1.3.5. Marketing Strategy

Question 1

What are the stages in a product life cycle?

Answer 1

1) Research and Development
2) Introduction
3) Growth
4) Maturity
5) Decline

Question 2

What is research and development? (In product life cycle)

Answer 2

The point before any sales can be made.

Question 3

What is introduction?

Answer 3

The p/s is now launched.

Question 4

What is growth?

Answer 4

The p/s is becoming established.

Question 5

What is maturity?

Answer 5

The p/s comes towards its peak and sales have begun to level out.

Question 6

What is decline?

Answer 6

Sales are falling due to a decrease in market share and growth.

Question 7

Cash flow: R&D?

Answer 7

Only costs at this point.

Question 8

Cash flow: introduction?

Answer 8

It is in the beginning stagehand so makes few sales, low profitability and has little market share.

Question 9

Cash flow: growth?

Answer 9

Sales and profitability are growing, as is the potential for greater market share/growth.

Question 10

Cash flow: maturity?

Answer 10

The brand has strong market share and so the company still receives profit at this point.

Question 11

Cash flow: decline?

Answer 11

The company may be making a slight profit or even a loss at this point.

Question 12

Marketing: R&D?

Answer 12

May include market research and testing.

Question 13

Marketing: introduction?

Answer 13

There is potential for high market growth if given enough promotion.

Question 14

Marketing: growth?

Answer 14

The company needs to strengthen its market position with investment.

Question 15

Marketing: maturity?

Answer 15

Market growth is low, because it is saturated with competition (this is when maturity becomes saturation).

Question 16

Marketing: decline?

Answer 16

By now, the company will have decided whether the p/s is worth further promotion or whether they should simply move on.

Question 17

Problems with the Product Life Cycle?

Answer 17

• it is difficult to understand which stage a product is in until it has reached the end of its life
• works most effectively when markets are stable, without dynamic swings or quick changes between trends
• some products die directly after introduction, when not enough research has been done
• cannot show future sales so marketers cannot see if product is about to start declining
• classic bell curve ignores idea that a product can improve, i.e. with extension strategies
• decline can be confused with maturity if long and drawn out

Question 18

What is benchmarking?

Answer 18

Comparing the business’s achievements with those of an industry standard, instead of using the PLC.

Question 19

What do product extension strategies involve?

Answer 19

Developing new features and finding new uses for a p/s, e.g. Apple’s App Store

Question 20

What do promotion extension strategies involve?

Answer 20

Anything from finding new users for a product or changing the price of an item, to redesigning its packaging.

Question 21

What does the Boston Matrix do?

Answer 21

It displays each p/s in relation to its market: how much market share the p/s has and how well the market is performing in general. It draws attention to where the cash flow in a company is and where the potential for investment lies.

Question 22

Stars?

Answer 22

Market leaders or products that have a large market share. They make a lot of sales and experience intense growth. However, they cannot support themselves alone and so the company needs to make large investments to keep the market share.

Question 23

Question Marks?

Answer 23

(Also known as problem children) These sit in a growing market, but have low market share. They are unprofitable, with negative cash flow.

Question 24

Cash Cows?

Answer 24

In low growth markets, cash cows have a high market share. This brings in positive cash flows and high profitability, so they do not need ongoing investment. The cash flows from cows can be used as investment in stars and question marks.

Question 25

Dogs?

Answer 25

Experience low market share in low-growth markets. They may create negative cash flow as they often operate in declining markets that have no real future. Firms should keep dogs in their product portfolio as long as they continue to create cash. Once a dog begins to restrict assets from other products, the firm should consider selling off the product or rebranding.

Question 26

What is a product portfolio?

Answer 26

The selection of products under a businesses control.

Question 27

Problems with the Boston Matrix?

Answer 27

In many instances, the model does not fit real business life-

• if a p/s is selling in more than one market
• industry data on a market is not always available
• high market share doesn’t necessarily mean profit
• cash cows might be a main source of profit
• dogs are able to return a profit, they only risk hurting the company when they need further investment

Question 28

What is a core customer base?

Answer 28

The customers in a market that every business is fighting to win.

Question 29

What is mass marketing? e.g.

Answer 29

Targeting a wide range of potential customers, e.g. national radio, TV ads, direct selling, webpage banners/

Question 30

What type of products is mass marketing used for?

Answer 30

• general consumer goods
• video-game consoles
• mobile phones
• consumer durables
• entertainment outlets

Question 31

Adv of mass marketing?

Answer 31

• large target market allows for high number of potential sales
• global marketing allows economies of scale for the company
• potential to create huge brand with worldwide recognition

Question 32

Disadv of mass marketing?

Answer 32

• expensive
• time consuming to implement and analyse
• requires constant investment
• risk of irritating consumer

Question 33

What is niche marketing? e.g.

Answer 33

Targeting small sections of a market (or small markets) as a way of filling a gap that is not currently being served by big business. E.g. providing excellent customer service, customer saver schemes and sponsoring local events.

Question 34

What type of products is niche marketing used for?

Answer 34

• local-area TV stations
• high-end sports cars
• luxury chocolate
• boutique clothing

Question 35

Adv of niche marketing?

Answer 35

• targets specific customer type

- less expensive than mass marketing

Question 36

Disadv of niche marketing?

Answer 36

• can potentially attract many competing firms

- potential for sales is much lower than mass marketing

Question 37

What is the difference between business-to-business marketing and business-to-consumer marketing?

Answer 37

Business-to-business is aimed at very few buyers, and business-to-consumer can be for almost anyone.

Question 38

Why is customer loyalty important?

Answer 38

It represents repeat business.

Question 39

Examples of customer loyalty schemes?

Answer 39

• loyalty/point cards
• saver schemes
• excellent customer service

Question 40

What are loyalty cards?

Answer 40

Non commonplace in most supermarkets, loyalty cards allow customers to collect points every time they shop and then receive discounts. In-store offers are often made available to members-only too, which can encourage more people to join.

Question 41

What are saver schemes examples?

Answer 41

Coffee shops - Free drink for every ten bought

Online marketplaces - Free shipping when customers make a certain amount of purchase

Question 42

What are some problems with consumer loyalty?

Answer 42

• Convenience
• Price
• Indifference

Question 43

Why is convenience a problem with loyalty?

Answer 43

A customer may simply be making repeat purchases because it is the closest business to them, if another opens up closer, they may go there instead.

Question 44

Why is price a problem with loyalty?

Answer 44

The consumer may only be loyal for the price, and therefore change their loyalty if a competitor offers a lower price.

Question 45

Why is indifference a problem with loyalty?

Answer 45

For example with mobile phone/Internet providers, a consumer may only stay with their provider because there are so many things happening in their life that they don’t consider changing.