1.3 - Marketing mix and strategy Flashcards
What factors is the traditional design mix composed of?
- function - the way a product works
- aesthetics - how the product appeals to the customer in terms of how it looks, feels etc
- economic manufacture - the capability of a product to be produced at a cost that allows profits to be made
How may the design mix change to reflect social trends?
- sustainability
- waste minimisation
- ethical sourcing
What is sustainability?
a businesses strategy to ensure natural resources are not being used quicker than their rate of replenishment.
How can a business be sustainable?
- minimise waste in production
- enable recycling or reuse e.g. changes to packaging, recycled materials as raw materials.
What are some environmental issues that a business may have to consider during product design?
- use of raw materials, water and other inputs
- energy use and its impact on climate change
- waste and pollution produced
- impact on employees and local, wider and international community
What are some examples of ethical sourcing?
- fair trade - trading partnership that contributes to sustainable trading development
- ethical supply chain - how products are made is a key issue for recent customers
- organic products
What is the promotional mix?
a combination of promotional activities that a business uses to generate sales.
What is above-the-line promotion?
indirect promoting, through the mass media, in order to reach a wide audience. e.g. tv , prints, ambient, digital and audio
What is informative advertising?
adverts designed to increase customer awareness for products and may give clear information about features of a product.
What is persuasive advertising?
adverts designed to put pressure on consumers, often to buy their product rather than competitors
What is reassuring advertising?
adverts aimed at existing customers, designed to be comforting and suggest that customers were ‘right’ to buy from that firm and that they should continue to do so
What are some advantages of advertising?
- generates wide coverage
- repetition means the message can be communicated effectively
- effective for building brand awareness and loyalty
What are the disadvantages of advertising?
- often expensive, especially in mass markets
- sometimes only one way communication - no feedback
- doesn’t guarantee sales as it may be ineffective
What is below-the-line promotion?
refers to any form of promotion that does not involve advertising in the mass media. It is usually more direct. e.g. sales promotion, personal selling, public relations and direct marketing.
What is promotion?
a component of the marketing mix that informs and persuades customers about the product as a way to gain awareness, interest, desire and action (AIDA)
What is sales promotion?
short-term incentives designed to stimulate sales. e.g. coupons, discounts, competitions, incentives, free samples and BOGOF
What are the benefits and drawbacks of sales promotion?
- achieves quick boost to sales
- encourages customers to trial a product or switch brands
BUT - sales effect may only be short-term
- may damage brand image
What is personal selling?
promotion on a person-to-person basis, using two-way communication. E.g. f2f selling, video/ web conferencing
What are some benefits of personal selling?
- high customer attention
- message is customised
- persuasive impact
- generates customer loyalty
What are some disadvantages of personal selling?
- high cost
- labour intensive
- can only reach a limited number of customers
What are public relations?
activities that create goodwill toward customers and aims to achieve favourable publicity. E.g. press release, exhibitions, promotional stunts and sponsorships
What are some benefits of public relations?
- connects with the target audience
- attracts investors
- builds brand image
What are some drawbacks of public relations?
- difficult to measure success
- no guaranteed results
What is direct marketing?
sending of promotional material to customers via email, social media or phone
What are the benefits of direct marketing?
- can personalise the marketing message
- easy to test different marketing messages
- cost effective if customer database is well managed.
What are the drawbacks of direct marketing?
- response rates vary enormously
- negative image of junk mail and email spam
- databases expensive to maintain and keep accurate
What is branding?
a way that a business distinguishes itself from competing business e.g. via a name, sign, symbol or logo
What are manufacturer brands?
brands created by the producers of goods or services and the good or service bear the producers name. e.g. Kellogg’s. the manufacturer will decide on all 4 P’s
What are own label brands?
products which are manufactured for wholesalers or retailers by other businesses but wholesalers sell the products under their own name - reduces costs
What are generic brands?
products that only contain the name of the actual product category or company name. e.g. foil, carrots
What are coporate brands?
When a business is associated with giving unique recognisable characteristics to a product or corporate image e.g. Toblerone’s unique shape
What is brand stretching?
where a brand is used for a diverse range of products, not necessarily connected. e.g. virgin
What are the benefits of effective branding?
- adds significant value
- able to charge higher prices and price is inelastic
- builds customer loyalty
What are some ways to build a brand?
- USP
- Advertising
- Sponsorship
- Use of social media
What are changes in promotion and branding to reflect social trends?
- Viral marketing - customers may use social media to promote a business
- Social media - allows businesses to communicate with potential customers
- Emotional branding - building a brand that will directly tap into the customers feelings
What is price?
The money charged for a product or service
What is cost plus pricing?
the cost to produce the products are worked out then money is added on top either by:
- adding a profit margin
- add a % mark-up on top of production costs
What are the benefits of cost plus pricing?
