1.3 marketing mix and strategy Flashcards
what are the three factors in the design mix?
-aesthetics
-function
-cost/economic manufacture
how can the factors affect one another?
-all products must have a balance of the design mix
-amending any one of these features can have a detrimental impact on the other two
eg: improving the design could reduce the functionality of the product, or improving the functionality could increase costs
which social trends have began to affect the design mix?
-designing for waste minimisation
-re-use and recycling
-ethical sourcing
-sustainability
importance of product in the traditional
marketing mix:
-products are at the heart of marketing
-the product needs to exist for the other elements of the mix to happen
what is a product?
anything that is capable of satisfying customer needs
the layers of a product:
1) inner
-core value
2) middle (actual product)
-quality
-packaging
-design
-brand name
3) outer (augmented product)
-after-sale service
what do aesthetics refer to in the design mix?
-how the product appeals to the customer in terms of how it looks
-popular way to differentiate a product
what does function refer to in the design mix?
-the way a product works / the benefits that a product or service provides / how well a product meets a need or solves the problem for which it was intended
what does cost refer to in the design mix?
the cost per unit of a product
common features of products that focus on function in the design mix:
-more predictable and stable demand
-longer product life cycles
-lower promotional costs
-build reputation for quality based on reliability
-economic manufacture through economies of scale
examples of products that focus on function in the design mix:
-washing machines
-batteries
-staplers
common features of products that successfully focus on aesthetic in the design mix:
-high added value
-demand fuelled by customer aspiration
examples of products that focus on aesthetics in the design mix:
-bag
-iphone
what is sustainability?
making a product without affecting long term supplies of materials
ways of increasing sustainability during production:
-minimise waste in production
-enable recycling or re-use
examples of ethical sourcing:
-fairtrade
-ethical supply chain
what is an ethical supply chain?
(+ implications)
-making sure that products are made ethically (eg: paying workers a fair wage, making sure the working practices of the suppliers are ethical, such as not using child labour)
-potential for significant damage to a business reputation if issues discovered in the supply chain
definition of ethical
morally right
the benefits of adapting designs to changes in social trends
-reducing waste helps businesses cut costs
-social trends can be used as a USP
-attending to social trends means businesses are more likely to be seen as being socially responsible
what is promotion?
used to generate customer awareness, interest and desire for a product/service
through various methods
what is above the line promotion?
any form of advertising through the media
examples of above the line promotions:
-television
-newspapers/magazines
-radio
-cinema
-posters/billboards
-internet (websites)
what is below the line promotion?
all other forms of promotion that are not advertising
examples of below the line promotion:
-sales promotions
-public relations
-direct selling/marketing
-personal selling
advantages of below the line promotion
-can offer a two-way form of communication (personal)
-can be more believable than advertising
influences on promotion choice
-the target audience
-the message
-technology
-promotion budget
-stage in the product’s life cycle
-competition
the target audience (promotion choice)
a business must choose the right method and channel to reach the right people
technology (promotion choice)
can help a business narrow down its promotion so that it only reaches the right people
promotion budget (promotion choice)
will determine which methods are available and the geographical reach of the campaign
the message (promotion choice)
-the purpose of an advert/what it wants to get across
(sponsoring a sporting event might encourage an association with healthy living)
different purposes of messages:
-inform customers
-remind customers
-persuade customers
-reassure customers
uses of promotion:
-increase sales
-attract new customers & create awareness
-encourage customer loyalty
-launch a new product
-encourage brand switching
what are the main aims of promotion
-to ensure that customers are aware of the existence of products
-to persuade customers that the product is better than competing products
what is the promotional mix?
the specific mix of promotional methods that a business uses to pursue its marketing objectives
what are the main elements of the promotional mix?
-advertising
-sales promotion
-personal selling
-PR /sponsorship
-direct marketing
what is advertising?
promotion through paid channels such as television, radio, print media (magazines), and online advertising
benefits of advertising
-wide coverage
-control of message
-repetition means that the message can be communicated effectively
-helps build brand awareness and loyalty
drawbacks of advertising
-often expensive
-impersonal
-limited ability to close a sale
what is personal selling?
sales representative meets with a potential client to persuade them to buy from the business
where can personal selling be done?
