1.3 - Marketing Mix and Strategy Flashcards
The 4Ps in the marketing mix
- Product
- Price
- Place
- Promotion
Design mix
- Function
- Aesthetics
- Economics manufacture
Ethical sourcing
Process of ensuring that raw materials, products, and services are obtained in a responsible and sustainable manner. This includes considering factors such as fair wages, safe working conditions, environmental sustainability, and animal welfare
Promotion
Marketing activities used by businesses to communicate with customers, increase awareness, and encourage sales of a product or service
Above the line promotion
Paid, mass-media advertising used to reach a large audience. It is typically non-targeted and focuses on building brand awareness and reaching as many potential customers as possible
Advantages of above the line promotion
- Wide audience reach, mass media advertising (TV, radio, newspapers) allows businesses to reach a large and diverse audience
- Brand awareness and recognition, helps establish and reinforce a strong brand image in consumers’ minds
- Credibility and trust, advertising in traditional media sources like TV and newspapers can enhance a brand’s credibility
Disadvantages of above the line promotion
- High costs, TV, radio, and newspaper advertising can be very expensive, making it less accessible for small businesses
- Less targeted, mass media advertising reaches a broad audience, meaning a large portion may not be potential customers
- Ad avoidance, many consumers skip TV ads, ignore radio commercials, or use ad blockers online, reducing effectiveness
Below the line promotion
Targeted, direct marketing activities aimed at specific customer segments rather than mass audiences
Advantages of below the line promotion
- Highly targeted, methods focus on specific customer segments, ensuring marketing efforts reach the right audience
- Cost-effective, generally cheaper than above the line promotion, making it ideal for small businesses or startups
- Direct customer engagement, methods like personal selling and direct marketing allow businesses to interact with customers and build relationships
Disadvantages of below the line promotion
- Time-consuming, strategies like personal selling and direct marketing require more effort and time compared to mass advertising
- Customer resistance, some consumers may find direct marketing methods (e.g., cold calls, emails) intrusive or annoying
- Difficult to create brand awareness, unlike above the line promotion, below the line promotion is less effective for building widespread brand recognition
Branding
Process of creating a distinct identity for a business, product, or service in the minds of consumers. It includes elements like a logo, slogan, design, colors, and brand personality to differentiate the business from competitors
Types of branding
- Manufacturer
- Own-label
- Generic
Manufacturer brands
Brands created, owned, and marketed by the producer of the product rather than a retailer. These brands are widely recognized and sold through multiple retailers
Own-label brands
Products that are manufactured by a third party but sold under a retailer’s brand name. These brands are exclusive to the retailer and often positioned as lower-cost alternatives to manufacturer brands
Generic brands
Unbranded or minimally branded products that focus on offering the lowest possible price by avoiding advertising and brand identity. These products are usually found in supermarkets or pharmacies and often have simple packaging with basic labels
Benefits of strong branding
- Higher price premium, strong brands can charge higher prices as customers perceive them as high quality (e.g., Apple, Nike)
- Customer loyalty, a well-established brand creates trust, leading to repeat purchases and long-term customer relationships
- Competitive advantage, a strong brand differentiates a business from competitors, making it harder for rivals to copy
Viral marketing
Marketing strategy that encourages people to share a brand’s message quickly and widely, often through social media, word of mouth, or digital platforms. The goal is to create high engagement and organic reach, similar to how a virus spreads
Social media
Online platforms that enable users to create, share, and interact with content in real time. It is widely used for communication, entertainment, and marketing by both individuals and businesses
Emotional branding
Marketing strategy that aims to create deep emotional connections between a brand and its customers. It goes beyond product features and price, focusing on feelings, values, and personal experiences to foster customer loyalty
Cost-plus pricing
Pricing strategy where a business sets the selling price by adding a fixed percentage (markup) to the cost of production. This ensures the business covers costs and makes a profit
Formula for cost-plus pricing
Costofproduction + Markup
Predatory pricing
Aggressive pricing strategy where a business deliberately sets prices very low, often below cost, to drive competitors out of the market. Once competition is eliminated, the firm raises prices to maximize profits
Price skimming
Pricing strategy where a business initially sets a high price for a new or innovative product and then gradually lowers it over time. This helps maximize revenue from early adopters before targeting more price-sensitive customers
Penetration pricing
Pricing strategy where a business sets an initially low price to attract customers and gain market share quickly, then gradually increases the price over time. This is often used to enter highly competitive markets
