HookHow a £2 drink caused supermarket stampedes
In December 2022, Aldi stores across Britain had queues before opening and security guards limiting shoppers to one bottle per flavour. The prize was Prime Hydration — a sports drink launched only months earlier by the Watford-born YouTuber KSI and his American sparring partner Logan Paul. Aldi's price was about £2; within hours bottles were listed on eBay for £10 and more, and corner shops charged whatever they liked. Prime spent essentially nothing on traditional advertising: its promotion WAS its founders' combined audience of tens of millions, plus engineered scarcity that turned a soft drink into playground currency. The founders reported worldwide sales of roughly $1.2bn for 2023.
Then the tide went out. By 2024 Prime sat fully stocked on every shelf, resale prices collapsed, and UK sales fell sharply — scarcity is a promotion tactic, not a moat. The full mix — product, price, promotion and place, held together by a strategy that matches the product's life-cycle stage — is what separates a viral moment from a durable brand. That gap is precisely what 1.3 examines.
ModelThe design mix — function, aesthetics, cost
Every product sits inside a triangle: function (does it work?), aesthetics (does it look, feel and taste right?), and economic manufacture (can it be made at a cost the price will carry?). Dyson leans to function — James Dyson built 5,127 prototypes before the first bagless vacuum worked. Fast fashion leans to aesthetics. Ryanair leans to cost, stripping out every gram of function that doesn't get the plane there. Design is the art of choosing which corner to sacrifice.
The spec's social-trends angle matters more every year: sustainable design, recyclable packaging, repairability and waste minimisation now shape the mix directly. The 5p carrier-bag charge introduced in England in 2015 cut single-use bag sales at the big supermarkets by well over 90% — proof that design assumptions can be rewritten overnight by regulation, and by customers who changed their minds about plastic. A design that ignores where social pressure is heading is a product recall waiting to happen.
MechanismBranding and promotion — renting a room in the customer's head
A brand is a promise that survives between purchases. The spec's types: individual brands (Walkers' Sensations stands apart from ordinary Walkers), family or corporate brands (Virgin stretched one name across planes, trains and banking), and own-label brands (Tesco Finest — retailer brands now take over half of UK grocery spending in squeezed years). Ways to build a brand: a genuine USP, consistent advertising, sponsorship, and increasingly digital — social media, influencers, viral campaigns. Prime is the case study in audience-first promotion; John Lewis's Christmas ad, an annual national event since 2007, is emotional branding — it sells almost nothing directly, it rents a feeling and attaches the brand to it.
Why brands justify the spend: they add value and carry a price premium, they lower price elasticity of demand (loyal customers stop comparing), they open distribution doors (retailers stock what shoppers ask for by name), and they make launching the next product cheaper — Prime rode KSI's existing audience for free.
ModelPricing — six strategies, one question: what will the market bear?
The six the spec names. Cost-plus: unit cost plus a percentage markup — simple, but blind to demand. Price skimming: launch high while the product is novel, then descend — new iPhones open near £1,000 and drift down as successors arrive. Penetration: launch deliberately low to build share and habit fast — Disney+ arrived in the UK in March 2020 at £5.99 a month, well under Netflix's standard price, then raised prices repeatedly once subscribers were embedded. Predatory: pricing below cost to drive rivals out — anti-competitive and illegal under the Competition Act 1998. Competitive: pricing at the going rate — Tesco and Sainsbury's both run Aldi price-match schemes precisely to neutralise price as a reason to switch. Psychological: £9.99, 'under £10'.
Which to choose depends on PED, competition, brand strength, spare capacity and life-cycle stage: skimming needs novelty and inelastic early adopters; penetration needs deep pockets and the capacity to serve the volume; cost-plus quietly assumes customers care what your costs are — they don't.
A café's flat white uses about £1.20 of coffee, milk, cup and direct labour per serving. With a 150% markup, price = £1.20 + (1.50 × £1.20) = £1.20 + £1.80 = £3.00. Now the test: a rival opens next door at £2.60, and the café's demand is elastic — the cost-plus price is now wrong regardless of the arithmetic, because the markup was set looking inward at costs, not outward at the market. Cost-plus guarantees a margin on every unit sold; it guarantees nothing about how many units sell.
MechanismDistribution — the path to the customer
Four standard channels: direct to consumer (producer → customer — Gymshark sells overwhelmingly through its own site, keeping the margin and the customer data); via retailers (Prime through Asda and Aldi — instant reach, surrendered margin); via wholesalers (corner shops buying from Booker — reach into thousands of small outlets no producer could serve directly); and via agents, common in exporting. Every intermediary adds reach and takes margin.
The structural change is online: internet sales are roughly a quarter of UK retail spending, up from about 7% in 2010, and whole categories have switched channel — Next now earns more online than from its stores. But watch the reverse current too: pure-online brands keep opening physical space for trust, theatre and returns — Gymshark opened its first permanent store on London's Regent Street in 2022, a decade after founding. Choosing distribution is a three-way trade: margin against reach against control of the brand experience.
ModelStrategy — the life cycle, the portfolio and loyalty
The product life cycle — introduction, growth, maturity, decline — dictates the sensible mix: heavy promotion with penetration or skimming pricing at launch; wider distribution and differentiation through growth; price defence and extension strategies at maturity. Extensions revive ageing products: Lucozade was repositioned in the 1980s from a convalescence drink sold in chemists into a sports-energy brand — same liquid, decades of new growth. The Boston Matrix maps the whole portfolio at a point in time by market share and market growth: stars (invest to hold), cash cows (milk to fund the rest), question marks (back or drop), dogs (divest). Mass-market strategies chase volume and scale economies; niche strategies chase margin and loyalty; B2B marketing differs again — fewer, more rational buyers who value reliability and relationships over advertising.
Loyalty is where strategy compounds. Tesco's Clubcard, launched in 1995, built the biggest customer database in UK retail — and Clubcard Prices now makes the loyalty scheme the price list itself: you visibly pay more without it. Changing consumer behaviour (comparison sites, subscription models, one-click switching) keeps rewriting how much loyalty any firm can assume.
VocabularyKey terms the mark scheme pays for
TrapsMisconceptions that cost marks
ExamWhat examiners want
Edexcel rarely asks you to list pricing strategies; it asks you to assess which fits THIS firm. Anchor every recommendation in the context: life-cycle stage, PED, competitor prices, brand strength, capacity. A beautifully explained strategy that ignores the extract's evidence caps at low Level 2.
The strongest evaluation line in 1.3 is internal consistency: the mix elements must reinforce each other, and a premium product with discount-store distribution — or a penetration price with tiny production capacity — tears itself apart. On 20-markers, use the life cycle as the arbiter: the right mix at introduction is the wrong mix at maturity, so 'it depends where the product sits on its life cycle' is a genuinely analytical closing judgement when you evidence the stage from the data, not a formulaic one.