2.2 Flashcards
Define the design mix
The combination of 3 elements that make up the design mix-function, aesthetics and costs (economic manufacture). These are considered when a business design the product/service in theR&D stage
What is a limit of the design mix
Bias
What is meant by function
What problem/purpose does the product or service solve? Is it durable?
What is meant by aesthetics
How does the product look, feel, sound, taste? (5 senses
Define product lifecycle
A visual tool to demonstrate the progress of a product through its lifetime, based on sales overtime
What is are benefits to a business of focusing on keeping low costs
○ Increase in profit
○ Should lead to a lower break-even point
What is are drawbacks to a business of focusing on keeping low costs
○ Reputation- assuming bad quality
○ Could mean business operates in a mass-market
What is are benefits to a business of focusing on keeping function
○ Reputation is sustainable
○ Loyal customers
What is are drawbacks to a business of focusing on keeping function
○ The purpose may only suit certain targets needs
○ High costs
○ Customers may only to buy one. Fewer sales
What is are benefits to a business of focusing on keeping aesthetics
○ Build customer attention
○ The popular brand will mean a free source of advertising
○ Increase the selling price through added value
What is are drawbacks to a business of focusing on keeping aesthetics
○ May have to spend money on ads
○ May lead to less focus on the important aspect of the functionality of product/service
Whatis the order of the product life cycle
- Introduction
- Growth
- Extension strategy
- Maturity
- Decline
Explain the introduction phase
○ 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 to yet be aware of the products
○ The business will have to invest heavily in marketing/ advertising to create awareness
Explain the growth phase
○ Products are enjoying a rapid increase in sales
○ At this stage the customers are aware of the product and demand is rising
○ The business will start to break even and begin making a profit
Explain the extension strategy phase
○ Extention strategy nay be used to try to save the product from becoming obsolete
○ At this stage, R&D will be injected into innovating the product and recreating awareness to encourage new sales
Explain the maturity phase
○ Maturity phase products face intense competition now all the producers have joined the market
○ Sales are high but profits may be starting to fall
○ Products have to be discontinued to keep sales high
Explain the decline phase
○ Decline phase products may be limited in production
○ At this stage profits and sales have fallen
○ The product may be withdrawn from sale
○ Lack of demand
○ Too much competition
What are benefits to a business of using the product life cycle
○ Identify the level of demand
○ To plan ahead
○ Spot mistake
○ Gain a competitive advantage
What are drawbacks to a business of using the product life cycle
○ Products can be affected by external factors short terms
○ Doesn’t always work un the logical stages for every product
○ Only shows sales
Define differentiation
When a business makes its products or service distinct from the competition by giving it a USP
What are the 7 ways a business can differentiate
- Branding
- Convenience
- Location
- Design
- Customer service
- Quality
- Adapt marketing mix (4Ps)
What is product design
the process of creating new products or services for firms to sell.
What is meant by the marketing-driven approach of product design
Is an approach that listens to the needs and wants of customers
Define brand image
The reputation of a company.
Define product image
The way an item looks.
What are the 3 aspects of the design mix
Function
Cost
Aesthetics
What is The stage before a product has actually been made.
Research and
development
What is The stage when sales of the product have peaked?
Saturation
What is the stage where a business launches the new product (or service) to the market
Introduction
What is The stage when the number of new customers buying the product has slowed down
Maturity
What is The stage that follows the product’s launch.
Growth
What is the stage when demand for a product begins to fall.
Decline
What may a business do to prevent its product from going into the decline stage
Extension Strategies
What are the 7 pricing strategies
- Cost-plus pricing
- Competitive pricing
- Penetration pricing
- Price skimming
- Premium pricing
- Predatory pricing
- Promotional pricing
What is cost-plus pricing
○The price is worked out by calculating the total cost to produce the product or service and then profit is added on top
What are the advantages of cost-plus pricing
Increase profit margins
What are the disadvantages of cost-plus pricing
Sales depend on customer demanding products or to pay high prices
What is competitor pricing
Some products which are very similar (like orange juice) will be priced very similar to competitors
What are the advantages of competitor pricing
Maintains stable revenue
What are the disadvantages of competitor pricing
○ More purchasing power for customer
○ The business will have to differentiate
What is skimming pricing
A product is priced high, to begin with as it has a desirability factor (novelty) that will mean customers will want it when it is new
What are the advantages of skimming pricing
Demand will be higher so the business can set their own prices
What are the disadvantages of skimming pricing
The price will decrease over time. Decrease profits long term
What is penetration pricing
This means setting prices really low for a new product or service to encourage sales and to persuade customers to try the product for the first time
What are the advantages of penetration pricing
○ Works well in competitive markets
○ Increases customer loyalty
○ Larger companies can afford to set lower prices
○ Maximize revenue
What are the disadvantages of penetration pricing
○ Lower profit margins
○ Possible perception of lower quality
What is predatory pricing
○ Existing businesses may hold off the threat of a new entrance by lowering their prices so that any competitor cannot make a profit
○ the intention is to drive competitors out of the market place or set barriers to entry to discourage
What are the advantages of predatory pricing
○ Reduces competition
○ Increases sales and market share
○ Higher quality of output
What are the disadvantages of predatory pricing
○ Very little profit margins
○ Possible lower perceptions
What is psychological pricing
This means pricing a product at £1.99 rather than £2.00 to appear cheaper
What are the advantages of psychological pricing
○ Gives the perception of added value
○ Should encourage sales
What are the disadvantages of psychological pricing
Restricts profit per item on a larger scale
