OxfordAQA A-Level Business: The marketing mix (9625/9725)

This guide teaches section 3.1.2.4, The marketing mix, in the OxfordAQA International AS and A-level Business specification. The two specifications differ here. The main text below follows 9725 (Version 1.1, International AS exams May/June 2027 onwards and International A-level exams May/June 2028 onwards), which lists four elements: product, pricing, the promotional mix and distribution (place). The current 9625 text (Version 3.1) is built on seven Ps and has different content in places, so it has its own section, If your course is 9625, after the 9725 material. Check which specification your school follows. Every business below is invented.

Course page: OxfordAQA A-level Business · Checklist: printable list · Topic overview: Marketing study guide · Recall: revision notes · Questions: practice set · Find weak spots: free diagnostics

The marketing mix and why it must fit together

The marketing mix is the set of choices a firm makes on its product, price, promotion and place so that it meets the needs of a chosen target market.

Applying the mix to different contexts changes the emphasis:

• Goods are tangible: design, packaging, quality, storage.
• Services are intangible and produced as consumed. Hartwick Fitness cannot stock a gym session, so its product is the experience and its place is the location and booking app.
• B2B buyers are few, buy in volume and judge on specification, reliability and support. Lathkill Components sells bearings to machine makers, so a sales force, long contracts and negotiated prices matter more than television advertising.
• B2C buyers are many; brand, emotion and convenience carry more weight.

Importance of an integrated mix. The elements send one message; a premium chocolate at a discount price gives mixed signals. Integration reinforces positioning, avoids wasted spend and is harder to copy. Influences on the mix: target market, budget, life cycle stage, competitors, costs, technology and objectives.

Product

New product development (NPD)

Influences on NPD: changing tastes, competitors’ launches, technology, budget and skills, and declining products. Value of NPD: competitive advantage, spread risk, new segments, protected revenue. It is expensive and can fail.

The six stages of new product development, in order:

1. Idea generation: collect ideas from staff, customers, research and competitors.
2. Screening: reject ideas that do not fit the objectives, resources or market.
3. Concept testing: show the idea (a description or sketch) to potential customers to gauge interest.
4. Business analysis: estimate demand, costs, price and profit to see whether the project is worth pursuing.
5. Product testing: build a prototype or sample and test it for performance and appeal.
6. Launch: introduce the product to the market.

Worked example. Daventrie Biscuits wants a seeded oat biscuit. Staff suggest 14 flavours; management drops 9 because the machines cannot make them (screening). Shoppers read a description of the five survivors and rate two highly (concept testing). Finance estimates 400,000 packs a year to break even against realistic demand of 520,000 (business analysis). A test batch is tasted (product testing), then it is put on shelves (launch).

Factors affecting success or failure include: a real need found by research, product quality, price relative to value, promotion and distribution ready at launch, timing, competitors’ responses, forecast accuracy and capacity to meet demand.

Extension strategies

When a product reaches maturity, sales growth slows. An extension strategy delays decline. The four listed are:

• Advertising: reaches old and new buyers; costly, and fades if stopped.
• Rebranding: refreshes perceptions; may confuse loyal customers.
• Lowering the price: lifts volume; shrinks unit margin, may start a price war.
• Adapting the product: new flavours or features; development cost, may cannibalise the original.

Branding

A brand (writer’s wording) is a name, symbol or design that identifies and differentiates a product. Value of branding: recognition, a premium price, trust, easier launches and less switching. Brand loyalty means customers repeatedly choose the brand even when alternatives exist, stabilising sales. An own label brand (writer’s wording) is a product sold under a retailer’s name, made by another producer or the retailer. The retailer gains margin and control; quality problems damage its reputation, and the maker may be squeezed on price.

Pricing

Influences on price

• Marketing objectives: market share points to lower prices, profit to higher margins.
• Target market and level of demand: price must suit what the segment will pay.
• Price elasticity of demand: customers’ sensitivity to price changes.
• Costs: price should normally cover costs over time.
• Competitors’ prices and actions: a rival’s cut may force a response.
• The rest of the marketing mix: a luxury image needs a matching price.

