2.2 - Making marketing Decisions

Question 1

What are the three elements of a design mix ?

Answer 1

Aesthetics
Function
Cost

Question 2

Explain the function element of the design mix ?

Answer 2

• it’s how well a product does its job
• how easy a product is to use
• how easy , fair or convenient the service is for someone to access and use
• improving products functionality can improve competitiveness
• allow it to target specific groups of customers

Question 3

Explain the aesthetics aspect of the design mix

Answer 3

• refers to the look , feel and visual appeal of a product
• must be attractive and appeal to customers
• for most customers aesthetics is the most important ( eg. Sofa , watches , shoes, perfume )
• huge influence on customers choice
• for some function is more important ( eg. Medicine )

Question 4

Explain the cost aspect of the design mix

Answer 4

• make sure product is financially viable

- producing product for a cost that allows business to make a profit

Question 5

Explain the advantage of cost of production being low

Answer 5

• sell products at lower price

- still make high profit margin

Question 6

Explain the disadvantage of low cost of production ?

Answer 6

• trade-off between costs and function/aesthetics
• cheaper materials = lower durability of product ( direct impact on products function )
• cheaper materials = product looks uglier ( impact on aesthetics )

Question 7

How should a business balance function , aesthetics and cost

Answer 7

• business might choose the accept increased costs of additional features
• additional costs should be covered by the value the features bring to product

Question 8

State the four stages of the product life cycle

Answer 8

Initial introduction
Growth
Maturity
Decline and discontinuation / extension

Question 9

Explain the introduction phase

Answer 9

• covers the research , development and launch of new product
• sales are low = product awareness is low ( brand reputation not well know )
• will not start to make a profit yet
• business needs to do a lot of promotion to attract attention / use special offers to attract customers

Question 10

Explain the growth phase

Answer 10

• successful during introduction phase = enter growth phase
• products becomes popular and sales increase rapidly
• important business is able to keep up with demand
• business might choose to raise price , if it believes the popularity will maintain demand even at higher price

Question 11

Explain the maturity phase

Answer 11

• growth slows down but sales still at peak
• likely to receive repeat purchases from customers , limit to number of new customers that are interested
• try to maintain sales at maturity for as long as possible ( promotion )
• sales high during maturity = business experience economies of scale + maximise profitability

Question 12

Explain the decline phase

Answer 12

• sales start to drop as product loses popularity
• might go out of fashion , replaced by tech
• business lowers price and use promotion to encourage customers to buy product again
• business has to decide to either discontinue or attempt extension strategy

Question 13

What is an extension strategy ?

Answer 13

Any action that a business can take in order to lengthen the product life cycle and encourage growth in sales during decline phase

Question 14

What are the two simplest extension strategies that a business can use ?

Answer 14

• lower prices

- increase advertising

Question 15

Describe a complex extension strategy

Answer 15

• totally rebranding the product
• modifying product , giving it a new name and logo , creating a new promotion campaign
• stimulates new demand + interest for original product or completely reposition the product in the market and target a different market segment
• introducing new varieties

Question 16

Explain how a business may differentiate its product

Answer 16

• product provides unique function , not provided by competitors
• give product a unique style or design
• create and use a distinctive brand
• provide consistently excellent customer service
• ensures products is of very high quality

Question 17

How does a differentiated product affect costs ?

Answer 17

• add value to product

- allows business to charge at higher price

Question 18

What are the two factors a business considers when setting prices ?

Answer 18

• the volume of the product

- the products profit margin

Question 19

Explain the high-volume pricing strategy

Answer 19

• producing a lot of product at a low cost in bulk( achieve economies of sales )
• common for simple , standardised products
• reduce production costs and set low price
• low profit margin , however increase number of sales

Question 20

Explain the high margin pricing strategy

Answer 20

• ( cost of making - price it sells at ) = adding value
• value asses through products quality , branding
• generate a premium product , customers willing to pay premium price
• results in low volumes ( smaller proportion willing to pay high price )
• lots of product may reduce a customers impression that the product is exclusive

Question 21

How does technology influence price ?

Answer 21

• gives flexibility ( price adjusted up and down depending on demand for products)
• in-game purchases
• easier for customers to compare prices , makes market competitive hence forces business to lower prices

Question 22

How does competition influence price ?