Competitive pricing
Strategy where a business sets its prices based on the prices charged by competitors rather than focusing solely on costs or demand. The goal is to stay competitive while maintaining profitability
Price war
When businesses continuously lower their prices in response to competitors, aiming to gain or protect market share. This aggressive competition can lead to significant reductions in profit margins
Psychological pricing
Strategy that influences customer perception by setting prices in a way that makes them seem more attractive or affordable. It is based on the idea that certain price points affect buying behavior
Dynamic pricing
Pricing strategy where businesses adjust prices in real-time based on factors such as demand, competition, and customer behavior. It allows companies to maximize revenue by charging different prices at different times
Product life cycle
Business model that describes the stages a product goes through from its introduction to its decline in the market. It helps businesses plan marketing, pricing, and production strategies
Stages in product life cycle
- Development
- Introduction
- Growth
- Maturity
- Decline
Extension strategies
Tactics used by businesses to extend the life of a product in the maturity or decline stage of the product life cycle. These strategies help maintain sales and profitability instead of letting the product decline
Examples of extension strategies
- Product modifications, improving or updating the product (e.g., new features, better design)
- Rebranding or repositioning, changing the product’s image or target market
- Price reduction, lowering the price to attract new customers
Product portfolio analysis
Strategic tool used by businesses to assess and manage their range of products to maximize profitability and market growth. It helps companies decide where to invest, develop, or discontinue products
Four categories of the Boston Matrix
- Dogs, low market share and low market growth
- Question marks, low market share and high market growth
- Cash cows, high market share and low market growth
- Stars, high market share and high market growth
Distribution channel
Path a product takes from the producer to the final consumer
Retailers
Businesses that sell goods and services directly to consumers. They act as the final link in the distribution channel, buying products from manufacturers or wholesalers and selling them to end customers
Wholesalers
Business that buys goods in bulk from manufacturers and sells them in smaller quantities to retailers or other businesses. They act as an intermediary in the distribution channel, helping products reach the market efficiently
Direct distribution
When a business sells its products directly to consumers without using intermediaries like wholesalers or retailers
Indirect distribution
When a business sells its products through intermediaries such as wholesalers, retailers, or agents instead of selling directly to consumers
Advantages of direct distribution
- Higher profit margins, no intermediaries, so businesses keep all the revenue instead of sharing it with wholesalers or retailers
- Stronger customer relationships, direct interactions allow businesses to build brand loyalty and provide personalised service
- Greater control, businesses have full control over pricing, branding, and customer experience
Disadvantages of direct distribution
- Higher costs, businesses must cover costs for warehousing, logistics, marketing, and customer service, which can be expensive
- Limited market reach, without retailers or wholesalers, businesses may struggle to reach a large customer base
- Time-consuming, managing sales, delivery, and customer interactions requires significant effort and resources
Advantages of indirect distribution
- Wider market reach, using retailers, wholesalers, or agents allows businesses to access a larger customer base across multiple locations
- Retailer and wholesaler expertise, retailers and wholesalers have experience in marketing, selling, and positioning products effectively
- Bulk selling opportunities, wholesalers buy in large quantities, ensuring steady revenue and reducing stockholding risks
Disadvantages of indirect distribution
- Lower profit margins, intermediaries take a share of the revenue, reducing the business’s overall profit
- Slower feedback loop, businesses receive less direct customer feedback, making it harder to adjust products or marketing strategies quickly
- Dependence on intermediaries, if retailers or wholesalers choose not to stock a product, it can negatively impact sales
Multichannel distribution
When a business uses multiple distribution channels to reach customers, such as selling through physical stores, online platforms, wholesalers, and direct sales simultaneously
Advantages of multichannel distribution
- Increased customer reach, businesses can attract different types of customers through multiple sales channels
- Stronger brand presence, a business becomes more visible and accessible in multiple places
- Diversification of risk, if one channel underperforms, others can compensate
Disadvantages of multichannel distribution
- Complex logistics, coordinating stock across different channels can be challenging
- Pricing conflicts, differences in pricing between channels can create customer dissatisfaction or retailer disputes
- Channel competition, selling directly and through retailers can create conflicts (e.g., retailers feeling undercut by direct sales)
