1.3.5 Marketing Strategy

Question 1

Marketing

Answer 1

The management process of identifying, anticipating and satisfying consumer demands for profit

Question 2

Marketing strategy

Answer 2

The methods used by a business to achieve their marketing objectives

Question 3

Product Development ( in product lifecycle)

Answer 3

• This is the first stage of the product lifecycle where a product is designed and market research is analysed to produce a product which will satisfy customer needs
• Cash flow at this point is tight, this is a very expensive phase and at this point the product is not making any revenue and therefore no profit
• All capital at this point will just be an investment, there is always a risk of the product not being a success

Question 4

Introduction of product to market

Answer 4

• The introduction phase will involve high costs in research and development and the product may have been test marketed before launching, so profits may be negative
• Sales will be low as customers may not yet be aware of the products
• Advertising will be informative to let customers know that the product has been launched

Question 5

Growth phase

Answer 5

• Growth phase products are enjoying rapid growth in sales and profits
• At this stage the customers are aware of the product and demand is high
• A business may advertise the product to take advantage of the high demand

Question 6

Maturity phase

Answer 6

• Maturity phase products face intense competition now all the producers have joined the market
• Market is starting to be saturated – everyone has bought the product who is likely to buy
• Sales are high but profits are starting to fall
• Products have to be discounted to keep sales high – so prices may be lowered or the product may be put on sale

Question 7

Decline phase

Answer 7

• Decline phase products may be limited in production
• At this stage profits and sales have fallen and the product may be withdrawn from sale
• The business may decide to heavily discount to get any last sales before the product becomes obsolete
• There is a trend towards more disposable items rather than products that can be fixed or repair – they are simply replaced with new ones, therefore repairable goods are in decline phase

Question 8

Product lifecycle extension strategies

Answer 8

1. updating packaging
2. adding more or different features
3. changing target market
4. advertising
5. price reduction

Question 9

Product portfolio defined

Answer 9

• A product portfolio is the collection of all the products and services offered by a company

Question 10

What is the Boston Matrix

Answer 10

• The Boston matrix is a marketing planning tool which helps managers to plan for a balanced product portfolio
• It looks at two dimensions: market share and market growth, in order to assess new and existing products in terms of their market potential
• It helps marketing managers work out how much to spend on each product

Question 11

Boston matrix - star

Answer 11

• Star products:
• Have high market share
• Are in a high growth market
• Star products need to maintain their current marketing spend to keep sales high
• Stars should become cash cows in time – if managed correctly

Question 12

Boston matrix – question mark

Answer 12

• Question mark products:
• Have low market share
• Are in a high growth market
• Question mark products have lots of potential to become stars if they are managed correctly
• Question marks will need lots of investment in marketing and promotion – if they are to succeed

Question 13

Boston matrix – cash cow

Answer 13

• Cash cow products:
• Have high market share
• Are in a low growth market
• Cash cow products are good sellers and need little or no new investment • The product just need to be “milked” for cash (hence the term)
• Cash cows need monitoring in case they become dogs

Question 14

Boston matrix - dog

Answer 14

• Dog products:
• Have a low market share
• Are in a low growth market
• Dog products require no investment as they are in the decline phase of their lifecycle
• The product may have become obsolete or replaced
• The business may consider discontinuing or withdrawing the product

Question 15

Uses of the Boston matrix

Answer 15

• The Boston matrix is a good starting point when reviewing an existing product line to decide future strategy and budgets
• The conclusions drawn from such an analysis are to transfer the surplus cash from cash cows to the stars and the question marks, and to close down or sell off the dogs
• In the end, question marks reveal themselves as either dogs or stars, and cash cows become so drained of finance that they turn into dogs

Question 16

Limitations of Boston Matrix

Answer 16

• Products may not be low or high market share they could be medium
• High market share does not always lead to high profits, there are high
costs also involved with high market share
• Many people argue this matrix is too simple

Question 17

Mass market strategies

Answer 17

• A mass market is one that caters for (almost) everyone, mass marketing is the process of selling products to all consumers regardless of age, gender, etc. in the same way
• These products can be marketed to consumers all over the world in the same way

Question 18

Niche market strategies

Answer 18

• A market segment is consumers who can be grouped in different ways; income, gender, lifestyle, ethnicity, religion, age, interest
• A niche market is one that caters to a small subset of a segment and will target consumers in a very specific way
• Products are designed for a specific purpose
• Small turnover keeps larger firms from entering market
• Inelastic demand means higher prices can be charged

Question 19

B2B marketing

Answer 19

• B2B stands for Business to Business marketing. Many businesses just deal with other businesses rather than consumers. For example a school or college will have a paper supplier so they can keep giving you handouts and you can print your work out.
• Advertising needs to be informative rather than persuasive or “clever”
• This will typically involve larger transactions than with consumers (think paper again)
• Suppliers need to build up closer relationships with customers
• Focus will be on offering a quality product and a quality service

Question 20

B2C Marketing

Answer 20

• B2C means business to consumer
• They are not looking to build up long term relationships with the supplier, maybe a one off purchase like a sofa
• Consumers want a variety of distribution channels for convenience e.g. online, click and collect, delivery etc.

Question 21

Customer loyalty

Answer 21

• Customer loyalty is creating a product or service that ensures repeat purchases

Question 22

Loyalty Cards

Answer 22

• Loyalty cards can work in a number of ways:
• They can improve customer retention e.g. a coffee shop making sure customers return by offering a stamp
• They can also collect important data on buyer behaviour and purchase decisions e.g. Boots advantage card, Tesco clubcard

Question 23

Saver schemes

Answer 23

• Each week consumers can carry out their shopping and pay into a saver card – ready for Christmas

Question 24

What are extension strategies

Answer 24

Methods used to prolong the life of a product