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Business---------------------------- > 1.3 Marketing risk and Strategy > Flashcards

1.3 Marketing risk and Strategy Flashcards

1
Q

What are the three factors of the Design Mix?

A

-Function
-Cost
-Appearance/Aesthetics

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2
Q

What is Product design?

A

the process of creating a new product or service

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3
Q

What is the importance of the Function of the product?

A

-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

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4
Q

What is the importance of Aesthetics of a product?

A

-Products and services should provide a sensory stimulation in addition to performing a function
– size, shape , appearance, sell 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

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5
Q

What is the importance of the Cost of a product?

A

-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

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6
Q

How is the design mix and social trends?

A
  • 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
    Design for waste minimization –> last longer, smaller and lighter, recyclable products, less packaging
    -Some industries are more difficult to change e.g. fashion changes every season
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7
Q

What is promotion?

A

-the publicising of a product, service or business to draw attention to it to generate sales and obtain and retain customers

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8
Q

What is Above the line Promotion?

A

-involves advertising in the media
-Informative advertising
-Persuasive advertising
-Reassuring adveritisng

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9
Q

What is informative advertising?

A
  • adverts are designed to increase consumer awareness of products, give information about the features of a product
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10
Q

What is persuasive advertising?

A

-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

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11
Q

What is Reassuring advertising?

A

-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

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12
Q

What is Below the line promotion?

A

-advertising that doesnt use media

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13
Q

What are some examples of Below the line promotion?

A

-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

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14
Q

What factors are considered when choosing methods of promotions?

A

-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

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15
Q

What is branding?

A

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.

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16
Q

What are some Types of Branding?

A

-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

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17
Q

What are the benefits of strong branding?

A

-Added Value
-Ability to charge a premium price
-Reduced price elasticity of demand

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18
Q

What are different ways to build a brand?

A

-Exploit USP
-Advertising
-Sponsorship
-Using social media –> turning like into customers is a problem

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19
Q

How has branding and promotion changes to reflect social trends?

A

-viral marketing
-social media
-emotional branding

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20
Q

What are types of pricing strategy?

A

-Cost plus
-Price skimming
-Penetration pricing
-Predatory pricing
-Competitive pricing
- Psychological pricing

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21
Q

What is Cost plus?

A
  • Calculating mark-up a unit costs)
    -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
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22
Q

What is Price Skimming?

A
  • technology (usually)
    -setting a high price initially and then lowering it later
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23
Q

What is Penetration Pricing?

A

-setting a low price when launching a new product in order to get establishing in the market

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24
Q

What is Predatory pricing?

A
  • setting a low price forcing rivals out of business (can be illegal)
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25
Q

What is Competitive pricing?

A
  • pricing strategies based on the prices changed by rivals
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26
Q

What is Psychological pricing?

A
  • setting a price slightly below a round figure
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27
Q

What are the factors affecting Pricing Strategies?

A

-amount of USP/Differentiation –> price skimming, get as much revenue as possible with a strong USP
-PED –> Price takers –>elastic- the price the market set and Price leaders –>inelastic –> unique products or lead brands - you can set the price
-Amount of competition
-Strength of brand
-Costs and the need to make a profit
-Stage in the product life cycle

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28
Q

What changes in pricing are to reflect social trends?

A

Online Sales
-Dynamic pricing - used to maximise revenue, ut can change e.g. last minute offers
-Auction sites
-Personalized pricing
-Subscription pricing
Price Comparison Sites

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29
Q

What is Distribution?

A

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.

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30
Q

What are Distribution channels?

A

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.

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31
Q

What are some examples of Distribution channels?

A

-Consumers
-retailer–> consumers
-Wholesalers –> retailers–> consumers
-agents/brokers –> wholesaler–> retailers –> consumers

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32
Q

What are intermediaries?

A

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

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33
Q

What is Direct Selling?

A

-Selling directly to consumers

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34
Q

What are benefits of direct selling?

A

-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

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35
Q

What are some examples of direct selling?

A

-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

36
Q

What are Retailers?

A

-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

37
Q

What are examples of some Retailers?

