1.3 Flashcards
What changes are made in the design mix to reflect social trends?
Renewable resources (social trend=concern over resource depletion)
Changes to packaging,compressed or concentrated products, refill packs, recycled materials as a raw material, recyclable packaging (social trend=designing for waste minimisation, re-use and recycling)
And ethical sourcing
What is ethical sourcing?
Using materials, components and services from suppliers that respect the environment and treat their workforce well. E.g fair trade, responsible and organic farming, sustainable sources
What is branding?
Branding is a promotional method that is involves the creation of an identity for the business that distinguishes them from other firms. Can give a competitive advantage
What are the benefits of strong branding?
-adds significant value allowing business to charge higher prices
-builds customer loyalty, repeating purchases
-tend to have inelastic price elasticity of demand
What are the ways to build a brand?
-unique selling point
-advertising
-sponsorship
- use of social media
What is promotion?
Is designed to inform customers and potential ones about the product/service and persuade them to buy it
What is the promotion mix?
Is the combination of promotional activities that a firm uses in order to create consumer awareness and generate sales
What is cost plus pricing?
When a percentage mark-up is added to the cost of producing a good or service to calculate the selling price. Formula:
Unit cost x percentage mark up =price
Pros + cons of cost plus
Pros
Price increase can be justified when costs rise
Each product will be sold at a profit
Cons
Ignores market conditions, competitions pricing and elasticity of demand
Less incentive to control costs
What is price skimming?
Price skimming involves setting a high initial price price for a new product to recoup costs and maximise profit.
Targets early adopters. Once this market has been ‘skimmed off’ the company will lower the price
What is Penetration pricing
Involves setting a low initial price for a new product in order to get a foothold in the market and gain market share. Its aim is to entice people to buy and gain an early customer base. Once product has been launched and built up a customer base the firm may raise its price.
Is suitable for the mass market and used for price elastic product
What is Predatory pricing
Is when prices are set very low for a short period of time to force competitors out of the market. Prices are then put back to where they were or higher. This is used by dominant businesses who can afford to make a loss to force new entrants out of the market