Answer 22

• increase competition = customers have more choice hence shop for best deal
• business set lower prices ( eg. In busy town markets where business locate close to each other )
• decrease competition = customers have less choice hence forced to buy a product at higher price

Question 23

How does mass market influence price ?

Answer 23

• mass market : large market where customers have similar needs
• lower priced because products are generic
• customers have a wide choice of similar products to choose from

Question 24

How does niche market influence price ?

Answer 24

• niche market : smaller market where customers have specific needs
• charge higher price , as they meet specialist needs for customers
• customers willing to pay more

Question 25

Why do business charge more for brand new products ?

Answer 25

customers are willing to pay a high price as they want to be first ones to own the product ( first movers / early adopters )

Question 26

What is advertising ?

Answer 26

• business pays to put out an advert in order to communicate a message to customers ( potential )
• Grab customer attention through humour , emotive language etc
• develop effective adverts through specialist advertising agencies
• through multiple medium , tV , radio , digital , print , outdoor
• expensive ( TV ) , difficult to analyse impact ad has on product sales
• large business afford Tv adverts , regional business = local radio
• choose medium that allows it to access target market

Question 27

What are sponsorship ?

Answer 27

• business supports event , activity , person or organisation either financially or providing products and services
• encourage positive consumer attitudes towards its brand and generating awareness

Question 28

What are product trials ?

Answer 28

• free access to or the giveaway of a product
• very expensive
• effective method of encouraging potential customers to sample a new product

Question 29

What are special offers ?

Answer 29

• sales promotion , boost sales over a short period of time
• entice customers into ship
• strategy to clear business stock
• take form of discounts or free upgrades

Question 30

What is meant by publicity ?

Answer 30

• any communication about a business that is created by business , customers or third party
• good publicity = generate interest in business , customers more likely to trust independent source
• can be dangerous as it can come from someone outside business
• some business use PR ( public relations ) to deal with this , help influence and manage publicity
• business spend time responding to feedback to manage publicity

Question 31

What is branding ?

Answer 31

Personality or image of a product which is generated through marketing activities
- strong brand = generate customer loyal , add value + differentiate

Question 32

How can business promote through technology ?

Answer 32

• targeted advertising on websites : banner/ side-bar adverts allow business to get exposure to potential customers
• websites able to track customer searches and use this to show advert that are linked = more relevant

Question 33

What is viral advertising ?

Answer 33

• message , video or image is distributed and shared among a lot of people on social network
• increases sales and boosts brand , generates global interest + exposure

Question 34

How can business use apps to promote its products ?

Answer 34

• Software Apps developed for smartphones and tablets
• use apps creatively to engage with customers
• gives customers access to catalogue of products , allow them to book appointments + show latest offers etc.

Question 35

How are emails and e-newsletters used to promote ?

Answer 35

• business collect small detail such as telephone and email address
• build long -lasting relationships with customers
• advert can be tailored + personalised = more effective
• e-newsletter communicate large amount of info with customers , generate positive attitude towards brand
• allows customers to access further info , immediately buy

Question 36

What is retailing ?

Answer 36

• traditional way in which products or services are distributed to customers
• selling products and services through a shop / other physical building

Question 37

Advantages of retailing

Answer 37

• allows customers to access face to face support
• gives customers chance to trial ; encourages customers ; enjoyable customer experience
• add value through excellent customer service / high street convenience
• sign of long established and trustworthy business

Question 38

Disadvantages of retailing

Answer 38

• expensive overhead costs such as rent or mortgage payments

- reduce manufacturer profit margin due to price mark up

Question 39

What is e-tailing ?

Answer 39

• products and services are sold directly to a customer through a website

Question 40

Advantages of e-tailing

Answer 40

• business does not need to own / rent a physical building
• business can access national / international market
• small business start up easily through low costs
• small business access wider target market than it would access on own ( Amazon )
• allows new markets to grow

Question 41

Disadvantages of e-tailing

Answer 41

• customer can’t check products quality before buying
• concerns about buying from fake websites
• e-tailors have to manage their own distribution costs
• business still needs to undertake extensive digital marketing

Question 42

How can a business achieve a competitive advantage ?

Answer 42

• PRODUCT : sell a product better than competitor through products design , quality , functionality etc.
• PROMOTION : business advertising campaign unique and memorable ( viral ) increase public awareness
• products brand image generated through promotion
• organise production , procurement and logistics cheaply to lower costs than competitors