2.2 - Making Marketing Decisions Flashcards
1
Q
What is the marketing mix important for?
A
+They’re important for established businesses as well as small businesses.
2
Q
What do the different parts of the marketing mix affect?
A
The different parts of the marketing mix affect each other.
3
Q
What different elements make up the marketing mix?
A
- Product [a good or service],
- Price
- Promotion
- Place
4
Q
What can a business use the different elements of the marketing mix for?
A
+A business can use the different elements of the marketing mix to make decisions about the business.
+By having the right combination of the four elemens, a business can have an advantage over competitord [called competitive advantage], by attracting and selling to more customers.
5
Q
What are the downsides of the marketing mix?
A
+However, the different elements of the marketing mix can affect each other - this may mean that a business will have to make a compromise between the different elements.
+For example, a business may have to charge a high price for high quality products.
6
Q
What will the method of distribution also affect?
A
+The method of distribution of a product will also affect its pricing and promotion.
+Products sold online are likely to be cheaper than those sold in stores since the business may have lower fixed costs [eg. rent].
+Hight-street retailers are likely to use displays in their store fronts to attract customers, whereas businesses that sell products online may use more online advertising.
7
Q
What will the quality and price of a product also affect?
A
+The quality and price of a product will also affect how it is promoted.
+If a product is of low quality but is quite cheap, then price may be emphasised in promotional material.
+However, if the product is of higher quality or is more expensive, then the promotional material may emphasise its quality.
8
Q
What can differentiation attract?
A
Differentiatiation can attract customers
9
Q
What is differentiation?
A
+Differentiation is about making your products or services distinctive in the market [eg. by changing elements of the marketing mix].
+These differences should make customers want to buy your product instead of competing products.
10
Q
Why might a company not be able to differentiate itself for long?
A
+A compay may not be able to differentiate itself for long - competitors may copy the idea which removes their competitive advantage.
11
Q
What happens without differentiation?
A
+Without differentiation, customers will think your product is identical to others.
12
Q
What is one way to differentiate your product?
A
+One way to differentiate a product is to give it a unique selling point [USP].
+This could be a special feature or a service provided by the company, such as fast delivery.
13
Q
How can you differentiate a product by promotion?
A
+You can promote your product in a way that makes it seem different, even if it’s not.
14
Q
How can you differentiate a product by price?
A
+You can also change the price of the product.
+Cheaper usually means more appealing to a mass market, but it also means less profit per unit sold.
+Having a really expensive product can actually make it appear much more luxurious than competitors’ products and more appealing to a niche [small and specialised] market.
15
Q
What is hugely important for product differentiation?
A
+Product design is hugely important for product differentiation.
+The design mix has three main ingredients.
16
Q
What does the design mix consist of?
A
- Function
- Cost
- Aesthetics
17
Q
What is the ‘function’ aspect of the design mix?
A
+The design must be fit for purpose.
+A car without an engine would be a non-starter.
+Unique features can also help - a razor with seven blades shaves better than a razor with one. Probably.
18
Q
What is the cost aspect of the design mix?
A
+A good design will lead to low manufacturing costs.
+This means higher profits.
19
Q
What is the aesthetics aspect of the design mix?
A
+Aesthetics [appearance] - a good product should look attractive and distinctive.
+Packaging can also help a product to stand out [and protect it till it reaches the customer].
20
Q
What will firms with even the greatest products find?
A
+Even firms with the greatest products will find that they don’t sell well forever - all products have a life cycle.
21
Q
How does demand for a product change?
A
Demand for a product changes over time
22
Q
What do all products go through?
A
+All products go through the same life cycle - but the sales life of some products is longer than others.
+For example, the sales life of most cars is about ten years, but the sales life of many computer games is only a few months.
+Whatever the product, its marketing mix will need to change during its life cycle.
23
Q
What is Research and Development?
A
+Research and Development [R&D] is the first stage of a product’s life cycle.
+It is used to develop an idea and turn it into a marketable product.
24
Q
Why is Research and Development so important?
A
- Scientific research is often vital for product development - A lot of scientific research is done in universities [It’s often pure science - without any kind of commercial aim].
- Large businesses often then have teams of “applied” scientists, who try to use recent scientific discoveries to develop new or improved products to sell.