A

-Independents
-Super markets
-Online stores
-Kiosk/street vendor
- Department stores
-Multiples
-Superstores
-Market traders

38
Q

What are Wholesalers?

A

-a business that buys goods from manufacturers and sells them in smaller quantities to retailers

39
Q

What are Agents or Brokers?

A

an intermediary that brings together buyers and sellers

40
Q

What factors influence the chose of distribution channels?

A

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

41
Q

How does social trends change distribution change?

A

-growth of online shopping
-larger shopping mall/center
-selling using call centres to sell products e.g. finance
-supermarkets extending their product range and opening hours
-Growth of TV shopping channels
-Flourishing charity shops on high street

42
Q

What is online distribution?

A

often called e-commerce there are two types:
- Business to consumer (B2C) –> businesses selling goods and services direct to consumers, must e-tailing often delivered to home, but more click and collect -can be done
-Business to Business (B2B) –> business selling to other businesses online

43
Q

What is the benefit to consumers of online distribution?

A

-its cheaper as online retailed have lower costs
-Can shop 24/7
-Generally a large choice
- You can shop anywhere

44
Q

What is the benefits to businesses of online distribution?

A

-e-tailers have less costs than operating stores
-lower start up cost (both fixed and variable)
- Lower costs when processing transaction
- Less paper needed, for invoices/receipts
-B2C can offer goods to wider market
-You can serve customers 24/7
-You have more choice where to locate your business

45
Q

What are the drawbacks of an online distribution?

A

-lots of competition
-lack of human contact
-could be technical issues
- could be security risks e.g. hacking
-customer can’t physically see products before
- Poor after sales service
-Exclusion of so customers without access or credit card
-People aren’t always available for the delivery so not always convenient

46
Q

How does a product change to a service?

A
  • more developed countries have moved towards services than products (tertiary from primary sectors)
  • music and DVD’s are now streamed
    -Newspapers are not in demand as much, more online subscription based
47
Q

What are the different stages of the product life cycle?

A

-Development
-Introduction
-Growth
-Maturity
-Saturation
-Decline

48
Q

What happens during the Development stage?

A

-Product is going through Research and Development
-Most products fail at this stage, businesses are often reluctant to take risks
-Costs are high as only is being spent on R & D
-NO SALES

49
Q

What happens during the Introduction stage?

A

-product is launched
-as the product is new to the market sale initially are slow
- Costs occur –>new production lines and plants
- Need to make customers aware –> Promotion therefore probably not profitable
-Price high to cover promotion costs – however low in order to break into the market
- technology –> longer as customers need to check it ‘works’, fashion products are fast-moving consumer goods

50
Q

What happens during the Growth stage?

A

-sales begin to grow rapidly
-new customers buy the product and there are repeat purchases
-Unit costs may fall as production increases
-the product then become profitable –> competitors may see this and launch their own versions –> can lead to a slowdown of the rise of sales

51
Q

What during the maturity and saturation stages?

A
  • growth of sales may start to level
  • product has become more established and has a stable market share at this point
  • more firms enter –> market becomes saturated –> some businesses will be force out as firms compete for consumers
  • Extension strategies are used to extend he life of the product
52
Q

What happens during the decline stage?

A
  • sales will eventually decline
  • this is due to changing consumer tastes new technology or the introduction of new products
    the products ill lose its appeal to customers
  • product will either be withdrawn or sold to another business
  • little is spent on promotion and other costs
53
Q

What are extension strategies?

A

-a way to pre-long the life of a business and product
-product development is a large cost and extension strategies are a great way to generate cash

54
Q

What are the two main approaches to Extension Strategies?

A

-Product adjustments
- Promotion

55
Q

What is Product adjustment?

A

try to prolong the life of a product by freshening it up
-updating is a common approach for technical and consumer durables
- Making improvements e.g. extra memory
-Extend product range e.g. new flavours, shapes etc
-Changing the packaging

56
Q

How can you use promotion to extend a products life?

A

leaving the product unchanging but investing in promotional campaigns
-find new uses for a product
-find new markets for their product (regional or national)
-Investment in a sizable advertising campaign
-Encourage more frequent use of hte product

57
Q

What is a product portfolio and what is it used for?