-telephone
-in retail outlets
-knocking on doors
which products are usually sold through personal selling?
highly priced, highly technical products
benefits of personal selling
-message is customised
-persuasive impact → close a sale
-potential for development of a relationship → encourages loyalty
drawbacks of personal selling
-needs staff with good interpersonal skills
-labour intensive
-limited reach
what is sales promotion?
short term incentives to boost sales
examples of sales promotion
-coupons
-competitions
-free samples
-loyalty points
-BOGOF
benefits of sales promotion:
-achieve a quick boost to sales
-encourages customers to trial a product or switch brands
drawbacks of sales promotion
-sales effect may only be short-term
-customers may expect or anticipate further promotions
what is PR?
(methods, benefits, drawbacks)
building relationships with the public and managing reputation
methods:
media relations, crisis management and community outreach
benefits:
-enhances a business’s reputation and credibility
-increased customer loyalty and sales
-cost-effective when compared to advertising or personal selling
drawbacks:
-can be time-consuming
-difficult to measure the direct impact of PR activities on profits
what is sponsorship?
(methods, benefits, drawbacks)
a company provides financial support to an event, person or organization in exchange for marketing exposure
benefits
-builds brand awareness
-can create emotional connections with target audiences
drawbacks
-can be expensive, especially for high-profile events
-may not directly drive sales
-may be subject to negative publicity if the sponsored entity experiences a scandal
what is direct marketing?
promotional material directed through mail, email, social media or text
benefits of direct marketing
-can personalise the marketing message
-cost-effective if customer database is well managed
-increasing sales to existing customers
-builds customer loyalty
-re-establishes lapsed customer relationships
disadvantages of direct marketing:
-response rates vary enormously
-negative image of junk mail and email spam
-databases are expensive to maintain and keep accurate
what is viral marketing?
uses social media and online platforms to try increase brand awareness
what is a brand?
the identity of a business/product which distinguishes it from others in the market
what does a brand represent?
the characteristics and personality of a business
benefits of strong branding:
-adds value (from customer
point of view) -> charge higher prices
-demand is more price inelastic
-builds customer loyalty
-builds aspiration
-product might become the natural choice for the novice customer
-helps a business to position-itself in the market relative to other competitors
what are some ways to build a brand?
-exploiting a USP
-advertising
-sponsorship (associating characteristics and personality with the subject being sponsored)
-using social media
what are the types of brands?
-manufacturer’s brands
-own-label brands
-generic brands
-service brands
-global brands
definition of manufacturer’s brands
(+example)
use of a company name or logo to promote all the products or services offered by the company
(kellogg’s)
definition of own-label brands:
(+ example)
the use of a retailer’s name to promote a specific product or service
(tesco’s finest)
what are generic brands?
products that do not have a particular brand association but simply use the name of the product
e.g. carrots
what are service brands?
brands that add perceived value to services
what are global brands?
-easily recognized and operating worldwide
-based on familiarity & availability
what is brand extension? (+ examples)
when a business uses a brand name on a new product that has some of brand’s characteristics
(eg: mars bar and mars ice cream, lucozade & lucozade sport)
what is brand stretching (+ examples)
-brand is used for a diverse range of
products, not necessarily connected
(eg: virgin)
three examples of branding methods that are used during to social trends:
businesses should maximise social trends to build their brands:
-social media
-viral marketing
-emotional branding - businesses often associate their brands with things that consumers have strong emotional connections to, for example, sports teams or good causes
what is price?
the money charged for a product or service
stages of price setting:
-develop pricing objectives
-determine demand for product
-evaluate competitors’ prices
-select pricing strategy & tactics
-decide on price
examples of business objectives that
will influence pricing:
-maximise profit
-improve cash flow
-maintain/improve market share
-beat/prevent competition
-increase sales
factors that influence pricing
-amount of differentiation
-price elasticity of demand
-competition
-strength of branding
-stage in the product life cycle
-costs
what is cost plus pricing?
