1. Marketing Flashcards
What is the purpose of marketing?
Essentially, marketing is about meeting the needs and wants of customers so that marketing’s primary aim of increasing sales can be met.
What is the marketing mix also known as?
The 4 Ps
What are the 4 Ps?
Promotion
Product
Price
Place
Why is the marketing mix referred to as being a “mix”?
Because each of the 4 factors affects the other and the mix must overall be suitable to the target customer
What is PROMOTION?
The collection of techniques used to INFORM and PERSUADE consumers to buy a product or service
What are the 2 categories with regards to promotion?
Above and below the line
What is meant by above the line?
Promotion which uses media where there is no direct contact with the potential customer.
What are the 7 types of above the line promotion?
- TV Advertising
- Radio
- Cinema
- Sponsorships
- Magazines
- Newspapers
- Billboards
What are the pros/cons of using TV advertising?
+ Mass audience
+ Visual and sounds
- Expensive compared to others
- Time slots are crucial (target audience may not be watching)
What are the pros/cons of using billboards?
+ Busy roads and traffic lights - good location
+ More cost-effective than TV ads
- Static nature (less will see it)
- Content cannot be changed easily (e.g. compared to social media)
What are the pros/cons of using radio? Who can be targeted?
Local radio stations: potential local customers
National radio stations: national chains
+ Has the widest coverage (majority of households)
+ Cheaper than TV (production cost and rates are lower)
- No way of replaying the ad once gone
- Ad appears in block? - listeners switch channel
What are the pros/cons of using magazines? Who can be targeted?
Specialist magazines can target consumers. (Still above the line as there is no direct contact with customer)
+ Magazine can be designed to appeal to specific group of customers (strong appeal made to a large group)
+ Magazines have a longer life span//newspapers
- Required to be printing months in advance
- Magazines are national and so regional testing can rarely be completed
What are the pros/cons of using cinema for advertising? Who can be targeted?
Target audiences can be decided based upon the film being screened
+ Can use sound, vision and motion to make a memorable ad
+ Cannot be switched off (100% of audience’s attention)
- One-time consumption (less exposure// TV)
- High in cost and people make an effort to avoid ads
What are the pros/cons of using sponsorship for advertising? Who can be targeted?
Can be used on a local and national scale to target all supporters of sports teams/people.
+ Fans will be exposed frequently to the business
+ Encourages word of mouth marketing
- Overload of sponsors = confused customers
- Sponsor’s behaviour can negatively affect a business
What are the pros/cons of using newspapers for advertising? Who can be targeted?
Wide range of newspapers - can target a particular segment of the market. (Local and national)
+ Trusted as being reliable
+ Proven that readers are more engaged//TV watchers
- Few scour the newspaper ads & readership is in decline
- Creativity limited
- Short life span
What is meant by below the line?
Promotion where the business can directly contact the potential customer.
What are the 6 types of below the line promotion?
- Personal selling
- Telesales (telephone selling - e.g. insurance)
- Product sampling (smaller version provided to persuade to purchase the full product)
- Leaflet distribution
- Trade fairs
What is meant by personal selling?
When there is a direct link between the customer and the sales person. Includes: sales assistants, door-to-door sales and telesales.
What are the common advantages of using below the line promotion strategies?
+ Personalised conversation: allows for questions and thus a better understanding
+ Customer has already shown a genuine interest (e.g. not at a trade fair if not planning on buying)
- Opportunity for customers to ignore
- Personal aspect is time-consuming
How can having a desirable brand be advantageous?
Customers want to be associated with the brand and they will products that they don’t necessarily like and pay more than they usually would for a similar item.
Example of a brand that is suffering from the target audience not wanting to be associate with it?
Superdry
What is meant by the phrase “using the internet for promotion” on the spec?
Business’ own website
How could a clothes business use a website to promote its brand?
Catwalk videos
16 models feature (ASOS)
Websites and social media are both types of ____ the line promotion techniques
BELOW
CAN CONTACT CUSTOMER EITHER VIA DIRECT MESSAGING OR CONTACT US SECTION OF WEBSITE
What are the advantages of using SOCIAL MEDIA as a form of promotion?
+ It is more cost-effective than other mediums
+ Customer interaction can be more personal
+ Social media presence can boost traffic on business’ website
+ Success is easily monitored
+ The target audience can be reached through the platform that they are most likely to use
What are the disadvantages of using SOCIAL MEDIA as a form of promotion?
- Resources have to be dedicated to creating/posting the content, as well as responding to feedback
- Brand reputation could be damaged by inappropriate posts or failing to respond to customers
- Businesses may become negatively affected by influencer controversy
State 2 different approaches towards social media advertising.
- Cold advertising (e.g. MissGuided photo with tagged products)
- Organic, personality-driven approach (Greggs responding to Piers Morgan)
Define the term “price”
Price is the amount of money that a customer needs to give up in order to obtain a product or service.
Outline how competitor pricing works.
A price is set based on prices charged by competitor businesses for a similar or identical product. This price is often lower in order to gain sales from rivals.
State an advantage and disadvantage of using competitor pricing.
+ Good in a competitive market
- May be losing out on mark-up (not fully aware of what customers are willing to pay)
Outline how cost-plus pricing works.
A percentage is added to the cost of making a product to give the selling price.
