1.3 Marketing Mix and Strategy Flashcards
What are the three factors of the Design Mix?
- Function
- Cost
- Appearance/Aesthetics
What is Product design?
the process of creating a new product or service
It can be a key tool in positioning a product within the market
What is the importance of the Function of the product?
- A product must be fit for purpose –> durability, offer long warranties to show that they have confidence
- Products should easy and convenient to use –> technical products, designed so maintenance can be carried out
- Ergonomically designed –> safely using product without using unnecessary effort
- if a business can design a product of service with superior functionality could be its USP
- Safe products/services is also key
What is the importance of Aesthetics of a product?
- Products and services should provide a sensory stimulation in addition to performing a function
- size, shape , appearance, smell or taste etc
- sometimes use more expensive material for looks
- someone may buy luxury cars for aesthetics that fuel economy
- Many consumers prefer smaller and more portable products that are more user-friendly
What is the importance of the Cost of a product?
- A well-designed products or service is likely is more likely to economically viable (they can make a profit)
- Therefore designers will need to select materials and processes that minimize costs
- In the airline industry, new routes must be cost-effective if they are to be introduced. Businesses often to reach of compromise between design and cost
How has the design mix changed to reflect social trends?
- People have become increasingly aware about the effect their lifestyles have on the environment
- Businesses have also responded to pressure from the government, media and consumer groups by taking into account environmental issues in the design of their product
SUSTAINABILITY - need to ensure that materials and components used are sustainably sourced
Design for WATSE MINIMISATION OR REUSE –> last longer, smaller and lighter, recyclable products, less packaging and at the end of life minimise what must be thrown away
-Some industries are more difficult to change e.g. fashion changes every season
RECYCLING - designers now looking to ensure recyclability of products and components wherever possible
What is promotion?
-the publicising of a product, service or business to draw attention to it to generate sales and obtain and retain customers
describes the methods of communicating - explicitly or implicitly - information about a product or service to consumers
What is Above the line Promotion?
- involves advertising in the media
- Informative advertising
- Persuasive advertising
- Reassuring adveritisng
What is informative advertising?
- adverts are designed to increase consumer awareness of products, give information about the features of a product
What is persuasive advertising?
- Some advertising is designed to put pressure on consumers to buy a product.
- Persuasive advertisements often try to convince consumers to buy a particular brand rather than that of a competitors
What is Reassuring advertising?
- This advertising is aimed at existing customers
- it is designed to be comforting and suggest to consumer that they were ‘right’ to buy and particular product and that they should continue to do so
What is Below the line promotion?
-advertising that doesnt use media
What are some examples of Below the line promotion?
- Sales promotions –> free gifts, coupons, loyalty cards, competition, BOGOF, money-off deals
- Public relations –> Press releases, press conferences, sponsorship, donations
- Merchandising and packaging –> product layout, display material, stocked shelves
- direct mailing and selling
- Exhibition and trade fairs
What factors are considered when choosing methods of promotions?
- Cost
- Market type (local business in Yellow Pages)
- Product type (Some products are more suitable for TV advertising)
- Stage (Product Life Cycle)
- Competitors promotions
- Legal factors
What is branding?
The process involved in creating a unique name and image for a product in the consumers’ mind, mainly through advertising campaigns with a consistent theme. Branding aims to establish a significant and differentiated presence in the market that attracts and retains loyal customers.
What are some Types of Branding?
Individual brands = single product brands - e.g. Marmite - firms that manufacture these brands make little attempt to push their company name
Brand family = Cadbury - brand name used across range of products - the benefit of using the brand name to encourage sales of each product and helps to get retail distribution when launching new products
Corporate Brand = using the company name as the brand - e.g. Nestle
- Manufacturer brands –> brands created by the producer of goods, or services
- Own-label distributor or private labels –> products that manufactured for wholesalers or retailers by other business
- Generic brands –> products that only contain the name of the product category rather than the company or product e.g. aspirin, carrots
What are the benefits of strong branding?
- Added Value
- Ability to charge a premium price
- Reduced price elasticity of demand
What are different ways to build a brand?
- Exploit USP - a particular feature of a product or service that no rival provides
- Advertising = reinforce the messages the company wants to send about its brand
- Sponsorship = sponsoring and event / sports team = could be a way of brand building
- Using social media –> building relationships with customers
How has branding and promotion changed to reflect social trends?
- viral marketing - faster and wider way to spread good (and bad) recommendations about a product (quicker than word of mouth)
- social media - place to display promotional messages - Twitter, Facebook, snapchat
- emotional branding - consumers can follow certain brands for daily updates on their brand of choice
What are types of pricing strategy? for new and for existing ?
For new products
- Price skimming - launch a new product at a high price while the product is unique
- Penetration pricing - launch a new product at a low price to entice customers to try it
for existing products
- Cost plus
- Predatory pricing
- Competitive pricing
- Psychological pricing
What is Cost plus?
Tell me a Benefit, Drawback and when this strategy is appropriate ?