- One aim during product development is to find the most cost-effective materials and methods to use.
25
What comes after research and development?
+Introduction comes next - the product is launched and put on sale for the first time.
+This is usually backed up with lots of advertising and sales promotions.
+Place is also an important P here - there's no point in launching a product in places where nobody will be interested in buying it.
26
What comes after introduction?
+Growth - During this phase, demand increases, until the product becomes established.
27
What comes after growth?
+Maturity - Demand reaches its peak during this stage.
+Promotion becomes less important - businesses will continue to advertise the product, but less than at its launch.
+As the product's popularity grows, businesses will try to make the product more widely availible.
+Towards the end of this phase, the market becomes saturated and there's no room to expand.
28
What happens as demand for products increases?
+As demand for a product increases, sales for a product increases, sales of the product will also increase, and vice versa.
29
What happens after maturity?
+Decline - Eventually demand starts to fall as rival products take over.
+The life cycle is linked to the cash flow of the business during the life of the product.
30
What happens to cash flow in development and introduction?
+The firm spends money on research and promotion, but sales of the product are usually low.
+The business will expect to make a loss during these stages.
31
What happens to cash flow in growth and maturity?
+The business will hope to earn enough money to pay back their initial investments and make a profit.
32
What happens to cash flow in decline?
+The firm will probably spend less money supporting the product - and as sales fall, it will begin to make a loss, unless it stops making the product.
33
What happens to sales of products over time?
+Over time the sales of products may eventually decline.
+But there are lots of things that businesses can do to keep their products selling.
+These are called extention strategies - they drag out the life of a product to the bitter end...
34
What may firms try to extend?
+Firms may try to extend the life of products in decline
+Although the sales of products will eventually decline, firms can take action to extend their life.
35
Which phase of the life cycle may firms decide to use an extension strategy?
+They might decide to use an extension strategy during the decline phrase of the life cycle.
36
What happens if the extension strategy works?
+If the extension strategy works, the product will make profit for longer.
+However, it means spending more money on the product - this takes away cash from other parts of the business.
37
What do firms have to strike a balance between in extension strategies?
+Firms have to strike a balance between investing money in supporting old products and in designing new ones.
38
What are there several types of?
There are several types of extension strategy
39
What are the ways that firms can extend the life of their products?
+There are lots of ways that firms can extend the life of their products, for example:
* Adding more or different features
* Using new packaging
* Targeting new markets
* Changing advertisements
* Lowering price
40
How can adding more of different features extend the life of a product?
+Adding new features may increase demand for the product by making it more useful or more appealing to customers.
41
How can using new packaging extend the life of a product?
+Creating a new packaging design for the product may make it more eye-catching, so that customers are more likely to see it and choose it over competitors' products.
+A new image for the product may also attract a new target market.
42
How can targeting new markets extend the life of a product?
+Businesses can find new markets for their products, eg. a different age group of country.
+They can target their promotional material at the new markets to extend the life of the product.
43
How can changing advertisements extend the life of a product?
+By running a new advertising campaign, businesses may be able to make more people aware of the product, or promote it in a way that makes it more appealing to the original market or to a new market.
44
How can lowering price extend the life of a product?
+Businesses can reduce the life of the product, or use special offers or competitions.
45
What are several of the extension strategies related to?
+Several of these extension strategies are related to each other.
+For example, changing the packaging of the product may help to target a new market.
+Businesses may use a combination of several strategies.
46
What can certain life cycle extension strategies be more beneficial than?
+Certain strategies may be more beneficial to a business or a certain situation than others.
47
Give an example of a business using extension strategies to extend the life of the product.
* Bubbletime is a company that sells shower gels and shampoos.
* One of its shower gels for babies entered the decline phase of its life cycle.
* Therefore, the company decided the rebrand the product as a shower gel for people with sensitive skin.
* It designed new packaging and also changed TV adverts and posters for the shower gel, so that they were targeted towards all ages with sensitive skin.
* This meant that the company was able to extend the life of the product.
48
What do businesses need to think about when setting prices?
+Businesses need to think about demand when setting prices
49
What do most businesses aim to make?
+Most businesses aim to make a profit - this means that the money they get from selling their products has to be more than the business's costs.
+The easiest way to do this is to make the price of each product higher than the total cost of making.