(+ formula)
-a business bases a price on the unit cost and then adds a percentage as a mark-up (unit cost x percentage mark-up)
benefits of cost plus pricing
-easy to calculate
-price increases can be justified when costs rise
-each product is being sold at a profit
drawbacks of cost plus pricing
-ignores price elasticity of demand
-may not take account of competition
-profit is lost if price is set below the that customers are prepared to pay
-sales are lost it price is set above the price customers are willing to pay
-business has less incentive to control costs
what is price skimming?
a higher price is charged for a new product to exploit customers prepared to pay for innovation
which products do price skimming work well for?(+ examples)
works well for products that create excitement amongst early adopters
electronic devices
when is price skimming best used?
in introduction or early growth stage of product life cycle
what is penetration pricing?
setting lower prices to achieve a higher market share
aim of penetration pricing:
-to gain market share quickly
-to build customer usage and loyalty
-to build sales of higher-priced related items (hook & bait approach)
examples of “hook & bait” penetration pricing
sell razor handles and inkjet printers at a low price to build customer usage:
sell consumable items (blades & cartridges) at a much higher price
what is predatory pricing?
setting prices at a level that is below the cost of production, to drive competitors out of the market
what is psychological pricing?
-the business bases the price below the next whole number to trick consumers into thinking the price is lower
(£9.99 psychologically appears cheaper than £10)
what is competitive pricing?
-the business sets prices based on the nearest competitor
-used in very competitive markets and helps avoid price wars
what are price wars?
-competitive price reductions by firms in a competitive industry
-each seeks to increase market share by price reduction but the result is destructive spiral of price reductions
-the process continues until weaker firms go out of business
-price wars might be seen as good for customers in the short run but it is harmful in the long run if competition is reduced
what is loss leader pricing?
-a product is sold at a low (even loss making) price to encourage customers to buy other full price products from the business along with the loss leader product
what are loss leaders often used by?
used by supermarkets to draw in customers from rival firms
what is the aim of loss leader pricing?
to encourage people to buy complementary goods at full price
what is dynamic pricing/surge pricing?
businesses set flexible prices for products or services based on current market demands
example of a business that uses dynamic pricing (i use it)
amazon changes its prices every 10 minutes on average
example of a business that uses surge pricing
-uber rates increase to ensure rellability when demand cannot be met by the number of drivers on the road.
-at times of high demand, the prices
increase to encourage more drivers to become available
which social trends such have a significant influence on how businesses adapt their pricing over time?
-auction sites
-price comparison sites
-personalised pricing
-subscription pricing
what are auction sites?
-they allow customers to gain the best prices, but use a sense of urgency to encourage people to bid so they don’t miss out
(eg: ebay and gumtree)
what are price comparison sites?
-sites like uswitch (energy) or trivago (hotels) make it easy for customers to compare prices and choose the best deal
what is personalised pricing?
technology and online databases collect customer information and allow businesses to target them with a personal price
what is subscription pricing?
a business charges customers a monthly fee to use a service (netflix)
what is distribution?
how the product gets to the customer
what is the aim of distribution?
to make products available in the right place at the right time in the right quantities
what is a distribution channel?
the network of intermediaries involved in getting a product or service from the producer to the consumer
what is each party in a distribution channel is called?
an intermediary
main types of intermediaries in distribution channels
-retailer
-distributor
-wholesaler
-agent
key facts: retailers
-provide customers with support from retail employees
-last stage
advantages of retail distribution
-convenient & accessible for customers
-after-sales support (e.g. returns)
-retailer chooses the final price
key facts: wholesalers
buy in large quantities from producers & break bulk into smaller quantities to sell to retailers
advantages of wholesaler:
-reduce the producer’s transport costs (fewer journeys to the wholesaler rather than many journeys to retailers / retailers can order in smaller amounts from wholesalers)
-wholesaler makes profit by buying at a lower price from the producer and adding a profit margin onto the price paid by the retailer
key facts: distributors
-sell on products and serve as a local sales point
-usually specialise in a particular industry
-offer products from many producers = greater choice
how are distributors different from agents?
a distributor holds stock, an agent doesn’t
key facts: agents
-does not hold stock
-tend to operate in tertiary sector (travel, insurance)
-help producers sell products to consumers and earn a commission for their sales
what does each stage in the distribution network add ?
