2.2 Making marketing decisions Flashcards
Design mix
Aesthetics
Cost
Function
Product life cycle stages
Development
Introduction
Growth
Maturity
Decline
Development
-Focus is on designing and developing product - high costs for research, development, and testing
- Cash flow is generally negative during this period, company is investing big amounts, marketing strategy is creating awareness
Introduction
-Begins when product is launched, generally slow sales
-Negative cash flow, marketing efforts are put in to raise awareness
Growth
-Enters a stage where sales start to increase rapidly, business focus shifts to building market share and increasing production to meet the growing demand
-Positive cash flow, marketing strategy is to differentiate the product from its competitors and build brand loyalty
Maturity
-Slow sales as product reaches its peak
-Cash flow positive, sales revenue continues to come in and costs are reduced through economies of scale and efficient production processes, business may find new markets
Decline
-Product becomes obsolete or is replaced by new products
-Negative cash flow, marketing strategy of discontinuing the product, reducing its price to clear inventory
Extension strategies
Product
Promotion
Generally happens during decline
Product related extension strategies
Improving products
Promotion related strategies
Changes to advertising
Sale promotions - loyalty programs
Price promotions - like offering discount prices
Product differentiation
-Product differentiation is an attempt by a business to distinguish its products from those of competitors
-Strong differentiation helps a business develop their competitive advantage, if it is successful business, it can help a business increase their demand for its products, increase brand loyalty and allow the business to charge higher prices
Pricing strategies
High margin, low volume - profitable
High margin, high volume - growth
Low margin, low volume
Low margin, high volume - strategic
Price skimming explained
The selling price is high then gradually lowered over a period of time, mostly used when businesses have a strong brand identity
Penetration pricing explained
Business sets a low price for a product and one the business starts to get lots of customers they increase the price
Factors influencing on pricing strategies
Technology
Competition
Market segments
Product life cycle
Technology
-Freemium pricing model is where people can get a app or game or product for free but will have to pay for premium and additional features which will generate a high profit margin
-Businesses may use technology to monitor levels of customers demand
Competition
In highly competitive markets businesses may need to set their prices low to remain competitive and in less competitive markets they can increase the prices
Market segments
When setting prices, businesses also have to take into account the kinds of consumers their products are aimed at. In a
niche market , business will charge a higher price with lower sales volume, as the number of competing products is likely to be small. In contrast, businesses selling to a mass market are likely to set prices at a lower level as they will expect a high volume of sales.
Product life cycle
Introduction - Low prices
Growth - High prices as demand for product increases
Maturity - Low prices
Promotion strategies
Advertising
Branding
Special Offers
Sponsorship
Product Trials
Advertising + and –
+
Reaches Large audiences
Increase brand awareness
Spread a message
–
Many customers ignore ads
Can be expensive
The effectiveness of advertising can be hard to measure
Branding + and –
+
Branding establishes recognition and identity
Differentiates a business from its competitors
Builds trust and credibility
–
Takes time to develop
Can be expensive
Special offers + and –
+
Can quickly boost sales or customer engagement
Can help to clear out stock or promote a new product
Can encourage impulse purchases
–
Can be expensive especially if the promotion requires heavy discounting
Can attract deal-seeking customers who may not be loyal to the brand
May reduce sales of full price products
Sponsorships + and –
+
Can help to build brand awareness and credibility
Can support specific business objectives, such as entering new markets or reaching new customers
–
Can be expensive, especially for high profile events
May not directly drive sales
May be subject to negative publicity if the sponsored entity experiences a scandal
