1.2 The Market and 1.3 Marketing Mix and Strategy Flashcards
what is an equilibrium price?
when supply and demand meet and are equal
what is a supply curve?
A line which is drawn on a graph that shows how much of a good which sellers are willing to supply at different prices
how would an increase in demand be shown on a supply and demand curve?
a shift to the right
how would a decrease in demand be shown on a supply and demand curve?
a shift to the left
if supply increases how will this be shown on a supply and demand curve?
shift to the right
if supply decreases how will this be shown on a supply and demand curve?
a shift to the left
what is disequilibrium?
when supply and demand are equal
what is excess demand
The position where demand is greater than supply at a given price and there are shortages in the market
what is excess supply
The position where supply is greater than demand at a given price and there are unsold goods in the market
what is price elastic demand?
a change in price results in a large change in demand
what is price inelastic demand?
a change in price results in a smaller change in demand
price elasticity of demand
The responsiveness of demand to a change in price
how do you calculate elasticity of demand?
percentage change in quantity demanded / percentage change in price
interpretation of numerical values of price elasticity of demand
less than one = price inelastic
greater than one = price elastic
factors influencing price elasticity of demand
- competition for the same product : if they increase price, consumers will go to cheaper alternatives
- branding: branding will allow them to charge a higher price
what is income elastic demand
The percentage change in demand for a product is proportionately greater than the percentage change in income
what is income elasticity of demand
the responsiveness of demand to a change in income
calculation for income elasticity of demand
percentage change in quantity demanded/percentage change in income
interpretations of the numerical values of income elasticity of demand
greater than one = income elastic
less than one = income inelastic
factors influencing income elasticity of demand
necessities and luxuries:
if a good is a necessity, these goods are income inelastic
if a good is a luxury, these goods are income elastic
what is the design mix made up of?
function (what it does)
aesthetic (how it looks)
cost (price)
how would waste minimisation affect the design mix?
function: make it more durable and sustainable
aesthetic: make it smaller and lighter to save the amount of material used in production
cost: more expensive to switch to re usable alternatives
3 benefits of adapting product designs to changes in social trends
- by reducing waste, they are using less resources, resulting in lower costs and higher profits
- if designs reflect social trends, consumers will be more attracted to buy the products
- they can charge a premium price for being ‘economically friendly’
what is above the line promotion
adverts using the media
what is advertising ?
Communication between a business and its customers where images are placed in the media to encourage the purchase of products
what is advertising ?
Communication between a business and its customers where images are placed in the media to encourage the purchase of products
what is informative advertising?
adverts used to raise awareness of the business’ products
what is persuasive advertising?
advertising putting pressure on consumers to buy their product rather than a competitor
what is reassuring advertising?
aimed at existing customers, comforts them, telling them they were right to purchase from that brand
what is below the line promotion?
promotion that doesn’t involve any form of advertising
what are sales promotions?
incentives used to encourage people to buy products, things like loyalty cards, buy one get one free or discounts
what is public relations?
an organisation that helps improves the image of a business, for example, sponsorship
what are manufacturer brands?
brands created by the producers of goods and services, like Kellog’s corn flakes
what are own label brands?
brands manufactured for wholesalers/ retailers by other businesses, for example, Tesco own brand stuff
what are generic brands?
products that only contain the name of the product category rather than the company or product name e.g aluminium foil
state 3 benefits of strong branding
added value: businesses will have a competitive edge
ability to charge premium prices
reduced price inelasticity of demand
state 3 benefits of strong branding
added value: businesses will have a competitive edge
ability to charge premium prices
reduced price inelasticity of demand
how can you build a brand
exploit a USP
advertising
through social media
what is viral marketing?
a strategy that would encourage people to pass on messages to others about a product or a business, it would be something interesting or eye catching
what is emotional branding?
using the emotions of a customer to build a brand, like how apple users stay loyal to the company and consistently buy apple products
what is a pricing strategy?
pricing methods used when deciding what to charge for its products
what is cost plus pricing?
adding a percentage (mark up) to the unit costs
give 2 limitations of cost plus pricing
- ignores market conditions
- difficult to identify all the costs associated with production of a particular product
what is price skimming?
when the business is launched into the market with a high price for a limited time period, this would generate high revenue before competitors arrive
what is penetration pricing?
entering the market charging a low price, this will encourage customers to like the product at a low price, meaning they will continue to purchase even when the price rises
what is predatory pricing?
aims to eliminate competitors from the market, involved charging a very low price for a period of time until one or more rivals leave the market
what is competitive pricing?
charging the same price as competitors, this is a safer pricing strategy
what is psychological pricing?
setting a price slightly below the round number to make the product appear cheaper, for example, £9.99 instead of £10
how does differentiation/USP determine price?
the business can charge a higher price if they have a USP
how does price elasticity determine price?
if the product is inelastic, they can increase the price and demand won’t change
how does the amount of competition determine price?
little competition in the market will lead to higher prices, but more competition will lead to lower prices in the market
how does strength of the brand determine price?
a strong brand will generate a higher price as they charge premium prices
what is a mark up?