-cost or adds value
-therefore increases the price of the product
what is a direct distribution channel?
channel where a producer and consumer deal with each other without an intermediary
what is an indirect distribution channel?
involves the use of intermediaries between the producer and consumer
reasons to use indirect distribution channels:
-customers may live too far away to be reached directly/ spread widely
-better use of resources elsewhere
-different segments of the markets can be best reached by different distribution channels
3 factors that affect which type of distribution channel is used:
-choice of intermediary
-nature of the product (fragile, customised)
-size of business
what is multi-channel distribution?
involves a business using more than one type of distribution channel
benefits of multi-channel distribution
-allows more target market segments to be reached
-enables higher revenues - (e.g. retail outlets have no stock, but customer can buy online)
drawbacks of multi-channel distribution
-potential for channel “conflict”
-can be complex to manage
example of multi-channel distribution:
apple consumer electronic devices
-450+ own retail stores in over 15 countries
-online stores
-multiple retail partners
which main 4 factors influence distribution?
-scope/scale
-nature of the product
-control over promotion and pricing
-expectations of customers
how does scope affect distribution?
-a product sold internationally may require distribution through an extensive network of wholesalers, agents and distribution companies
-a local business may simply require one retail outlet
how does the nature of the product affect distribution?
-some products are not suitable for certain channels
-eg: difficult and costly to ship delicate objects
how does control over promotion & pricing of the product affect distribution?
-business may opt to use its own website or retail chain if controlling these factors is important
how do the expectations of customers affect distribution?
will customers expect to access the product via multi-channels or will one suffice?
how recent social trends have affected distribution
-there’s a growth in direct ordering of products through the internet,
manufacturers use courier businesses to deliver their products directly to customers
-increase in providers selling services via websites and apps (deliveroo, uber)
examples of a service that has moved to being distributed online
newspaper publishers traditionally would sold physical papers, now they sell news as a service online
the value of digital marketing and e-commerce:
-allows small businesses to target a global market
-lets businesses gather customer info easily
-opportunities for personalisation & involving customers in the design of products
-targeting specific segments is easy
-builds relationships through a more personal service by tracking buying habits
the benefits of online distribution
for businesses:
-e-tailers don’t have to meet the costs of operating retail stores.
-lower start-up costs make it easier for small businesses to launch
-businesses can take sales 24/7
-businesses can offer goods to a much wider market
benefits of online distribution for customers
-customers can shop 24/7
-comparison between brands is much easier
-usually a wider choice available
-customers can see reviews & then make an informed choice
what is a product life cycle?
a theoretical model which describes the stages a product goes through over its life
key uses of the product life cycle model
-forecast future sales trends
-help analyse & manage the product portfolio
what are the stages in a product life cycle?
-development
-introduction
-growth
-maturity
-saturation
-decline
key facts about the development stage:
-often complex
-absorbs significant resources
-may not be successful
-may involves a long lead time before sales are achieved
-cost of development rises as it approaches launch
-market research often done to reduce the risk of product failure
why are new products scrapped before launch?
-inadequate demand
-competitor action
-production problem
-high costs
-does not fit in the firm’s product range
-life cycle expected to be too short
key facts about the introduction stage:
-a new product is launched on the market
-low sales
-low capacity utilisation
-usually negative cash flow
-heavy promotion to increase awareness
strategies at the introduction stage
-high promotional spending
-skimming or penetration pricing
-limited, focused distribution
key facts about the growth stage:
-arrival of competitors due to market growth & rise in profits
-fast growing sales
-rise in capacity utilisation
-cash flow may become positive
-unit costs fall with economies of scale
-price may increase with popularity
strategies in the growth stage
-advertising to promote brand awareness
-intensive distribution
-improve the product - new features, more options
key facts about the maturity stage:
-promotion slows as customers are aware of product
-introduction of new customers slows
down
-focus on retention and repeat purchase
-high capacity utilisation
-high profits for those with high market share
-cash flow should be strongly positive
strategies for mature products
-promotion focuses on differentiation
-intensive distribution
-enter new segments
-repositioning (change the image of product to target a new or wider market)
key facts about saturation stage:
-the market is full
-all potential customers have the product and there are other better/cheaper alternatives
strategies in saturation stage
prices may be cut to maintain competitiveness
key facts about decline stage
-falling sales
-decline in profits
-decline in capacity utilisation
reasons why products enter the decline stage:
-technological advance
-changes in consumer tastes
-increased competition
-failure to innovate and develop the product
strategies in decline stage
-price cutting to maintain competitiveness
-promotion to retain loyal customers
-an extension strategy may be used
examples of extension strategies:
-lower price
-change promotion (e.g. new promotional message)
-change product - re-styling and product improvement
-look for alternative distribution channels
-find new uses for the product
weaknesses of the product life cycle model
-shape and duration of the cycle varies from product to product
-it is difficult to recognise exactly where a product is in its life cycle
-length cannot be reliably predicted
-decline isn’t inevitable
what is a product portfolio analysis (PPA)?