A

-made up of product line - a group of products that are similar
- make sure products are launched in intervals so they dont overlap and is never a gap in the market

58
Q

What is the Boston Matrix?

A

-Product Portfolio Matrix developed by the Boston Consulting Group
- a Way of categories the stage of the life cycle a product is at categories according to two criteria –> Market Growth Relative Market Share
- Aswell as help the business manage there product profolio

59
Q

What are the disadvantages of the Boston Matrix?

A

-Hard to tell what stage of the life cycle it is at, also there is no standard lifetime for a product

60
Q

What are the 4 section of the Boston Matrix?

A

-Cash Cow
-Rising star
-Question Marks / Problem Childs /Wildcats
- Dog

61
Q

What is the Rising Star?

A

-high market growth and relatively high market share
- They are valuable to a business and are very profitable
-But business needs to invest in the product to cope with the growing market e.g. new promotion to fend off competition
-Cash flow nearly 0 as profits are high abut so are investments

62
Q

What is the Cash Cow?

A

-Relatively high market shares, however a low Market growth –> therefore little chance of increasing sales and profits in the future
- still quite profitable and there is little need for investment, With slow growth in sales there should be little need for new premises.
-Positive net cash flow as little is spent of investments

63
Q

What is the Question Marks?

A
  • problem children or wildcats
  • relatively low market share in a fast-growing market
    -problem for business –> unclear what should be done with these products
    -If a product is performing weakly it is unlikely to be profitable –> but as it is in a fast-growing market –> potential to turn into a star
    -Net Cash flow zero or negative
    -investment needed to cope expanding sales in a fast-growing market
64
Q

What is the Dog?

A

-These are products with a relatively low market share in a market with low growth
- Dogs have poor prospects for future sales and profits
- they may generate some positive net cash flow because they will need little investment but may earn some profits
-But if they make little or no profit, net cash flow may be zero or even negative

65
Q

How is the Boston Matrix used to Balance product lines?

A

-Businesses must ensure that their product portfolios do not contain too many items within each category
- they dont wants lots of Dogs, and also avoid having too many stars and problem childs
-Costs for development and promotion of new products drain on resources –> need to be balanced with ‘Cash Cows’ ( as they have already recovered the promotional costs)
- However a business does not want too many Cash cows as Stars and Questions marks have the potential to become cash cows too

66
Q

How does the Boston Matrix help a business decide what to do with its products?

A

Products in different Categories may require different approaches:
- Stars –> great future potential, business needs to build the brand of these products so sales increase and competition is fought successfully
-Cash Cows –> Milked for cash, used to develop other products
-Question Marks –>can either build the brand hoping it turns into a star, or harvest the product by raising and cutting promotion so that profits are increased, or divest itself of the product, by withdrawal or selling it as no profit is being made
-Dogs –> may be divested if they are not making a profit or in some cases harvested

67
Q

What is Marketing Strategies?

A

a set of plans that aim to achieve a specific objective
- e.g. a local car rental company might aim to become the market leader in the region, its strategy to achieve this objective might be to:
- improve the quality of customer service by delivering cars to people’s homes
- contact all previous customers offering then a half-price deal

68
Q

How can Product be used as a Mass Market Strategy?

A

-Product –> there will be many product trying to grab customer attention, most are close substitutes for each other. most successful businesses usually differentiate their product, developing a USP helps a business stands out

69
Q

How can Price be used as a Mass Market Strategy?

A

-Price –> the price charged in a mass market is usually the same, businesses fear a price war with competitors because they usually reduce revenue even competitors
-Price leadership is common in the mass markets where the dominant business, perhaps the one with the lowest unit costs, sets the price and everyone follows

70
Q

How can Promotion be used as a Mass Market Strategy?

A
  • in an absence of price competition, firms will look to non-price competition –> invest heavily in advertising and promotion as it is an important part in the marketing mix
71
Q

How can Place be used as a Mass Market Strategy?

