1.2 The Marketing Mix- Marketing

Question 1

Product

Answer 1

The good or service.

Question 2

Price

Answer 2

How much is charged for the good or service.

Question 3

Place

Answer 3

How the product is distributed to its customers.

Question 4

Promotion

Answer 4

How consumers are persuaded to buy.

Question 5

Physical evidence (extended marketing mix)

Answer 5

The presentation of good/service in modern shops. This includes things like having cafes adjacent to the shop. Or having attractive toilet facilities. And well signed posted shop floor.

Question 6

People (extended marketing mix)

Answer 6

Customer service lies at the heart of modern service industries. Customers are likely to be oral to organisations that serve them well. This includes telephone queries but also face-to-face interactions.

Question 7

Process (extended marketing mix)

Answer 7

Associated with customer service are a number of processes involved in making marketing effective in an organisation. E.g. the process for handling customer complaints.

Question 8

Objectives of a pricing policy

Answer 8

The choice of pricing method will depend on the objectives of the organisation which might include; to make as much profit as possible, to make as many sales as possible, to enter new markets, to increase market share, to establish brand image.

Question 9

Pricing strategies- Cost plus pricing

Answer 9

A business decides in advance how much profit it wishes to make on each unit of sale. The average cost of producing a unit of the product is calculated and a percentage ‘mark-up’ is added to arrive at the selling price.
An advantage is that by adding a pre decided percentage to average costs, the business can be sure that it will cover its costs and make some kind of profit.

Question 10

Pricing strategies- competition based

Answer 10

This is when rival companies charge similar prices for similar products, for example petrol, dvds and console games.
An advantage is that it avoids a price war between competitors.

Question 11

Pricing strategies- skimming

Answer 11

This method is used during the introduction stage f a product life cycle, often where the product involves highly technical features. Consumers are less influenced by price and more by a desire to have the latest gadget.
An advantage is. That this approach ensures profits are made at each stage in the products life cycle, although some customers may hold off purchasing until prices come down.

Question 12

Pricing strategies- penetration

Answer 12

A low price is set at introduction to attract customers, thus penetrating an existing market where there are a number of similar products already selling well. The objective. Is to break consumers’ brand loyalty to existing products.
An advantage of penetration is that once brand loyalty is established, prices will be increased in order to cover costs, and make a profit.

Question 13

Pricing strategies - price discrimination

Answer 13

Different groups of customers are different prices for the same product depending on their circumstances and levels of demand.
And advantage is that they can maximise sales during off-peak times.

Question 14

Pricing strategies- destroyer

Answer 14

This is a tactic designed to undermine competitors sales and can be used at any stage of the life cycle of a product. The price of the product is reduced to an artificially low level- usually resulting in short term losses.
An advantage is that once the completion has been removed or reduced, price is then restored to its higher level and then the business can enjoy high profits.

Question 15

Pricing strategies- loss leaders

Answer 15

The price of a few products is reduced to loss making levels to attract the attention of consumers.
An advantage is that once in the shop, customers buy other products, resulting in higher overall profits.

Question 16

Place- Channel of distribution

Answer 16

In marketing terms ‘place’ refers to the way in which in product passes between the manufacturer and consumer.

Question 17

Channels of distribution- wholesalers

Answer 17

Wholesalers take bulk deliveries from the manufacturer, which they break down into smaller units for sale to retailers or direct to consumers.

Question 18

Advantages of using a wholesaler

Answer 18

Manufacturers need not meet the costs of making small deliveries to retailers or individual customers e.g transport costs, sales staff or paperwork.
The wholesaler bears the cost and risk of holding stock.
They can provide a link between retailers and manufacturers.
Wholesalers has an established a network of retailers, allowing access to a broader market in terms of location and type of customer.

Question 19

Disadvantages of using a wholesaler

Answer 19

Profits must be shared with the wholesaler- manufacturers must sell to wholesalers for less than they would sell to retailers or direst to customers.
Manufactures may want more control over how products are displayed to customers.

Question 20

Advantages of using retailers(shops)

Answer 20

The retailer meets the risks and cost of storing the product.
The retailer prepares goods for sale by marking prices on them and displaying them attractively.
They take on much of the immediate after-sales services eg credit facilities, hire-purchase, guarantees, delivery and dealing with returns.

Question 21

Disadvantages of using retailers(shops)

Answer 21

Manufacturers may lose control over the pricing and presentation of the product. The retailer may choose to display the products in a quiet area or next to its cheaper ‘own label’ products.

Question 22

Types of retailers-independent retailers

Answer 22

One or two outlets offering a personal service in a convenient location. Examples include butchers, newsagents and convenience stores. Groups of independent retailers may join together to benefit from bulk purchasing of stock or joint advertising.

Question 23

Types of retailers- multiple chains

Answer 23

A retailing company that operates more than 10 branches. Some are specialist stores with a narrow range of goods e.g river island. Others are variety chains providing a range of goods e.g M&S, Boots.