Methods of pricing

Type	Method	How it works	Fits when
Cost based	Cost-plus (standard form)	Unit cost plus a percentage mark-up	Costs are clear, many products to price
Demand based	Penetration	Low price at launch to win share	Price-sensitive buyers, wants volume
Demand based	Price skimming	High price at launch, lowered later	New, distinctive product, early adopters
Demand based	Dynamic pricing	Price changes frequently with demand	Online sales, perishable capacity
Competition based	Premium	Priced above rivals	Strong brand, quality image
Competition based	Going rate	Priced in line with rivals	Similar products, many competitors
Competition based	Discount	Priced below rivals	Cost advantage, price-led market

Worked example (cost-plus, standard form). Daventrie’s box of biscuits costs £1.20 to make. A 35% mark-up gives £1.20 × 1.35 = £1.62. Profit per box is £0.42, a profit margin of 0.42 ÷ 1.62 = 25.9% of the selling price. A mark-up is on cost; a margin is on price, so they differ.

Price elasticity of demand (PED)

PED = percentage change in quantity demanded ÷ percentage change in price. (This is the standard form.) The sign is normally negative for a normal good; the size shows sensitivity. If the size is above 1 demand is elastic; below 1 it is inelastic.

Worked example (elastic). Burnthwaite Cycles sells a helmet at £40 and 2,000 a month. It raises the price to £44 and sales fall to 1,700.

• % change in price = 4 ÷ 40 = +10%.
• % change in quantity = −300 ÷ 2,000 = −15%.
• PED = −15 ÷ 10 = −1.5, elastic.
• Revenue before = £80,000; after = £44 × 1,700 = £74,800; revenue falls by £5,200.

Worked example (inelastic). Ingleton Tea charges £5.00 for a tin and sells 10,000. PED is estimated at −0.6. A 10% rise to £5.50 should cut quantity by 6% to 9,400. Revenue moves from £50,000 to £51,700, a rise of £1,700.

The rule: with elastic demand a price rise cuts revenue and a cut raises it; with inelastic demand a rise raises revenue. PED is an estimate, and revenue is not profit.

Cross-price elasticity of demand (XED)

XED = % change in quantity demanded of product A ÷ % change in price of product B. (Standard form.) A positive result means substitutes; a negative result means complements. A larger size means a stronger link.

Worked example. Torrisdale Mobility sells scooters. A rival’s scooter rises from £400 to £424 (+6%) and Torrisdale’s sales go from 3,000 to 3,270 (+9%). XED = 9 ÷ 6 = +1.5: substitutes, and fairly strongly linked. Torrisdale also sells replacement batteries. When it raises the scooter price by 5%, battery sales fall from 4,000 to 3,700 (−7.5%). XED = −7.5 ÷ 5 = −1.5: complements. A scooter price cut can also lift battery sales.

The promotional mix

Purpose and value of promotion: to inform, persuade and remind; build awareness and image; raise sales.

Element	Advantage	Disadvantage
Advertising	Wide reach, controls the message	Costly, hard to measure, message can be ignored
Sales promotions (discounts, free gifts, buy one get one free)	Quick boost, encourages trial	Margins fall, may attract one-off buyers
Sales force	Personal, answers questions, suits B2B	High cost per contact, depends on staff quality
Public relations	Credible, low cost	Little control over coverage
Sponsorship	Builds image through association	Costly, results hard to prove
Social media	Targeted, cheap, two-way, can be measured	Bad comments spread fast, needs constant management

Influences on the promotional mix: budget, target market’s media habits, product (complex goods need a sales force), life cycle stage, competitors’ promotion and B2B or B2C.

Distribution (place)

A channel of distribution is the route from producer to customer. Intermediaries (writer’s wording) sit between them:

• Wholesaler: buys in bulk, sells smaller lots to retailers. Reaches many outlets; takes margin.
• Retailer: sells to final customers. Controls shelf space and may demand lower prices.
• Agent: sells on commission without owning stock. Local knowledge, low fixed cost; less control.
• Online (direct): sells direct by website or app. Wide reach, keeps the whole margin; needs delivery and service.

Multi-channel distribution uses several routes at once, such as a shop, a website and a wholesaler. It reaches more customers and spreads risk, but can cause channel conflict and raises management cost.