50
What does the total cost of making a product include?
+The total cost of making a product includes the cost of getting it to market too - eg. marketing and distribution costs.
51
What will firms need to think about what price affects?
+However, firms need to think about how the price of a product will affect demand [the quantity of a product that customers are able and willing to buy].
+As prices rise, demand for a product tends to fall.
+So firms need to make sure that the price of a product isn't so high that they won't sell many.
52
Sometimes, what will firms need to do to get a decent level of demand for the product?
+Sometimes, a firm may need to set the price of a product lower than the total cost of making it so that there is still a decent level of demand for the product.
+In this case the firm may have to rely on making lots of profit on other products in its portfolio so that it doesn't go bust.
53
What factors influence pricing decisions?
+Internal and external factors influence pricing decsions.
+There are many factors to consider when deciding on the price of a product - some of these factors are internal [controlled by the business] and some are external [not controlled by the business].
54
What are the internal factors that influence pricing decisions?
* Technology
* Method of production
* Product life cycle
55
How is technology an internal factor that can influence pricing decsions?
+The technology used by the business in every step of its process of making and marketing the product will affect pricing.
+For example, if expensive machinery is needed to make the product, then this may increase the price that it needs to be sold at in order to make a profit.
+However, in the long-term, machinery may help to reduce costs since, eg. processes may be more efficient or fewer employees may be needed.
56
How is the method of production an internal factor that can influence pricing decsions?
+Flow production may require expensive machinery but it will also be more likely to benefit from economies of scale compared to job production so products may be cheaper.
57
What is flow production and job production?
+Flow production involves making lots of identical products on an assembly line.
+Job production is when individual products are made one at a time.
58
How is the product life cycle an internal factor that can influence pricing decsions?
+Where a product is in its life cycle will affect its price.
+For example, when the product is in the introduction and growth phases a firm may charge a very low or very high price to encourage people to buy it.
+When it's in the maturity phase, a firm may need to bring its price in line with competitors' prices.
+When it's in the decline phase, the firm may need to reduce the price in order to increase demand for the product again.
59
What are the external factors that influence pricing decisions?
* Competition
* Market segements
* Cost of raw materials
60
How is competition an external factor that can influence pricing decisions?
+If the product is sold in a competitive market, the firm needs to look at what competitors are charging for similar products.
+If a firm puts its prices too high, customers will just choose a competitor's product.
+If it puts prices too low, customers will query whether the quality is as good as its competitors'.
61
How are market segments an external factor that can influence pricing decisions?
+The nature of the market segment that a product is being targeted at will affect its price.
+For example, if the product is aimed at a segment with a high income, its price will be higher than a similar product aimed at a segment with a lower income.
62
How are the cost of raw materials an external factor that can influence pricing decisions?
+This will affect the cost of each unit [individual product].
+High quality raw materials will lead to high unit costs and so high prices will be needed to cover these costs.
63
As it grows, what is a business's pricing decisions likely to do?
+A business's pricing decisions are likely to change as it grows.
+Eg. once it has developed loyal customers and a good reputation, it might be able to increase prices without demand falling too much.
+On the other hand, as a business grows it can benefit from economies of scale - this means that the average cost of making each product falls, so the business can afford to lower prices.
64
What are the five pricing strategies businesses can use?
1. Price Penetration
2. Loss Leader Pricing
3. Price Skimming
4. Competitive Pricing
5. Cost-Plus Pricing
65
What is Price Penetration?
+This is where a firm charges a very low price when a product is new to get lots of people to try it.
+It's a good way to establish a market share for a product in a competitive market.
+The product will make very little profit at first but once it has become established the firm increases the price.
+Loyal customers should continue to buy the product despite the price increase.
66
What is Loss Leader Pricing?
+This is when the price of a product is set below cost - the firm doesn't make a profit on it, but the idea is that customers will buy other products as well [which it does make a profit on].
+Eg. games consoles are often priced below cost but firms make profit on games that go with them.
67
What is Price Skimming?
* This is where firms charge a high price to begin with - they can usually do this when they know there will be a high demand for the product [eg. goods that use new technology and have a desirable USP, such as smart TVs].
* It often works for established firms as they'll have loyal customers who will be willing to pay.