-assesses the position of each product or brand in a firm’s portfolio to help choose
the right marketing strategy
what is the boston matrix?
-boston consulting group developed this as a tool of portfolio analysis
-it can be applied to the portfolio of products produced by a firm or the portfolio of businesses owned by a firm
-firms analyse their portfolio and categorise products as: question marks, stars, cash cows, dogs)
what portfolio should businesses aim for (the boston matrix)?
a balanced portfolio with some products in each category
the product life cycle vs the boston matrix
PLCY:
concerned with individual products & sales over time
BMX:
concerned with the firm’s portfolio of products, focuses on cash flow from products
what is on the X and Y axis of the boston matrix?
X = relative market share (cash generation)
Y = market growth rate (cash usage)
question mark products: facts
-low market share in fast growing market
-cash flow is negative
-have potential but the future is uncertain
-could become either a star or a dog
strategy for question marks
-invest to increase market share
-invest in promotion and other aspects of marketing
-heavy investment to develop and ensure success
star products: facts
-high share of a rapidly growing market
-position of leadership
• Require high marketing spending
-net cash inflow is neutral or at best modestly positive
strategy for star products
-distribution must be effective to ensure product availability
-build sales and/or market share
-spend to keep competitors at bay
cash cow products: facts
-high/dominant share of a slowly growing market
-mature stage
-little potential for growth
-large positive cash inflow
strategies for cash cow products
-defend market share
-reduce investment to maximise short term cash flow and profits
-use profits from cash cows to invest in new products
-little promotion is required
dog products: facts
-products that have failed/are in the decline phase of their life cycle
-low share of a slowly growing market
-no potential
strategies for dog products:
-phase out or sell off (divest)
-not worth investing in
strengths of the boston matrix:
-a useful tool for analysing product portfolio decisions
-useful for making decisions about where funds should be allocated
weaknesses of the boston matrix:
-products and markets are complicated and do not necessarily follow a pattern.
-soes not provide clear solutions for a -simplifies what can be a complex issue
-has little or no predictive value
what is a marketing strategy?
a set of plans that aim to achieve a specific marketing objective
examples of marketing objectives
-becoming market leader
-building customer loyalty
-improving brand recognition
-increasing market share
a description of product in a mass market (marketing mix)
-product is generic
-business must differentiate
a description of price in a mass market (marketing mix)
-competitor pricing and managing costs are key to success as many products will have a similar price
a description of promotion in a mass market (marketing mix)
-heavy advertising and promotion are used to build brand image through media with a wide reach
a description of place in a mass market (marketing mix)
-multiple channels will be used to distribute and sell goods
-wholesale, retail outlets and the internet
a description of product in a niche market (marketing mix)
-differences in the product will be quite significant
-it is important for the business to communicate these differences and the benefits they bring
a description of price in a niche market (marketing mix)
niche markets have more flexibility to offer premium pricing strategies due to the unique value they can add
a description of promotion in a niche market (marketing mix)
promotion is targeted using specialist media and direct methods
a description of place in a niche market (marketing mix)
-more likely to sell direct to customers or use a small number of carefully selected channels
why does marketing differ between B2C and B2B?
-B2B marketing will require more information and detail on how a product/service could reduce costs or increase productivity
-B2C marketing will involve emotive techniques to attract customers
which marketing strategies do B2Cs and B2Bs use?
-outbound
-inbound
-hybrid
what is outbound marketing?
-includes any strategy that involves pushing a message out to customers
-can include above-the-line and below-the-line methods
what is inbound marketing?
-any technique that attracts potential customers to a website when they are looking for a particular service or product
-eg: blogging, social media and search engine optimisation
what are hybrid strategies?
involve a combo of inbound & outbound:
-outbound strategies are more short term
-inbound strategies take around six months to start generating real interest
its often easier to ______ than it is to attract new customers (customer loyalty)
keep customers and encourage them to repeat purchase
4 ways to develop customer loyalty:
1) good communication - keeping customers informed of new products and developments
2) customer incentives
3) excellent customer service
4) preferential treatment for returning customers