The percentage added to unit cost that makes a profit for a business when setting the price
what is dynamic pricing?
when prices change depending on the situation, for example, in the travel industry, prices of flights go up and down depending on the time of year
what is subscription pricing?
charging customers a regular monthly fee
what are price comparison sites?
sites that compare prices of different businesses
what are distribution channels?
the route taken by the product from the producer to the consumer
what are the different distribution channels for consumer goods?
manufacturer -> consumer
manufacturer -> retailer -> consumer
manufacturer -> wholesaler -> retailer -> consumer
manufacturer -> agent/broker -> wholesaler -> retailer -> consumer
what is direct selling?
when producers sell their products directly to consumers, for example, hairdressers or restaurants
how can direct selling be done?
the internet, direct mail, door to door selling
what is retailing?
when a business buys goods from manufacturers and wholesalers and sells them in small quantities to consumers
what is wholesaling?
they buy from manufacturers and sell to retailers in bulk
what are agent/brokers?
an intermediary that brings buyers and sellers together, like travel agents to book holidays
what is online distribution? and how is it split up into 2 sections?
when good and services are sold via the internet, split up into B2B and B2C
what are 3 benefits to the consumer of online distribution?
- can shop 24/7
- more choice
- can shop from anywhere
3 benefits to the business of online distribution
- low start up costs
- more choice of where to locate operations
- they can serve customers 24/7
2 drawbacks to the business of online distribution
- high competition as it is a cheap method of distribution
- lack of human contact, can’t offer customer service
give 2 examples of products that have changed to a service
- CDs are now online streaming
- DVDs are now film channels
what is the product life cycle?
it is the stages a product goes through when being introduced into the market, the process is: development, introduction, growth, maturity, decline
what is introduction stage of the product life cycle?
launching of the product
what is the growth stage of the product life cycle?
once customers are aware of the product and sales begin to grow rapidly
what is the maturity stage of the product life cycle?
when sales have peaked, they will become stable and competitors will have entered the market
what is the decline phase of the product life cycle?
when sales decline, usually due to consumer tastes or new technology
what is an extension strategy? how can it be done?
ways to prolong a products life before it enter the decline stage
give 2 ways a product can be extended
product adjustments: repackaging or updating the product
promotion: finding a new use for the product to increase sales, or finding a new marker for the product
what is the boston matrix?
A matrix model that analyses a product portfolio according to growth rate of the market and the relative market share of products within the market
what is a star? (boston matrix)
a product with high market growth and high market share, it is highly profitable
what is a cash cow? (boston matrix)
high market share low market growth, meaning it generates profit, but there is little chance of growth in the future
what is a question mark? (boston matrix)
low market share high market growth, investment is needed to improve growth
what is a dog? (boston matrix)
low market share low market growth, not profitable
what is a product portfolio?
the collection of products a business is currently marketing
what is a product line?
products categorised into groups, e.g dairy products
what is a marketing strategy?
a set of plans that aim to achieve a market objective
what are the marketing strategies for a mass market? (4 Ps)
product: differentiate/USP their products as there are many substitutes
price: they competitively price within the market, meaning many prices are the same and very low
promotion: they invest heavily in marketing and advertising to stand out in order to gain a competitive edge
place: often use multiple channels to distribute their goods
what are the marketing strategies for a niche market? (4 Ps)
product: the products are very different to each other in a niche market as there are very little competitors
price: often charge premium prices as there is less competition
promotion: advertising is more targeted and they often use less media as they have a smaller target market
place: they are often more selective, and distribute their products privately
how would a B2B strategise their marketing?
outbound and inbound marketing strategies, an hybrid strategies
what is an outbound marketing strategy? what is a limitation to this?
directing marketing material at potential customers, this can be through email or sponsorship, but these can be easily ignored
what is an inbound marketing strategy? what is a limitation to this?
attracting potential customers to websites when they are looking for solutions to problems, like blogging or social media, however, it is hard to keep up to date with trends
what are hybrid marketing strategies?
a combination of inbound and outbound methods