A
  • businesses will often use multiple channels to distribute their goods.
    -business targeting consumers –> use supermarkets, wholesalers, independents and any other outlets.
    -Some manufacturers pay supermarkets to display their goods in prominent places e.g. at eye level to attract more customers
    -The internet has also allowed small businesses in a remote areas can distribute products to individual customers anywhere in the world
72
Q

How can Product be used as a Niche Market Strategy?

A
  • in a niche market product is likely to have quite significant differences from its rivals
    -in Niche markets products will be designed carefully in order to meet the very specific needs of the customer group
    -Product will be a key element in the marketing mix
73
Q

How can Price be used as a Niche Market Strategy?

A

-Businesses selling in niche markets have more flexibility in their pricing
-There is less competition in niche markets so higher prices can be charged without losing significant market share to rivals
-Also, customers may be prepared to pay higher prices if their specific needs are being met effectively

74
Q

How can Promotion be used as a Niche market Strategy?

A

-In Niche markets promotion and advertising will tend to be more targeted.
-Since niche markets are smaller there is less need to use national media when advertising
- businesses need to identify their customer profile very accurately to ensure that advertising and promotion expenditure is not wasted
-Adverts are likely to be placed in specialised publications

75
Q

How can Place be used as a Niche Market Strategy?

A

-Businesses selling in to a Niche Markets are often more selective when choosing distribution channels
-They are more likely to use exclusive distributors or to handle distribution privately
-they will use the internet if it is practical

76
Q

what are Outbound marketing strategies?

A

-this involves directing marketing materials at potential customers whether they are expecting it ore not
-this could include direct mail, emails, telemarketing, sponsorship, or targeted adverts

77
Q

What are some drawback to Outbound marketing strategies?

A

-people are increasingly ignoring adverts, so they may go unnoticed
-people commonly object cold calling and mailing lists
-can be seen as intrusive
- persistence in directly targeting consumers can damage a brand’s reputation
-Significantly more expensive than inbound strategies

78
Q

What are Inbound Marketing strategies?

A

This invokes attracting potential customer to websites when they care looking for suppliers or solution to to problems
- this can be done through blogging, social media marketing, search engine optimisation, free e-book, video marketing and targeted email marketing

79
Q

What are some drawbacks to Inbound Marketing Strategies?

A

-It requires a lot of effort and resources
-It is difficult to turn visits to a website into sales
-It can be hard to keep these methods up to date with dynamic trends

80
Q

What are Hybrid Marketing Strategies?

A

-This involves combining both outbound and inbound marketing strategies
- It is common for these methods to take at least six months to generate results
-because of this, businesses will often employ outbound methods to use in the short-term to get quicker results
- Once hybrid methods begin to take effect, less successful outbound marketing can be dropped
-This will help to reduce costs and create sustainable growth in marketing shares

81
Q

What are different ways a business can develop customer loyalty?

A

-communication
-Customer service
-Customer incentives
- Personalisation
-Preferential treatment

82
Q

How does communication develop customer loyalty?

A

-this may involve using advertising campaigns to inform customers about new products,
-Some businesses may use reassuring adverts to help convince customers that they have made the right choice about their prurchase
-Communication is also made via newsletters and e-mails, the key to developing customer loyalty is to make a bond with your customers

83
Q

How does customer service help develop customer loyalty?

A

-Customers are more likely to return to a business if they receive high-quality customer service
-This can be improved by both dealing with matter importantly as well as positive after sales service
- Employees who deal with customers must be professional and have the correct

84
Q

How does customer incentives help develop customer loyalty?

A

-Many businesses reward their customers if they keep returning
-for example, supermarkets have introduced loyalty cards to encourage people to keep returning to the same provider in order to accumulate enough points to gain rewards in the future

85
Q

How does personalisation help develop customer loyalty?

A

-Some businesses try to deal with customers on a personal level
-Some firms will send customers cards or emails on their birthday, and address then by name when sending out the monthly newsletter to them

86
Q

How does Preferential treatment help develop customer loyalty?

A

-Many people like the idea of receiving preferential treatment from a business
-for example, some nightclubs offer VIP areas reserved exclusively for selected customers
-The principle behind this is that if people receive ‘special’ treatment, they are more likely to return for more from the business in the future

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