* The high price helps the firm to increase revenue and to cover any research and development costs.
* Once the product's established, the firm lowers the price to help it become a mass-market product.
68
What can having a high price also help make the product?
+Having a high price also helps to make the product more desirable to people with high incomes, or to a more niche market [eg. professionals].
+This can help to improve the firm's image and status.
69
What is competitive pricing?
+This is when the firm has to charge similar prices to other firms.
+It happens most when there is lots of choice and much differentiation - eg. petrol.
+The firm may make very little profit and have to find ways other than price to attract customers.
70
What is cost-plus pricing?
+Firms may use this method if they're not in price competition with other producers.
+The firm works out the total cost of making the product, and then adds on a certain amount depending on how much profit they want to make while still having reasonable demand.
+There are two main ways this can be done;
71
What are the two main ways cost-plus pricing can be done?
* Using a Mark-up
* Using a profit margin
72
How can you use a mark-up for cost-plus pricing?
+Work out how much the product costs and then add a percentage mark-up.
+So if the product costs £2 to make, and you want a 25% mark-up, you'd sell it for £2 + 25% = £2.50.
73
How can you use a profit margin for cost-plus pricing?
+Work out how much the product costs and increase it to get the profit margin you want.
+So if the product costs £2 to make, and you want a 20% profit margin, this means that £2 is 80% of your required selling price.
+So 80% = 200p, 1% = 200 ÷ 80 = 2.5p, 100% = 2.5p x 100 = 250p. So you'd sell it for £2.50.
74
What is a mark-up and profit margin expressed as?
+Mark-up is expressed as a % of cost
+Profit margin is expressed as a % of the selling price.
75
What is promotion basically?
+Promotion is basically when firms big-up a product so that customers notice it and want to buy it.
76
What is good branding?
+Good branding is important
77
What is a firm's brand image?
+A firm's brand image is the impression that customers have of the firm or products sold by the firm -eg. the firm may have a reputation for high quality, luxury products.
+There may also be a recognisable logo that customers associate with the company or products.
78
What happens to products with a strong brand image?
+Products with a strong brand image are easily recognised and liked by customers.
+A strong brand image is usually built up over a number of years.
+It's important that a firm's products, prices, methods of promotion, and the places they sell in all build the right brand image.
79
What brand images may a firm create?
+A firm may create different brand images for different products to target different market segments.
+Eg. a skincare company may market some products to women and others to men.
80
What can developing a brand image and promoting products be for a business?
+Developing a brand image and promoting products is expensive for a business, but both should increase the revenue of a firm - through first time purchases and repeat purchases.
+The business will have planned for this increase in revenue to cover the costs of promotion and branding.
81
How can firms promote their products?
+Firms promote their products by advertising
82
What is one way a business can establish a good brand image?
+One way a business can establish a good brand image is through effective advertising.
83
What is advertising?
+Advertising is any message that a firm pays for which promotes the firm or its products.
84
What are the different methods of advertising?
* Newspapers
* Magazines
* Posters
* Leaflets
* Television
* Internet
85
How are newspapers a method of advertising?
+Local ones can reach a market segment in a specific geographical area and national ones can reach a wide audience.
+They're printed often so they're a good way to promote temporary offers.
+However, the print quality is usually poor and the number of people reading newspapers is declining.
86
How are magazines a method of advertising?
+Magazines are often aimed at a particular market segment [eg. people in the same age group or people with similar hobbies].
+Businesses can use adverts in these magazines to target these specific market segments.
+Magazine adverts can be pricier than newspaper adverts, but they're better quality and people tend to hang on to magazines for longer.
87
How are posters and billboards a method of advertising?
+Posters and billboards can be placed near a target audience, stay in place for a long time and be seen daily by lots of people.
+But people might not look at them for long, so messages need to be short.
88
How are leaflets, flyers and business cards a method of advertising?
+Leaflets, flyers and business cards are cheap to produce and distribute.
+They can be targeted at certain areas [which is useful for targeting a market segment in a particular location] and people can keep them until they need information.
+But many people see them as 'junk' and throw them away quickly.
89
How are television adverts a method of advertising?
+Television adverts can be seen by a wide audience and include sounds and moving images.
+They can deliver long messages and help to emphasise the firm's image.
