1.3 Flashcards
What is the design mix?
- Aesthetics,style and appearance= increases desirability of product=brand loyalty
- Function - does it meet needs and wants or solve problems
- Cost (economic manufacture)= affects price that good is later charged at
> Improving or trying to balance mix= effect other element eg cutting costs decreases function/aesthetics
Changes in the elements of the design mix to reflect social trends
- concern over resource depletion: designing for waste minimisation, re-use and recycling
> Businesses are now designing products to minimise waste and use fewer raw materials.
>Companies focus on reusability and recycling - ethical sourcing
> Ethical sourcing means that products are produced without exploitation of workers or environmental damage
>Ethical sourcing includes using sustainable raw materials
> companies may change their design mix to incorporate sustainable materials and production processes
Benefits of adapting design for changes in social trends
- Decreased waste= decreased cost
- Reflecting social trend = increased sales as product is more appealing eg reusable
- Social trend = USP so adapting design mix= differentiates good
- Increased reputation as firm appears more socially responsible eg recycling
What is promotion
Promotion is any communication that attempts to influence people to buy products/services to increase brand awareness
Advertising definition and adv and dis
Promotion through paid channels such as television, radio, print media
Adv
-reaches late audiences to increase brand awareness
Dis
-expensive
- many ignore
-difficult to measure effectiveness
Types of promotion
- Above the line
- Below the line
Above the line definition and examples and adv and dis
Above the line - any forms of promotion through media
- Radio
- TV
- Posters/billboards
- Direct marketing (emails) communicating directly through email,text message, social media or post
Adv of direct
-target specific audiences
Dis of direct
-expensive
What is below the line and examples and adv and dis
Below the line - any promotion not media
- Sales promotion - Short-term incentives to boost sales eg discounts
ADV of sales p
-quickly boosts sales
-helps clear out stock or promote new product
Dis of sales p
-can decrease sales of full priced products
-can attract deal seeking customers who may not be loyal to brand
-expensive
- Public relationships, Building relationships with the public and managing reputation -increases loyalty and sales but time consuming and difficult to measure direct impact of PR on profits
- Sponsorship - An agreement where a company provides financial or other support to an event
Adv
-can build brand awareness
Dis
-expensive
-may not directly drive sales
-personal selling-when a sales person interacts with potential customers one to one
Adv
-allows businesses to build relationships with customers and understand their specific needs
Dis
-expensive due to training sales staff
- Merchandise
Influences in promotion
- Target audience- if not set at right audience= ineffective
- promotion budget
- type of message
- technology
Brand definition
A brand is a name/design or logo that distinguishes one firm from another and represents the characteristics and personality of the business
Types of brands and adv and dis
- Manufacturer brands- brand created by the producer of goods/services eg cornflakes
Adv
-Creates strong brand recognition and reputation for the company= can increase customer loyalty and trust
-It helps build economies of scale by promoting multiple products under one brand=
decreased cost
Dis
-If a company’s reputation is damaged by a product, it can have a negative impact on all the products offered under that brand
- Own-label brands- brand associated with a retailer eg Tesco
Adv
-It can help retailers differentiate themselves from their competitors by offering unique products
-It allows retailers to offer products at a lower cost than branded products, which can help to increase sales and profitability
-It can help to build customer loyalty by offering exclusive products that are not available elsewhere
Dis
-Own brand products may have a lower perceived quality than branded products which can affect customer loyalty and trust
- Generic brand- products that dont have a brand association and use the name of a good eg carrots
Ways to build a brand
- USP and differentiation
- Sponsorships
- Advertising
- Social media
Benefits of strong brand
- Added value by creating a perception of quality, reliability, and trust
- Ability to Charge Premium Prices – Consumers are willing to pay more for trusted brands
- Reduced Price Elasticity of Demand – Brand loyalty makes customers less sensitive to price changes.
