1.3 Marketing risk 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
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, 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
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 is the design mix and 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
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
What is promotion?
-the publicising of a product, service or business to draw attention to it to generate sales and obtain and retain customers
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?
- 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
- Advertising
- Sponsorship
- Using social media –> turning like into customers is a problem
How has branding and promotion changes to reflect social trends?
- viral marketing
- social media
- emotional branding
What are types of pricing strategy?
- Cost plus
- Price skimming
- Penetration pricing
- Predatory pricing
- Competitive pricing
- Psychological pricing
What is Cost plus?
- 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
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?
- setting a low price forcing rivals out of business (can be illegal)
What is Competitive pricing?
- pricing strategies based on the prices changed by rivals
What is Psychological pricing?
- setting a price slightly below a round figure
What are the factors affecting Pricing Strategies?
- 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
What changes in pricing are to reflect social trends?
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
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?
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?
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
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