£50,000+) to recover development costs
Promotion: Used advertising to educate consumers about new technology benefits
Place: Developed specialised dealerships and charging infrastructure
This demonstrates how a single technological innovation affects multiple elements of the marketing mix simultaneously.
Market research
Primary market research is perhaps the most important influence when designing a marketing mix. Its findings provide crucial information to inform decisions on the form, functions and design of the product itself.
Market research uncovers vital data about:
- Prices that consumers are willing to pay
- The type of purchasers likely to buy the product
- Pricing strategies most likely to succeed in the target market
This research-based approach ensures that all elements of the marketing mix are grounded in actual customer needs and preferences rather than assumptions. Businesses that skip comprehensive market research often develop products that miss the mark or price them inappropriately for their target market.
Product decisions and new product development
Several factors influence the development of new goods and services and determine the value businesses place on innovation.
Technology as a driver of innovation
Technological developments are at the heart of many new products entering the market. These advances create opportunities for businesses to meet consumer needs more effectively.
Worked Example: Battery Technology Innovation
Advances in battery technology have generated a range of more efficient electric cars. Firms use these technological advances as the foundation for developing new products:
Step 1: Identify technological breakthrough (e.g., lithium-ion battery improvements)
Step 2: Assess how technology addresses consumer needs (longer range, faster charging)
Step 3: Develop product that leverages the technology
Step 4: Differentiate from competitors through superior features
This process allows early adopters to gain market share before competitors catch up.
Businesses that adopt new technology early can gain a competitive advantage through superior product features and performance.
Competitors' actions
The behaviour of competitors can spur businesses to innovate. When a competitor launches a new product, rival firms often feel pressure to develop something at least as good, if not better.
Worked Example: Competitive Response in Hospitality
Hotels have improved their services by offering guests a choice of different types of pillow to enhance comfort. This innovation by some hotels prompted competitors to respond:
Initial innovation: Premium hotel chain introduces pillow menu (foam, feather, memory foam options)
Competitor response: Rival chains match or exceed the offering
Market outcome: Pillow choice becomes industry standard to avoid losing customers
This demonstrates how competitive pressure drives continuous improvement and ensures businesses remain relevant to changing customer expectations.
Key Points to Remember:
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The seven Ps provide a comprehensive framework for marketing decisions: Product, Price, Place, Promotion, People, Physical environment, and Process.
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Finance influences the marketing mix through profit levels (affecting pricing flexibility) and cash flow (enabling promotional spending and trade credit terms).
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Product nature determines emphasis – different products require different marketing approaches (e.g., insurance needs heavy promotion, whilst specialist services rely on quality and reputation).
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Technology affects multiple elements – it influences pricing strategies (initially high), product features, and distribution methods (enabling digital distribution).
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Market research is fundamental – primary research provides essential information about customer needs, acceptable pricing, and target market characteristics that should guide all marketing mix decisions.