Changes in Branding and Promotion to Reflect Social Trends
-Viral Marketing-Creating shareable content that spreads quickly
-Social Media- Using digital platforms to interact with consumers, run campaigns, and respond to feedback in real time.
-Emotional Branding- Connecting with consumers on a personal level
Types of pricing strategies/ price competition
- Cost plus
- Penetration
- Competitive
- Price skimming
- phsychological
Cost plus producing definition and ADV and DIS
- Cost plus- The business calculates the cost of production and then adds a markup to determine the final price
ADV of cost plus pricing
-Helps ensure costs are covered and guarantees a profit
-simple method to decide prices
DIS of cost plus pricing
-takes no account if demand for product exists
-takes no account of rivals prices
Price skimming definition and ADV and DIS
- Price skimming- set high at first for new products as demand would be high and cut down as demand falls
ADV of price skimming
-high profits
-premium brand image
-helps businesses recover its development and marketing costs quickly
DIS of price skimming
-quality of new product must justify the high price to be effective
Price penetration ADV and DIS and define
- Price penetration- Low initial price to attract customers and gain market share to high
ADV of penetration pricing
-stimulates demand
- helps build brand loyalty
-grow market share
-attract price sensitive customers
DIS of penetration pricing
-lower profits
-price war if rivals lower price too
- difficult to raise prices later without losing customers
Competitive pricing adv and dis and define
- Competitive pricing- the business sets its prices based on its competitors’ prices
> This is effective when a business is in a highly competitive market and wants to maintain its market share
ADV of competitive pricing
-remain competitive in market
- increase market share
DIS of comp pricing
-price wars
- low profits
Phsycological pricing and adv and dis
- Psychological- firms price to the nearest whole number eg £9.99 instead of £10 to make them seem cheaper
Adv of physcological pricing
can increase sales without lowering actual price much.
Dis of physiological pricing
-doesn’t guarantee profit and not long term
Factors Determining the Most Appropriate Pricing strategy
- USP/differentiation
- PED
-Level of comp
-Brand strength - Stage in product life cycle
- Cost/ profit objective
Factors Determining the Most Appropriate Pricing Strategy explained
-Number of USPs/Differentiation
>Unique products (high differentiation) → Price Skimming
>Generic products (low differentiation) → Competitive Pricing
-Price Elasticity of Demand (PED)
>If demand is elastic (customers sensitive to price changes) → Penetration Pricing
>If demand is inelastic (strong brand loyalty) → Price Skimming or Premium Pricing
-Level of Competition
>High competition → Competitive Pricing
>Little competition → Price Skimming
-Brand Strength
>Strong brand (Apple, Rolex) → Premium or Price Skimming
>Weaker brand → Penetration or Competitive Pricing
-Stage in PLC
> In the introduction stage, prices may be set lower to attract customers and build market share
In the growth stage, prices can increase as demand for the product increases
In the maturity stage, prices may need to be lowered again
-cost/profit
> Prices must cover the cost of production and provide a reasonable profit margin
Changes in Pricing to Reflect Social Trends
-online sales
-price comparison sites eg trivago = allows customers to choose best price
-subsription pricing- monthly fee to use good
-auction sites eg ebay where customers can bid and get a low price
-personalised pricing- tech allows firms to keep data base = collect info on customers = target them
Define distribution , agent/broker, retailer, wholesaler, direct selling
Distribution- how a product gets to the customer
Agent/broker- link buyers and sellers together- have knowledge and give both parties advice
Retailers- provide customers with goods and services
Wholesalers- bulk quantities from manufacturers that distribute to network of retailers
Direct selling= online sales/door to door
What are the channels of distribution
-Direct Distribution= Producer → Consumer
-One-Intermediary Channel =Producer → Retailer → Consumer
-Two-Intermediary Channel =Producer → Wholesaler → Retailer → Consumer
-Multi-Channel Distribution- Businesses sell through multiple channels (e.g., in-store, online, third-party retailers).
