1.3 key terms

Question 1

What is Above-the-line promotion?

Answer 1

Promotional methods that can’t be controlled by the business selling the product/service.
E.g. TV, press advertising, billboards, radio service
It focuses on direct communication with mass market.

Question 2

What is Below-the-line promotion?

Answer 2

Promotional methods that can be controlled by the business.
E.g. social media, emails, pamphlets, sponsorships, press conferences
It focuses on advertising to specific customers and adverts are created with demographics in mind.

Question 3

Factors influencing price:

Answer 3

• competitors
• demand
• consumer incomes, economic climate
• USP, celebrity endorsement
• Quality of product
• Branding
• Manufacturing costs
• Product Life Cycle

Question 4

What is Cost - Plus pricing?

Answer 4

Costs to produce products are worked out and then money is added on top. (Unit cost + %)

Question 5

What is competitive pricing?

Answer 5

Where a business sets prices based on the nearest competitor. This is used in very competitive markets and helps avoid price wars. This means that customers will have to judge a product/service on non-price factors.

Question 6

What is skimming pricing?

Answer 6

When a business sets an initially high price for a new product when it is in high demand. The price will fall over time.

Question 7

What is penetration pricing?

Answer 7

When a business sets their prices low to penetrate the market to encourage sales. Then if a product grows in demand, the price will increase.

Question 8

What is predatory pricing?

Answer 8

Where the business sets a low price in order to force competitors out of the market. This usually occurs in oligopolies or monopolies.

Question 9

What is an oligopoly?

Answer 9

A market with 5 main businesses with large market shares e.g. the supermarket industry

Question 10

What is a monopoly?

Answer 10

A market with one main business with the largest market share

Question 11

What is psychological pricing?

Answer 11

When the business bases the price below the next whole number to trick consumers into thinking the price is lower.
E.g. a product may be priced at £1.99 instead of £2.00

Question 12

What is direct selling?

Answer 12

selling products online through e-commerce

Question 13

What is a wholesaler?

Answer 13

Wholesalers take bulk quantities from manufacturers and distribute them across a network of retailers.
Example: Costco

Question 14

What is an Agent/Broker?

Answer 14

Agents and Brokers link buyers and sellers together and operate in industries such as insurance.

Question 15

What is Product Portfolio Analysis? (PPA)

Answer 15

It is used to track and analyse the development of multiple products over time taking into account a number of factors such as growth, market conditions and sales.

Question 16

What happens in the Introduction stage in the product life cycle?

Answer 16

Product is being released to the market. During this stage, marketing and promotion are high as the company tries to make people aware of the product. Prices are low to initiate sales.

Question 17

What happens in the Growth stage of the product life cycle?

Answer 17

Consumers are taking to the product and demand for it is increasing. Competitors become aware of it. Marketing is aimed at increasing its market share.

Question 18

What happens in the Maturity stage of the product life cycle?

Answer 18

Sales start to decrease or stop. Pricing becomes competitive and often decreases. There is a focus on retention and repeat purchase.

Question 19

What happens in the Decline stage of the product life cycle?

Answer 19

Product sales drop significantly or stop altogether, the product loses more and more of the market share. Business may discontinue product or bring in a replacement product.

Question 20

What is an extension strategy?

Answer 20

A plan to extend the maturity stage of the product life cycle.
Examples of extension strategies:
- lower prices 
- sell products in a different country 
- use different advertising techniques

Question 21

Categories in the Boston Matrix: Stars

Answer 21

High growth products with high market share. Often needs heavy investment to sustain growth

Question 22

Categories in the Boston Matrix: Cash Cows

Answer 22

Low growth products with a high market share. These are mature, successful products with little need for investment.

Question 23

Categories in the Boston Matrix: Question Marks

Answer 23

Products with low market share operating in high growth markets suggesting the product may need substantial investment to grow market share.

Question 24

Categories in the Boston Matrix: Dogs

Answer 24

Products that have a low market share in a low growth market. Dogs are usually sold or closed.

Question 25

B2B marketing

Business to Business

Answer 25

Business sells products to other businesses who resell them and usually use the cost-plus method.
Examples: suppliers, wholesalers

Question 26

B2C marketing

Business to customer

Answer 26

Product meets customer needs and is promoted through social media, TV, adverts etc. They use pricing strategies such as penetration, skimming, psychological etc

Question 27

What is a Fad?

Answer 27

A trend that captured a lot of attention and hype for a short period of time. This happens when there is a lot of repeat purchase of a product and usually happens around the holiday season.
Examples of Fads: fidget spinner, loom bands, rubik’s cube