Deciding price by adding a desired % onto total costs per unit
- adding a percentage (the mark-up) to the cost of producing a product to get the price
- Mark-up–> the percentage added to unit cost that makes profit for a business when setting the price
Benefit should guarantee a profit is made on each unit sold
Drawback Ignoring the market may mean an unrealistic price is generated
Appropriate when the firm is a market leader with little need to worry about competition
What is Price Skimming?
- technology (usually)
- setting a high price initially and then lowering it later
What is Penetration Pricing?
-setting a low price when launching a new product in order to get establishing in the market
What is Predatory pricing?
Tell me a Benefit, Drawback and when this strategy is appropriate ?
- setting a low price forcing rivals out of business (can be illegal)
benefit once a rival has been forced to close, prices can be pushed up, increasing margins
Drawback it can be proven to be specifically designed only to drive rivals out of pricing (PP is illegal)
Appropriate When a firm is clearly more financially powerful than smaller rivals
What is Competitive pricing?
Tell me a Benefit, Drawback and when this strategy is appropriate ?
- pricing strategies based on the prices changed by rivals
benefit Should ensure that price will not put customers off buying the product
Drawback Firms that use CPSA have little control over the price they charge and thus the revenue they generate
Appropriate when a company is trying to take on more powerful rivals
What is Psychological pricing?
Tell me a Benefit, Drawback and when this strategy is appropriate ?
- setting a price slightly below a round figure - £9.99 vs £10
benefit can help nudge customers into making a purchase by helping them to believe they are not quite spending £10
Drawback it may have little effect on many planned purchases and may in fact annoy consumers
Appropriate when selling impulse purchases or little treats
What are the factors affecting Pricing Strategies?
- amount of USP/Differentiation –> highly differentiated products will have more control over pricing potentially allowing them to use cost-plus pricing
- PED –> Inelastic demand means that firms can adjust prices however they wish without impacting demand. Firms selling Price ELASTIC products will always face pressure to reduce prices to boost demand which could force them into a competitive pricing strategy
- Amount of competition - the higher the level of competition the less scope for the firm to move away from a purely competitive strategy
- Strength of brand - strong brands differentiate products reducing their PED
Stage in the product life cycle - key decsiion to be made at introduction of a a new product - penetration or price skimming
What changes in pricing are to reflect social trends?
Online Sales
- Dynamic pricing - used to maximise revenue, but can change e.g. last minute offers
- Auction sites
- Personalized pricing
- Subscription pricing
Price Comparison Sites -encourage firms to price competitively so their products show up as best value on these sites
What is Distribution?
The movement of goods and services from the source through a distribution channel, right up to the final customer, consumer, or user, and the movement of payment in the opposite direction, right up to the original producer or supplier.
What are Distribution channels?
The route a product takes from producer to consumer = DISTRIBUTION CHANNEL
A distribution channel is a chain of businesses or intermediaries through which a good or service passes until it reaches the end consumer. It can include wholesalers, retailers, distributors and even the internet itself.
What are some examples of Distribution channels?
- Consumers
- retailer–> consumers
- Wholesalers –> retailers–> consumers
- agents/brokers –> wholesaler–> retailers –> consumers
What are intermediaries?
the businesses between the producer and the consumer in a distribution channel such as retailers
who acts as a mediator on a link between parties (customers/consumers) to a business deal, investment decision or negotiation
- links between producers and consumers
What is Direct Selling?
-Selling directly to consumers
E.g. buying a Dell PC on line
Dell are manufacturer and you go direct t their website to buy a Dell PC - no retailer
What are benefits of direct selling?
- main benefits is saves intermediary costs
- you can reach those who dont want to go to shops, but people dont like a lot of directing selling
What are some examples of direct selling?
- The internet
- Direct mailing - a lot of financial service do
- Door-to-door selling e.g. energy suppliers
- Mail order catalogues e.g. Next
- Direct response adverts - adverts in newspapers people respond to e.g. plumber
- Shopping parties e.g. Avon
- Telephone shopping - legal service e.g. PPI
What are Retailers?
- retailers buy goods and sell to customers
- they buy in bulk from manufacturers/ wholesalers and sell in small amounts this is known as bulk breaking
- They sell in convenient locations for customers, where there is parking and they try to add value
What are examples of some Retailers?
- Independents
- Super markets
- Online stores
- Kiosk/street vendor
- Department stores
- Multiples
- Superstores
- Market traders
What are Wholesalers?
-a business that buys goods from manufacturers and sells them in smaller quantities to retailers
Wholesalers add a mark up when they sell to retail store
What are Agents or Brokers?
an intermediary that brings together buyers and sellers
What factors influence the chose of distribution channels?
the nature of the product:
- most services are sold directly to the customer e.g. hairdresser
- fast moving consumer goods cannot be sold be sold from a manufacturer e.g. chocolate
- high quality products e.g. perfume chose their outlets to maintain their image
- product which need explanation or demonstration sold by specialist
- Cost –> often go with the cheapest and most direct route
- The market, producers selling to mass markets will likely use intermediaries, where builders will call the customer directly
- Control, some businesses want complete control over the whole process
