2.2

Question 1

2.2 - Design mix

Answer 1

function
aesthetic
cost

Question 2

2.2 - Marketing mix

Answer 2

price
place
product
promotion

Question 3

2.2: product life cycle steps

Answer 3

Research and development (R&D)
Introduction
Growth
Maturity
Decline

Question 4

2.2: Sales and profit during the product life cycle

Answer 4

Development and introduction - the firm spends money on research and promotion, but sales on the product are usually low. businesses will expect to make a loss during these stages.

Growth and maturity - the business will hope to earn enough money to pay back their initial investments and make a profit.

Decline - the firm will probably spend less money supporting the product.
sales will fall, it will begin to make a loss, unless it stops making the product.

Question 5

2.2: extension strategy

Answer 5

Extending the product lifecycle by:

• Adding more or different features.
• using new packaging.
• targeting new markets.
• changing advertisements
• lowering prices

Question 6

2.2: Internal factors affecting price

Answer 6

• technology
• method of production
• product life cycle

Question 7

2.2: external factors affecting price

Answer 7

• competition
• market segments
• cost of raw materials

Question 8

2.2 - pricing strategies

Answer 8

• price penetration
• loss leader pricing
• price skimming
• competitive pricing
• cost-plus pricing

Question 9

2.2: price penetration

Answer 9

starts with very low prices when a product is new so people try it.
good way to establish market share

the product will make very little profit but once its established the firm increases the price.

Question 10

2.2: loss leader pricing

Answer 10

Using loss leaders is a method of selling certain products at a loss or below market value to encourage customers to come into a business. The hope is that they will buy other full price items.

Question 11

2.2: price skimming

Answer 11

Price skimming means setting a relatively high price to boost profits. It is often used by well-known businesses launching new, high quality, premium products

Question 12

2.2: competitive pricing

Answer 12

Competitive pricing occurs when a firm decides its own price based on that charged by rivals. Setting a price above that charged by the market leader can only work if your product has better features and appearance.

Question 13

2.2: cost plus pricing

Answer 13

Cost-based (cost plus) pricing - This method of pricing is based on calculating the cost of producing the item and then adding on the percentage profit required by the company. For example, if a cake costs £1 to make and the company wants to make a 50% profit, they will sell the cake for £1.50.

Question 14

2.2: methods of promotion

Answer 14

• sponsorship
• newspapers
• magazines
• posters and billboards
• tv adverts
• internet adverts
• leaflets, flyers and business cards.

Question 15

2.2: Sales promotion

Answer 15

Special offers

product trials