1C Flashcards
Design mix triangle
Function, aesthetics, cost
How is function important
A product must be fit for purpose which means it must be capable of doing the job that it is sold to do.
How are aesthetics important
Products and services should provide sensory stimulation in addition to performing a function.- This can include size, appearance, shape, smell or taste.
How are costs important
Designers need to choose materials and processes that minimize costs in order to reach profit.
Types of brands
Individual-Marmite, brand family-Cadbury, cooperate brand-Nestle
4 Benefits of strong branding
Added value, Charging premium price, reduced price elasticity and combatting discounters
Benefits of added value
A strong brand can increase the value of the product or service in the eyes of the consumer- making it more competitive. Buying the product gives you the ‘power’ of the brand.
Strong branding leads to charging a premium price
Customer loyalty builds up so businesses can increase prices without losing customers to competitors.
Strong branding leading to reduced price elasticity
a strong brand has fewer close substitutes.
USPs?
Improves product differentiation
Advertising
Spreading the word about brand and product
Sponsorship
The majority of sponsorship spending is in sport- it is used to create positive PR
Digital media
Easy way to target customers through pocket.
Changes to branding
Viral marketing- Encouraging people to pass on messages to others about a product electronically
Social media- increased funding spent on social media promotion
Emotional branding- to create a love affair between the customer and the product or service.- Christmas adverts
Definition of pricing
The process is the choice of pricing strategy that a business makes when setting prices for their products and services.
Pricing strategy depends on
The product or service itself
Competitors in the market
The aims and objectives of the business
Cost plus pricing
Seeks to set a price for a product or service which covers the costs and provides a good profit margin.
The most logical approach to pricing is because it achieves the business objective of maximizing profits.
+- of cost-plus pricing
+ Protects the profit margins
+ Easiest method of pricing to apply
+ Easy to estimate profit levels
-This method does not take into account the prices of competitors.
Skimming pricing
Used when launching a new product. Price is set high creating high profits and can be used to pay back r&d costs. Usually used in technological or very innovative products which have few competitors.- As competitors enter market price is reduced.
+- for Skimming pricing
+Upmarket image
+Early buyers pay premium, higher profits to pay for r&d
-Cheaper imitation of products can take away sales
-Risky strat as consumers may be put off by high price
Competitive Pricing
Some products or services are priced in line with competitors- meaning customers will have to judge a product or service on nonprice factors such as quality of service or speed. Strat is usually used where products in a market are all very similar.
+- of competitive pricing
+useful in a market where a brand is dominant, The other brands would need to discount and offer lower prices encouraging customers.
-Cant match competitive rates, smaller businesses can’t reach the same economies of scale as large ones.
Penetration pricing
Setting prices really low on a new product to encourage sales and to persuade customers to try the product. Then when they like the product and have to keep buying it the business raises the prices.
Lower prices give business higher market share.
+- of penetration pricing
+Works best with new products being launched to encourage consumers to try products.
-Consumers may have bought anyway even without low price-loss of profit.
Expensive as it eats into profit, reducing sales revenue.
What is predatory pricing
In oligopolies(markets with few large businesses) Aggressive price cutting is used to deter competitors and drive them out of the market. Businesses may be able to carry on charging low prices.
What is predatory pricing
In oligopolies(markets with few large businesses) Aggressive price cutting is used to deter competitors and drive them out of the market. Businesses may be able to carry on charging low prices.
+- of predatory pricing
+discoruage competition
-depends on PED, if inelastic then wont make difference
-Very expensive and can take a long time
What is psychological pricing
This means pricing the product at $1.99 rather than $2.00 to appear cheaper
+- of psychological pricing
-Can be high risk if comparable to products at lower price.