- easy to calculate
- price increases are justified when costs increase
- each product is sold at a profit
What is competitive pricing?
when products or services are priced in line with competitors.
What is a price leader?
Firms that dominate the market with an existing product set the price and other firms in the market follow suit.
What is a price taker?
Smaller firms in the market who set their prices based on the market price.
What is price skimming/ creaming pricing?
A product is priced high to begin with as it has a desirability factor that will mean customers will want it when it is new, and then the price is dropped afterwards
What are the advantages of price skimming?
- help establish the product as a must have item
- early adopters are willing to pay high prices
- high prices = covers investment costs
What are the disadvantages of price skimming?
- customers may feel they are being ripped off
- customers who bought the product at a high price may be annoyed when price is decreased
What is price penetration?
setting prices really low on a product to encourage sales and persuade customers to buy it and then gradually increased.
What are the advantages of price penetration?
- low price = may attract high sales vol making it harder for competitors
- high sales vol = cut in production per unit as producer can buy in bulk and get purchasing costs down.
- creates customer loyalty
What are the disadvantages of price penetration?
- products may appear cheap which can affect the brand image
- may be hard to gain distribution in some markets due to mass-market pricing
- pricing on the basis of value for money can make customers and competitors price sensitive
What is predatory pricing?
when a dominant firm incurs losses by decreasing the price of a product with the intention to remove rivals and deter potential competition
How may a business use predatory pricing?
Businesses may hold off the threat of a new entrant by lowering their prices so competitors cannot make a profit
What is psychological pricing?
pricing a product at, for example, £1.99 instead of £2 to appear cheaper
What does place in the marketing mix define?
- physical location where the product is available
- the distribution channel it has travelled through to go to the manufacturer to the customer.
What is direct selling?
This is when the product is sold directly from the manufacturer to the customer.
E.g. door to door selling, direct mail, internet
What is a retailer?
A business that buy good from manufacturers and wholesalers and sells them in small quantities to consumers.
What is a wholesaler?
A business that buys goods from manufacturers and sells them in smaller quantities to retailers.
What is an agent/broker?
An intermediary that brings together buyers and sellers.
How may the type of product affect distribution decisions?
- the characteristics of the product need to be taken into account
- e.g. high quality exclusive designers may carefully chose retailers to maintain their desired image.
How may the market affect distribution decisions?
- producers selling to mass markets are likely to use intermediaries
- businesses targeting smaller markets are more likely to target customers directly.
- producers selling overseas are likely to use agents as they know the market better.
How may cost affect distribution decisions?
- firms must ensure that the method of distribution is cost effective
- businesses will often chose the cheapest distribution channel
- they often prefer more direct channels as intermediaries shave to take a share of the profit
How may the degree of control affect distribution decisions?
- businesses may want to protect their brand by limiting the spread of the product
- will also keep tight control of where it is available and its price
What are the benefits of online distribution?
- small set up costs
- greater geographically dispersed market
- niche products can reach a wider audience
What are the drawbacks of online distribution?
- increasing competition
- lack of human contact
- can be technical problems
- cant inspect goods before purchasing
- can be hard to identify scams
What is multichannel distribution?
involves a business using more than one type of distribution channel
What are the advantages of multichannel distribution?
- more target market segments can be reached
- higher revenues
What are the drawbacks of multichannel distribution?
- potential for channel conflict
- can be complex to manage
- pricing strategy may become confused in the eyes of the customer
What is the product life cycle?
The stages a product endures from the time of which is first launched to the market until it is withdrawn from the market or given an extension
What are the 5 stages of the product life cycle?
- development - not on the market yet, time for research, no sales
- launch - product is launched to the market, high advertising costs
- growth - sales begin to rise, high advertising costs, profit can be made if costs have been recouped
- maturity - sales are at their peak, advertising can be reduced
- decline - sales begin to fall, extension strategies may be introduced
What are extension strategies?
Methods in which a business extends a products life cycle when sales begin to fall
What are some examples of extension strategies?
- change product - new and improved versions of the product are released
- change price - price can be lowered
- change place - new distribution channels or products can be sold in different countries
- change promotion - different advertising or sales promotion techniques
What are some weaknesses of the product life cycle model?
- the shape and duration of the cycle varies depending on the product
- difficult to know exactly where a product is in its life cycle
- length cannot be reliably predicted
What factors determine the most appropriate pricing strategy for a particular situation?
- differentiation and USP - businesses can charge higher prices if it has a USP or is sufficiently differentiated from its rivals
- price elasticity of demand - e.g. if a product is price inelastic there will be scope for price increases
- strength of the brand - the stronger the brand, the more the business can charge.