+On the downside, they're very expensive.
90
How are internet adverts a method of advertising?
+Internet adverts can be seen at any time by a large, targeted audience, can include sounds and moving images, and customers can visit the firm's website immediately after viewing the advert.
+However, there are so many adverts online, people may stop looking at them properly or choose to block them.
91
What can businesses sponsor?
Businesses can sponsor organisations and events
92
What can firms sometimes give money to?
+Firms sometimes give money to organisations and events - eg. schools, TV production firms and exhibitions.
+In return, their name is displayed by the organisation or at the event.
+This is called sponsorship.
93
How might firms sponsor sport?
+A large firm might stamp its brand name all over international competition.
+A smaller firm might only be able to afford to sponsor the local Sunday League team, but the aim is the same.
94
How might firms sponsor television?
+Some soap operas and weather reports are sponsored by well-known brands.
95
What can a sponsorship create?
+Sponsorship can create a high profile for your business or brand name, it's also a good way to target a market segment that is characterised by lifestyle [eg. hobbies].
+But if the thing you're sponsoring starts to get bad publicity, your company's image might suffer too.
96
What is sales-promotion?
Sales Promotion is a short-term method used to boost sales.
97
What are two examples of types of sales promotion?
* Special offers
* Product trials
98
How are special offers a type of sales promotion?
+Businesses may offer a discount on the product for a limited period of time, or two products for the price of one.
99
How are product trials a type of sales promotion?
+Eg. cafés may offer free samples of new food or drink to get customers interested and to persuade them to buy the new products in the future.
100
What is an advantage of sales promotion?
+An advantage of sales promotion is that it should encourage new customers to try a product.
+This will boost sales in the short term but could also increase sales in the long term if customers like the product and continue to buy it once the promotion has ended.
101
What is a disadvantage of sales promotion?
+A disadvantage of sales promotion is that customers get used to seeing products on promotion and may be reluctant to buy them at other times.
+Also, using regular sales promotions might not be suitable for certain market segments.
+Eg. it might make a product in a luxury market seem like less of a luxury item, so it won't be useful for targeting a higher income segment that are looking for luxury.
102
What can firms also use for promotion?
+Firms can also use new technology for promotion
103
What opportunities does technology provide for promotion?
+Technology provides many opportunities for promotion.
+Eg. firms can create social media accounts which advertise their products and improve their brand image.
+They are also able to make separate accounts for different parts of the business, and so may be able to target specific market segments.
104
What can an individual's search history be used to create?
+An individual's search history can be used to create targeted advertising.
+Web pages have spaces for adverts, but the adverts found in these spaces will depend on what an individual has searched for in the past.
+So the adverts will be more likely to be something that the individual is interested in, and therefore will be more effective.
+Technology can also track an individual's location for use in targeted advertising - although some individuals dislike this, and may be put off by the brand.
105
What is viral advertising?
+Viral advertising is when adverts are shared on social media are viewed many [perhaps millions] of times in a short time period.
+This is good for targeting segments of a market that use social media frequently [eg. younger age groups].
106
What is a business's mailing list?
+As well as social media and targeted advertising, individuals may also decide to be part of a business's mailing list.
+This means that they will get e-newsletters from the business about promotions and offers.
107
What must the place where products are sold be?
The place where products are sold must be suitable
108
How can a business make sure that their products are availible to consumers in the right place?
+To make sure that a business's products are availible to consumers in the right place the business needs to choose the most appropriate method of distribution.
+This depends on things like where the consumer is likely to shop, how many consumers they want their products to reach, how quickly they want the product to get to the consumer, and how much customer service the consumer will need.
109
What can the methods of distribution include?
+Methods of distribution can include retailers [these sell products to consumers, eg. from a corner shop] and e-tailers [these are companies that sell products online - ie. that use e-commerce].
110
What are high street retailers likely to have?
+High-street retailers are likely to have employees on hand who customers can talk to, which is less likely for e-tailers, so selling products via retailers may mean that better customer service is provided.
111
What are the advantages of e-tailers?
+E-tailers have many advantages.
+For example, they can sell to a global market - this means that they will have more potential customers than if they used stores.
+They will also have lower fixed costs than retailers, since they won't have to pay to have stores open - this may mean that they can charge less for products.