Eg Producer → Agent → Wholesaler → Retailer → Customer
> Each stage in distribution network = adds cost = increased price of good
Influences of distribution
- scope/scale- goods sold overseas= may require extensive network of channels of distribution = expensive - local firms may only require retail outlets
- nature of product= not all goods can use same channel eg cannot ship plants as its hard and costly
- control over promotion and price- firm may use own website or retail chain to control factors like price
Benefits of online distribution to consumers
- Lower price due to low cost
- shop 24/7
- compare brand easier
- wider choice than retail.ers
- can review products= rational decisions
- can be more targeted or personalsed due to business tracking
Benefits of online distribution to businesses
- No need to have stores= low cost = no rent so no fixed cost = lower breakeven level = higher MOS = decreased risk
- low start up costs
- take orders 24/7
- wider market to offer goods
- gather info on consumer habits faster
Benefits of multi channel distribution
- open 24/7 and many ways to purchase product = convenience
-different prices for different channels= can cover increased FC from store
-increased brand awareness as different segments
Drawbacks of multi Chanel
- higher costs
- harder to ensure customer service will be equal on all channels
Product life cycle diagram
Product life cycle definition and characteristics of each stage
The Product Life Cycle (PLC) describes the stages a product goes through from introduction to decline.
Development
-Product is being developed and tested.
-High costs, low or no sales.
-Focus on R&D and market research.
Introduction
-Product is launched to the market.
-Sales growth is slow, and costs are high due to promotion and distribution.
-Heavy promotion is necessary to create awareness.
Growth
-Sales increase rapidly as the product gains acceptance.
-Profitability rises due to economies of scale or popularity
-Competition may enter the market.
Focus on gaining market share.
Maturity
- highest revenue
- low promotion
-Focus shifts to brand loyalty and differentiation to keep customers
Decline
-Sales decline as customer needs shift or newer products emerge.
-Costs are high, and profits are low.
-The business may decrease price or discontinue or replace the product
Product and promotion extension strategies
Product Extension Strategies:-
-Product Modifications
-Repackaging
Promotion Extension Strategies:
-Increased Advertising
-Sales Promotions eg discounts
BOSTON MATRIX DIAGRAM
Star products have a high market share in a high-growth market
Cash cows are products with a high market share in a mature market
Problem child or question mark products have a low market share in a high-growth market
Dog products have a low market share in a low-growth market
Adv of product portfolio and Boston matrix
- Useful if firm has many products
- Useful for making decisions on where to allocate resources
- Useful for planning future sales and plan for distribution
Dis of product life cycle and Boston matrix
- No solutions for problems
- simple and doesnt consider external factors= market may not follow pattern because of these external factors= inaccurate
How can niche markets adapt to marketing mix
Product- high differentiation
Price- premium price due to unique value and needs met
Promotion- target promotion using specialist and direct media
Place- sell direct or use small number of channels
How can mass markets adapt to marketing mix
Product- generic goods= needs to differentiate somehow
Price- competitive price and cost management
Promotion- heavy advertising and promotion to build brand image
Place- multiple channels used
Business-to-business B2B) Marketing-
company sells its goods to another for them to sell it further
> small and focused market, less brand image required
Business-to-Consumer (B2C) Marketing
Selling directly to consumers
> larger market, branding important
How do firms build customer loyalty
- Customer service
- loyalty cards
- saving schemes
- communication- keep them informed about new product developments
Predatory pricing
- Predatory pricing - the business sets prices so low that it drives its competitors out of the market, its illegal
Adv
-high sales quantity leads to
economies of scale and lowers the
firm’s marginal cost
- Increases demand and allows for
repeat purchases
Dis
- Reduces choice
- Customers often expect
permanently low prices so
customer loyalty is low
- Customers may perceive the brand
as cheap and poor quality
4 P’s
Promotion eg advertising or sale promotion
Product eg branding,packaging
Place eg channels transport location
Price eg price strategy,pricing