Question 24

Types of retailers- supermarkets

Answer 24

A store with 2000+ square feet of selling area and at least 3 check-outs. They offer a wide range f food and other non-durable products at low prices, operating on the principle of low profit mark-up and high volume sales.

Question 25

Types of retailers- E-tailer

Answer 25

Many retailers also establish ‘e-tailing’ where goods can be purchased over the internet for home delivery or collection from store.

Question 26

Channels of distribution- mail order (direct selling)

Answer 26

Pictures and descriptions of products are included in a catalogue which is mailed to customers who then browse at their convenience. Orders are places over the telephone or by post. Payments can often be spread over several months.

Question 27

Channels of distribution- direct response advertising (direct selling)

Answer 27

Producers place adverts in newspapers or specialist magazines. Consumers respond directly, at their convenience, by placing orders by post or phone.

Question 28

Channels of distribution- personal selling (direct selling)

Answer 28

Door to door selling or telephone selling involves visiting or telephoning people at home to sell them the product or service e.g. double glazing or insurance. When visiting the home, the seller can demonstrate the product, allowing the customers to ask questions.

Question 29

Channels of distribution- television shopping channels (direct selling)

Answer 29

Manufacturers present products on specialist TV channels and viewers use a free-phone number to order and pay using credit cards.

Question 30

Channels of distribution- direct mailings (direct selling)

Answer 30

Mailings are posted directly to consumers and may be linked to a promotion eg money off vouchers. This can be targeted at particular geographical locations.

Question 31

Channels of distribution- internet selling (direct selling)

Answer 31

Full product details are displayed on a web page eg using text, sounds, animation or video clips to demonstrate. Products are competitively priced. As sales are made on a large scale, the business can benefit from the economies of sale.

Question 32

Advantages of direct selling

Answer 32

Removes costs of maintaining a retail outlet (rents, fixtures, sales staff) or having to discount prices to intermediaries = more profit to the manufacturer.
More direct control over promotional activities and the ability t offer the level of specialist advice that comes from being the manufacturer.
Ability to reach a wider market- including customers who are restricted by their location.

Question 33

Disadvantages of direct selling

Answer 33

The producer has to meet more of the storage, administration and distribution costs, plus the cost of after-sales service e.g. returns and complaint handling.
Sales to people who prefer to view the product at a retail outlet may be lost as some customers prefer the personal service that can be offered within shops.

Question 34

Above the line promotion

Answer 34

Advertising using independent media eg television, newspapers, internet websites, social media. They can reach large audiences more easily.

Question 35

Below the line promotion

Answer 35

Promotion that is directly controlled by the business eg sales promotions, direct mail, trade fairs and depersonalisation selling.

Question 36

Television promotion advantages (above the line)

Answer 36

Gives exposure on a national scales reaching a wide range of socio economic groups. Sound, vision, movement and colour can all be used to demonstrate the product and make it more appealing.

Question 37

Television promotion disadvantages

Answer 37

Expensive in comparison to other media. If no nationwide interest in the product, advertising could be wasteful. The message can be short lived. Many viewers leave the room during advertising breaks.

Question 38

Daily newspapers promotion advantages (above the line)

Answer 38

National exposure. Technical details provided in written form. Market segments can be targeted according to readership. Consumers can cut out and keep adverts for future reference.

Question 39

Daily newspapers promotion disadvantages

Answer 39

People do tend to scrutinise daily newspapers. The advert will be in black and white. It can be expensive to pace an advert in a national daily newspapers.

Question 40

Specialist magazines promotion advantages (above the line)

Answer 40

Specialist leadership, therefore advertising can be targeted.

Question 41

Specialist magazines promotion disadvantages

Answer 41

May miss incidental sales to customers in other segments

Question 42

Direct mail promotion advantages (above the line)

Answer 42

Good for targeted marketing if used with mailing lists. Old for exclusive products and particular interest groups.

Question 43

Direct mail promotion disadvantages

Answer 43

Poor strike rate if target audience is not carefully selected. Many consumers view it as ‘invasion of privacy’

Question 44

Independent radio promotion advantages (above the line)

Answer 44

Less expensive than press and television. May have a captive audience if played in the work place or when driving.

Question 45

Independent radio promotion disadvantages

Answer 45

Relies on verbal message- details may be missed or forgotten. Difficult to target specific segments.

Question 46

Cinema promotion advantages (above the line)

Answer 46

Messages can combine voice, image and colour. Effective for targeting local markets.

Question 47

Cinema promotions disadvantages

Answer 47

Limited market coverage. Expensive to produce quality adverts.

Question 48

Internet advertising promotions advantages (above the line)

Answer 48

Cost effective if advertising on own site. Can target sites according to market segment trying to reach. Adverts are quick to update

Question 49

Internet advertising promotions disadvantages

Answer 49

Computer users may lock ‘pop up’ advertising. Popular sites are very expensive to advertise on.