2.2 - making marketing decisions Flashcards
product, price, place, promotion, using marketing mix to make business decisions
parts of the design mix
- function
- aesthetics
- cost
_ all to appeal to different target markets
what is cost in the design mix
how cost-effective it will be to manufacture
phases of the product lifecycle
- introduction
- growth
- maturity
- decline
what is a product portfolio
range of goods and services offered by one business
uses of the product life cycle
- how dynamic the market is (rate of change)
- how strong the brand image is
why do business make a product life cycle
- another way a business can make PRODUCT DECISIONS
- plots SALES OF A PRODUCT through the stages of its life
the 5th part to the product life cycle =
extension strategies
ways of extending the life cycle of a product
- product differentiation
- reducing the price of the product
- rebranding the product
- repositioning the product
- increasing marketing activity
EXTENDING PRODUCT LIFE CYCLE - how does reducing the price of the product extend the life of a product
- if price is reduced
- customers may continue to buy it OR switch from competing products
- as there may be lots of competition during maturity
(where the business can’t charge as high prices)
EXTENDING PRODUCT LIFE CYCLE - how does rebranding the product help extend its life cycle
- new packaging can appeal to new customers OR convince previous customers to buy again
EXTENDING PRODUCT LIFE CYCLE - how does repositioning the product extend its life cycle
- this involves exploring new markets
- make it appeal to new audiences
-> testing new uses, adding value
EXTENDING PRODUCT LIFE CYCLE - how does increasing marketing activity extend the life cycle of a business
- new advertising campaigns and sales promotions can attract new customers OR remind previous customers that the product still exists
- encouraging more customers to buy the product
EXTENDING PRODUCT LIFE CYCLE - how does product differentiation extend the life cycle of a product
- means making a product stand out from its market competitors
- ensuring a product has a good USP
ways of differentiating a product
- unique features
- unique style or design
- distinctive brand
- consistently excellent service
- high quality
example of a product differentiation question
one method starbucks could use to differentiate their products from that of their rivals is:
- having unique style or design features (context)
-> customers wanting to purchase from starbucks as they notice it more from competitors
-» beat competitors and gain more market share
pricing strategies for a business
- cost of making the product
- quality of product
- brand image
- demand and supply of a product
PRICING STRATEGIES - why should businesses consider the cost of making the product
- should set the price to be greater than the unit cost
-> to ensure the product is profitable - as long as customers are willing to pay that price
PRICING STRATEGIES - why should businesses consider the quality of the proudtc
- consumers expect to pay more for a high quality product
- charging a higher price may give the impression the product has a higher quality when it may not be
(increasing quality also may increase the price) - customers pay less for lower quality
PRICING STRATEGIES - why should a business consider the brand image of the product
- brand product often has higher price than non-branded as maintaining the brand image requires lots of money
-> on things like marketing activity and consistent level of quality - customers will pay more for a brand - popular or good reputation
PRICING STRATEGIES - why should business consider the demand and supply of a product
- high demand means customers may be more willing to pay more for it
- so businesses can charge a higher price for popular products
what is high volume pricing strategy
pricing low to achieve a high volume of sales but at a low profit margin
what is low volume (HIGH MARGIN) pricing strategy
- pricing high while accepting there will be a low volume of sales but at a high profit margin
what includes high volume pricing strategies
- producing lots of products at a low cost
- large market share means materials can be purchases cheaper
- usually for simple products
- high volume allows reduced production costs and therefore lower prices
what includes high margin (low volume) pricing strategies
- adding value
- product becomes premium therefor high price can be charged
- lower sales volumes but higher profit margins
- high price gives customers the opinion the product is exclusive
factors that influence pricing strategies
- changes in technology
- number of competitors
- market segments
- where a product is in its life cycle
FACTORS INFLUENCING PRICING STRATEGIES - changes in technology what is a freemium pricing model
- access to basic version of a product is provided free of charge with additional features being made available as costly addons
FACTORS INFLUENCING PRICING STRATEGIES - advances in technology
- affected frequency that businesses review their prices
- consumers have immediate access to pricing information
-> and can check online prices
-> price comparison websites, and checking prices in stores vs online
FACTORS INFLUENCING PRICING STRATEGIES - what do changes in technology mean businesses may have to do
- be more flexible in setting prices
- change them more often
FACTORS INFLUENCING PRICING STRATEGIES - how do technological advances benefit a business
- they can use technology to monitor levels of customer demand
- and identify when they might be able to increase prices
FACTORS INFLUENCING PRICING STRATEGIES - number of competitors
- in competitive markets businesses often compete on price
- especially when selling similar products
FACTORS INFLUENCING PRICING STRATEGIES - what marketing segments do businesses need to think about
- the kinds of consumers their products are aimed at
FACTORS INFLUENCING PRICING STRATEGIES - how does a niche market segment affect the pricing strategies of a business
- charge higher price
- expecting lower sales volume
- as number of competing products is likely to be small
FACTORS INFLUENCING PRICING STRATEGIES - how does a mass market segment affect the pricing strategies of a business
- set prices at lower level
- as they will expect a high volume of sales
FACTORS INFLUENCING PRICING STRATEGIES - how might a business price its product in the introduction stage (for generic products)
- use low starting price to encourage sales
- high volume but at low profit margin
FACTORS INFLUENCING PRICING STRATEGIES - how might a business price its product in the growth stage (for generic products)
- prices rise as it becomes more established
- OR keep the price down to maintain sales
FACTORS INFLUENCING PRICING STRATEGIES - how might a business price its product in the decline stage (for generic products)
- offers
- switch to high volume, low price strategy to maintain sales
FACTORS INFLUENCING PRICING STRATEGIES - how might a business price a product with a USP INITIALLY
- high price
- accepting a low volume of sales
- but high profit margin
- as there is little competition
FACTORS INFLUENCING PRICING STRATEGIES - how might a business price a product with a USP during maturity
- may face competition at this point
- may no longer be able to charge high prices
- if it reduces its price existing customers may continue buying and other customers may switch form competing products