Influences on distribution decisions: product nature (perishable, bulky, high value), target market habits, number of customers, channel cost, control wanted, competitors’ routes and technology.

The importance of marketing

• Technology: digital marketing, social media, dynamic pricing and e-commerce allow precise targeting and fast price changes, but need skills, data security and constant updating.
• Ethical issues: misleading promotions and targeting vulnerable groups, such as children. These risk complaints and lost trust even when they lift short-term sales.
• Competitiveness: good decisions on product, price, promotion and place create advantage, which wins customers from rivals.
• Interrelationships: marketing needs operations to deliver (capacity, quality), finance for the budget and human resources for skilled staff. A promotion that outruns capacity creates late deliveries.

If your course is 9625

The 9625 text for 3.1.2.4 (Version 3.1) differs from 9725 as follows. The six NPD stages and cross-price elasticity are not printed in this section of the 9625 text; ask your teacher whether they are needed.

• Seven Ps: the section is headed “7Ps”. Besides product, price, promotion and place it lists people, process and physical environment (influences on them). The mix is considered for industrial and consumer goods and services, B2B and B2C, national and international markets and e-commerce.
• Product: influences on and value of NPD; the implications of different stages of the product life cycle, including extension strategies; the Boston Matrix with cash cows, stars, dogs and problem children; the value of branding, including own label brands.
• Pricing: influences on price; price skimming, price penetration and price discrimination. Students interpret PED data, analyse the impact of price changes on revenue and assess the value of PED to a business.
• Promotion: the elements named are advertising, sales promotions, sales force, public relations and exhibitions. Distribution: channels including online, and multi-channel.

Definitions below are standard forms or the writer’s own wording, not the specification’s:

• People: the staff who deal with customers; their skills, attitude and training shape the service. Process: how the product reaches and is served to the customer, such as ordering, payment and delivery steps. Physical environment: the setting a customer experiences, such as shop layout or website design. Influences include the target market, budget and type of product.
• Product life cycle: stages of introduction, growth, maturity and decline (standard form). Extension strategies delay decline.
• Boston Matrix: sorts a firm’s products on two axes, share and growth. Stars have high share in a growing market. Cash cows hold a large share where growth is slow, and fund other products. Problem children have low share in a growing market. Dogs have low share in a slow market. It uses simple categories and ignores other factors.
• Price discrimination: selling one product at different prices to separate customer groups, such as peak and off-peak users. It needs separable markets and can raise revenue; customers may see it as unfair.
• Value of PED: it helps predict revenue effects, but it is an estimate that changes over time.
• Exhibitions: events where firms show products to buyers. Strength: direct contact and demonstration; cost: stand hire and staff time.

Common errors

• Writing “price rises” without saying what happens to revenue.
• Listing the stages of NPD without applying them to the product given.

Frequently asked questions

How does price elasticity of demand affect revenue? With elastic demand, a price rise cuts revenue and a price cut raises it. With inelastic demand, a price rise raises revenue and a price cut reduces it.

How do you calculate price elasticity of demand? PED is the percentage change in quantity demanded divided by the percentage change in price. A value above 1, ignoring the sign, is elastic and a value below 1 is inelastic.

What is an integrated marketing mix? An integrated mix is one where product, price, promotion and place all send one message to the same target market. A premium chocolate at a discount price, for example, gives mixed signals, while an integrated mix reinforces positioning, avoids wasted spend and is harder to copy.

What is multi-channel distribution? Multi-channel distribution uses several routes to customers at once, such as a shop, a website and a wholesaler. It reaches more customers and spreads risk, but can cause channel conflict and raises management cost.

What are the 7Ps in OxfordAQA 9625? The 9625 section is headed “7Ps”: product, price, promotion and place, plus people, process and physical environment. 9725 uses the four elements of product, price, promotion and place.

Official syllabus

OxfordAQA International AS and A-level Business specification, section 3.1.2.4 The marketing mix. Text read: 9725 Version 1.1 (4Ps) and 9625 Version 3.1 (7Ps); the two differ, see the 9625 section above. Published by OxfordAQA.