What is promotional pricing
A product or service is offered for sale at a cheaper price for a limited time
What are the advantages of promotional pricing
○ Short term increases in sales
○ gives perception of lower price for quality product
○ Reduce stock levels unwanted goods
What are the disadvantages of promotional pricing
○ Increases advertising costs
○ Cannot cost-effective long term
What is premium pricing
A goods price is set at a higher price than competitors to give a perception of high quality
What are the advantages of premium pricing
○ Higher profit margins
○ Will attract customers with higher disposable income
○ Gives perception of high quality
What are the disadvantages of premium pricing
○ Smaller target markets to appeal to
○ Higher (possible) material costs
What factors influence the prices a business sets for its product/service
○ Location ○ Current economy ○ Demand ○ Income levels ○ Target market ○ Levels of market share ○ Tax levels ○ Changes in technology ○ Cost of important ○ Exchange rate ○ Competition ○ Minimum wage
What is meant by PLACE in terms of the marketing mix
Place is about making products and services available to customers when and where those customers want them to be
Define channel of distribution
Channel of distribution is the process in which the product travels from the manufacture to the end customers
What are the different ‘places’ (marketing mix)
○ Location ○ Retail ○ Wholesale ○ Mail order ○ Internet ○ Direct sales ○ Peer to peer ○ Multi-channel
Define retailer
A retailer is a business that sells goods directly to a consumer through a ‘bricks and mortar’ shop
Define e-retailer
An e-tailer is a business which sells goods directly to a consumer via the internet
What is meant by an independent retailer
Not part of a chain
What are advantages of being a retailer
○ An enjoyable experience
○ Try on clothes
○ no shipping time
○ Customers may need to test the product
What are disadvantages of being a retailer
○ Only open during the day-people are busy
○ Customers may have to wait in a queue or carry heavy bags
○ May charge a higher price-more costs
What are advantages of being an e-retailer
○ Can be started with a smaller investment as no premises and less staff needed
○ Can sell a much larger range
○ Can undercut competitors prices by being cheaper
○ Can grow rapidly and be global
○ Lower fixed costs
What are disadvantages of being an e-retailer
○ Hard to establish trust
○ Website costs can be high
○ Security and fraud for online transactions
○ Only as strong as your distribution /delivery if this is late may damage your reputation
WHat impacts where a business decides to sell
○ Proximity to the target market ○ Proximity to resources/ transport links ○ Proximity to labour ○ Proximity to competitors ○ Costs
What is promotion
Promotion is an element of the marketing mix which is used by businesses to communicate and generate awareness to its current and potential customers about their products, services or companies.
Define advertising
Businesses pay-TV companies and newspapers to have their adverts broadcasted or printed. It is used to inform, persuade or reassure.
Whatis a sponsorship
– businesses attract publicity by linking their brands with events, E.g. Capital One cup, Barclaycard Wireless festival.
What are the product trials
free miniatures and samples were given away to help collect feedback from customers
What is meant by Sales offers/promotions
incentives used to encourage people to buy products. May be used to break into a new market or reward loyal customers. Can measure success through returned voucher/coupon.
What are public relations
communicating with stakeholders to improve business image and increase sales. E.g. press release/conference.
What are the 5 types of promotion
Advertising Product trials Public relations Sales offers/promotions Sponsorship
What are the benefits of advertising
Wide coverage
Control of message
Repetition means that the message can be communicated effectively
Effective for building brand awareness and loyalty
What are the drawbacks of advertising
Often expensive Impersonal One way communication Lacks flexibility Limited ability to close a sale
What are the benefits of sponsorships
Wide coverage
Control of message
Effective for building brand awareness
What are the drawbacks of sponsorship
Often expensive Time-consuming Based on celebrity popularity Celebrity may not be admired by all If celebrity behaves badly can harm brand reputation
What are the benefits of product trials
Limited coverage – targets those who want to try
Effective for encouraging new customers
Can provide feedback to the business on customer demand
What are the drawbacks of product trials
Often expensive – lower profit margins
Costly and time-consuming to administer
Results may not be representative of the full target market, leading to inappropriate decisions
What are the benefits of Sales offers/promotions
Effective at achieving a quick boost to sales
Encourages customers to trial a product or switch brands
What are the drawbacks of Sales offers/promotions
Sales effect may only be short-term
Customers may come to expect or anticipate further promotions
May damage brand image
What are benefits of public relations
Wide coverage Control of message Effective for building brand awareness Two way communication Ability to close a sale
What are drawbacks of public relations
Often expensive
Costly
Time consuming
Based on location specific target market
Define mass market
Where a business targets the larger population where customers have generic everyday needs and wants
Define niche market
Where a business targets a smaller segment of a larger market, where customers have specific needs and wants
Define branding
A characteristic name or symbol that distinguishes one product from another suppliers
What is the benefit of having a strong brand?
Positive brand recognition – spreads word of mouth promotion
Able to charge high prices – increases profit margins
Customer loyalty – increases repeat purchases
Strong brand reputation
Customer trust – can be innovative and encourage demand with new products
How can a business use technology in promotion?
Viral advertising via social media
Apps
E-newsletters
Targeted advertising online
Define Viral advertising via social media
to generate interest and the potential sale of a brand or product through messages that spread over the internet quickly.
Define Apps
software application designed to run on a mobile device
Define E-newsletters
type of email that informs your audience of the latest news, tips, or updates about your product or company
Define Targeted advertising online
placing ads on websites based off of individual’s demographics, buying history or digital behaviors like social media follows.
