2.2 - Making marketing decisions Flashcards
2.2.1 - Product 2.2.2 - Price 2.2.3 - Promotion 2.2.4 - Place 2.2.5 - Using the marketing mix to make business decisions
2.2.1 - What is the design mix?
The three aspects that make up the design of a product:
- Aesthetic (How does the product look, feel or taste?)
- Function (What problem the product solves?)
- Price (Can it be manufactured and sold or prices that make a profit?)
2.2.1 - What is the first stage of the product life cycle?
Introduction:
- Will involve high costs in research and development
- 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
- Little-to-no cash flow
2.2.1 - What is the second stage of the product life cycle?
Growth:
- Enjoying rapid growth in sales and profits
- The customers are aware of the product and demand is high
- High cash flow
2.2.1 - What is the third stage of the product life cycle?
Maturity:
- Face intense competition now all the producers have joined the market.
- Sales are high but profits are starting to fall.
- Products have to be discounted to keep sales high
- Highest cash flow
2.2.1 - What is the fourth and final stage of the product life cycle?
Decline:
- May be limited in production.
- Profits and sales have fallen.
- The product may be withdrawn from sale.
- Low cash flow
2.2.1 - What are examples of extensions strategies and why may they be used?
Extension strategies extend the life of a product (usually through the maturity phase) to increase shelf-time and opportunity for sales.
- Advertising
- New packaging
- Explore new markets
- Price reduction
- Add new value
2.2.1 - What are examples of differentiation and why is it important?
Differentiation creates a unique brand image and promotes customer loyalty as a product stands out from its competitors This can be achieved through:
- Branding
- USP
- Location
- Design
- Customer Service
- Quality
- Product mix
2.2.2 - 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.
- The price can be lowered later on, but is high to start with to skim the profit while the product is trending.
2.2.2 - What is penetration pricing?
- Setting an initial low price for a new product so that it is attractive to customers.
- The price is likely to be raised later as the product gains market share.
2.2.2 - What is cost plus pricing?
- Cost-plus pricing is worked out by calculating the total cost to produce the product or service and then profit is added on top
- Most often used in the food industry where it is easy to calculate the exact cost of ingredients
2.2.2 - How does the way that technology affects the costs of a business, effect their pricing?
While the inital cost of machinery is high, technological advancements means that production processes have become more efficient giving a business economies of scale.
As the average costs of production fall then this can be passed on to the consumer as lower prices.
2.2.2 - What is the difference between niche and mass market?
Niche:
Unique differentiated products are more likely to be sold for higher or premium prices.
Mass:
Similar products which are sold to the mass market will have low prices to encourage sales.
2.2.2 - How may pricing change throughout the product life cycle?
- Introduction: Low prices to encourage customers to try the product.
- Growth: Small discounts to encourage purchase.
- Maturity: Prices will be at their highest as the business harvests profit.
- Decline: Heavy discounts to get last sales before withdrawal.
2.2.3 - What is advertising used for?
- Promote the brand
- Raise awareness of a product
- Remind customers how great the product is
- Persuade customers to switch
[Some A class advertising below]
2.2.3 - What is sponsorship and how is it used in promotion?
- When a business sponsors something, they are establishing an association with another organisation or event.
- That connection must make sense to the customers and enhance the reputation of the business.
2.2.3 - What are product trials and what strategies might be used alongside it?
When consumers buy a good for the first time and assess whether or not they want to buy it again.
- Public Relations
- Viral Marketing
- Free Samples
- User Testing
- Penetration Pricing
2.2.3 - What is targeted advertising?
A customer is shopping online for video games, they then click on a news site and see an advert for video games.
This is targeted advertising. Businesses can choose the audience for adverts on Facebook.
2.2.3 - What are methods of viral marketing?
- Advertising
- Social media
- Internet
- Word of mouth
- Interactive games
- Video clips
2.2.3 - What are e-newsletters?
Advertising by sending out an e-newsletter to a customer (means via e-mail). This campaign has then gone viral. The business needs to ask their e-mail customers to share the newsletter.
2.2.4 - What are retailers?
- A retailer sells goods direct to a consumer. The owner of the retail shop may have bought the goods from a wholesaler or manufacturer to sell on to the consumer
- The retailer will mark-up the price of the goods, so they will be more than they paid for them.
2.2.4 - What are e-tailers and ‘clicks and mortar’ stores?
- E-tailers are online e-commerce stores (e.g Amazon)
- Clicks and mortar stores have both online and physicla presence (e.g. Argos, Sainsburys)
2.2.4 - What are the advantages and disadvantages of retailers?
PROS:
- Going shopping is an enjoyable experience that customers can do with their friends or family
- Trying on clothes helps when buying
- Customers can have the product as soon as they have bought it (instant satisfaction)
- Retailers win when a customer needs to see, touch, try or test a product first
CONS:
- Retailers are only open during the day and customers may be too busy with work or family
- Customers may have to wait in a queue or carry heavy bags of shopping
- Customers may find it embarrassing to buy some personal items
- May charge higher prices than the e-tailers
2.2.4 - What are the advantages and disadvantages of e-tailers?
PROS:
- Can be started with a smaller investment as no premises and less staff needed
- Can sell a much larger range than a physical shop
- Can undercut competitors prices by being cheaper (no shops, less staff)
- Lots of potential to grow rapidly and reach an global marketplace
- Lower fixed costs as no shops to pay rent on
CONS:
- Hard to establish trust with the customer as no face-to-face interaction
- Website costs can be high
- Security and fraud for online transactions are an issue
- Only as strong as your distribution / delivery if this is late then it may damage your reputation
2.2.5 - How is price affected by the rest of the marketing mix?
- Products that are rarer or higher in demand will drive up price
- Places that have increased distance to travel cost more to transport the product increasing price
- Promotion may be used heavily to ensure that its acceptable to charge high prices
2.2.5 - How is product affected by the rest of the marketing mix?
- Customers may demand lower prices so the quality of products may be reduced to match this
- Customers demand products to be accesible from new places e.g. digital download
- Products may have to be adapted to fit new promotion techniques
2.2.5 - How is place affected by the rest of the marketing mix?
- Products that need to be tried and tested before purchase need to be sold in retail stores
- Products with higher prices will be sold in high-end areas to match its target market
- More influential promotion will increase the range of where products can be sold
2.2.5 - How is promotion affected by the rest of the marketing mix?
- Older products may need more promotion to, for example, extend its life and clear all stock.
- Places such as discounter shops will expect products to constantly have promotional sales -
- Higher priced products that target a niche market will benefit more from PR reviews in magazines (niche promoting)