State an advantage and disadvantage of using cost-plus pricing.
+ Easy to calculate
- Doesn’t take into account elasticity or competitors
Outline how price skimming works.
The product is more advanced than competitors and customers want to associate with a particular brand, and therefore the price is set high because customers are willing to pay higher prices to own that product.
State an advantage and disadvantage of using price skimming.
+ Maximises sales revenue that is made per customer.
-
Outline how marginal pricing works.
-
State an advantage and disadvantage of using marginal pricing.
+
-
Outline how contribution pricing works.
-
State an advantage and disadvantage of using contribution pricing.
+
-
Outline how penetration pricing works.
When a business is new to the market, a price is set lower than competitor businesses. Short-term strategy to break customer loyalties from trusted brands.
Outline how physiological pricing works.
Involves making the customer believing that the product/service is cheaper than it really is. E.g. selling a car at £12,995 instead of £13,000. Irrational customers will round down instead of up.
What is the formula for calculating PED, (Price Elasticity of Demand)?
(% change in demand/% change in price) x 100
What does a PED greater than 1 mean in terms of elasticity?
Demand is unit elastic.
E.g. (15% increase in price = 15% decrease in demand)
What does a PED between 0 and 1 mean in terms of elasticity?
Demand is inelastic in relation to price change.
What does a PED of exactly 0 mean in terms of elasticity?
Demand is perfectly inelastic
Calculate the PED:
2% fall in demand
10% rise in price
(-2/10) x 100 = -0.2
THUS INELASTIC
What does income elasticity of demand mean?
Measures the extent to which the quantity of a product demanded is affected by a change in income.
What is the formula for calculating IED (Income Elasticity of Demand)?
(% change in quantity demanded/% change in income) x 100
When using the IED formula, products that are luxuries have an income elasticity greater than __ and products that are necessities have an income elasticity less than __ but more than ___.
1
1
0
For _____ goods, as incomes _____, DEMAND actually FALLS. IED is less than __.
INFERIOR
RISE
0
E.g. Butlins holiday –> Holiday abroad
For negative IEDs, why does demand fall?
Consumers switch to the more luxury competitors
Substitutes are more affordable
What is meant by Cross Price Elasticity of Demand (XED)?
This measures the responsiveness of demand for good X following a change in the price of a related good, (Y)
What is the formula for XED?
% change in demand for good X / % change in price of good Y
For XED, COMPLEMENTS should result in a…
If there is a strong complementary relationship then the XED will be…
NEGATIVE FIGURE (Below 0) Highly negative
For XED, SUBSTITUTES should result in a…
If they are close substitutes then the XED will be…
POSITIVE FIGURE (Above 0) Strongly positive
What are the (dis)advantages of using XED?
+ Useful because it helps marketers decide whether/how much to increase/decrease prices by
- Assumes that you know how demand will be affected. This info will be not always be available/accurate. It will also be difficult to predict new products as there is limited previous data.
What is a product?
A good/service that is exchanged for money. (tangible or intangible)
What is the product life cycle?
A theoretical model which describes the stages a product goes through over time.
What are the 4 stages of the product life cycle?
Introduction
Growth
Maturity
Decline
What is meant by the INTRODUCTION stage of the product life cycle?
Researching, developing and then launching the product
What is meant by the GROWTH stage of the product life cycle?
When sales are increasing at their fastest rate
What is meant by the MATURITY stage of the product life cycle?
Sales are near their highest, but the rate of growth is slowing. Most profitable as costs have been recovered.
What is meant by the DECLINE stage of the product life cycle?
Final stage of the cycle, when sales begin to fall.
INTRODUCTION stage of product life cycle:
Sales: ____
Promotion: _____
Pricing strategy: ______
Initially slow sales
Heavy promotion of an informative style
Penetration pricing
GROWTH stage of product life cycle: Sales: \_\_\_\_ Promotion: \_\_\_\_ Distribution: \_\_\_\_\_\_ Competitors: \_\_\_\_\_\_
Sales are increasing quickly
Continued heavy promotions, persuasive style
More distribution of the products
Competition becomes interested
MATURITY stage of product life cycle: Competitors: \_\_\_\_ Pricing: \_\_\_\_ Product improvements: \_\_\_\_\_\_ Cash flow: \_\_\_\_\_\_
Weaker rivals will leave and some will remain
Competitor pricing may be adopted
Further improvements may be made
Cash flow is likely to be positive
DECLINE stage of product life cycle:
Causes: _____
Pricing: _____
Distribution: _____
Technological advancements, economic conditions, fashion fads
Prices may be drastically reduced to sell off any remaining stock (contribution or cost plus with small %)
Distribution limited than previously
What is an extension strategy for a product?
A strategy that is designed to prolong the life of a product.
Identify 5 ways of prolonging a product’s life cycle
- Advertising (remind current audience)
- Price reduction (more attractive)
- Adding value (e.g. higher spec product)
- Explore new markets (e.g.selling in new areas)
- New packaging (brightening up e.g. Imperial Leather)
What are the pros of the product life cycle?
+ Assists planning and decision making
+ Managers can avoid the pitfalls of the different stages
+ Can spot trends before they occur
What are the cons of the product life cycle?
- May be misleading as fluctuations in sales occur and managers may adopt an inappropriate strategy as a result
