3.3 Marketing mix

Question 1

What are the costs of developing a new product?

Answer 1

-Market research to identify customer needs
-Development of a new product

Question 2

What are the benefits of new product development?

Answer 2

-Charge higher prices
-Increase potential sales
-May achieve growth and economies of scale

Question 3

What is ‘brand image’?

Answer 3

general impression of a product held by consumers

Question 4

What are the purposes of ‘brand image’?

Answer 4

-Consumers recognise their product more easily
-Product can be charged higher than less well-known brands

Question 5

What are the roles of packaging?

Answer 5

-Protect product
-Give information about product
-To help consumers recognise product
-To keep product fresh

Question 6

What is the ‘product life cycle’?

Answer 6

the cycle which every product goes through from introduction to withdrawal or eventual demise

Question 7

What are ‘extension strategies’?

Answer 7

marketing activities to extend the maturity stage of a product

Question 8

Examples of ‘extension strategies’?

Answer 8

Finding new markets for product
Finding new uses for product
Adapting product or packaging to improve its appeal to consumers
Increased advertising and other promotional activities

Question 9

What are the different types of pricing?

Answer 9

price skimming
penetration pricing
competitive pricing
cost-plus pricing
promotional pricing

Question 10

What is ‘price skimming’?

Answer 10

Setting a high price for a new product that is unique or very different from any other product on the market

Question 11

Advantages + disadvantages of price skimming

Answer 11

ads:
Profit earned is very high
Helps to recover research and development costs

disads:
Laws may have been placed to stop this
Backfire if competitors produce similar products at a lower price

Question 12

What is ‘penetration pricing’?

Answer 12

Setting a low price to attract customers to buy a new product

Question 13

Advantages + disadvantages of penetration pricing

Answer 13

ads:
Attracts customers more quickly
Can increase market share quickly

disads:
Cannot recover development costs quickly
Possible loss of revenue due to lower prices

Question 14

What is ‘competitive pricing’?

Answer 14

Setting a price similar to that of competitor’s products which are already established in the market

Question 15

Advantages + disadvantages of ‘competitive pricing’?

Answer 15

ads:
Business can compete on other things e.g. service

disads:
Still need to find ways of competing in order to attract sales

Question 16

What is ‘cost-plus pricing’?

Answer 16

Setting price by adding a fixed amount to the cost of making or buying the product

Question 17

Advantages + disadvantages of ‘cost-plus pricing’?

Answer 17

ads:
Quick + easy to work out price
Makes sure that price covers all costs

disads:
Price might be set higher than competitors/ more than customers are willing to pay, → reduces sales and profits

Question 18

What is ‘promotional pricing’?

Answer 18

Setting price of a small number of products at below cost to attract customers into outlet in hope that they will buy other products priced to earn a profit

Question 19

What is ‘price elasticity of demand’?

Answer 19

Measures by how much demand for a product changes when there is a change in price

Question 20

What is ‘price inelastic demand’?

Answer 20

Change in demand less than proportionate to change in price

Question 21

What is ‘price elastic demand’?

Answer 21

Change in demand is more than proportionate to change in price

Question 22

What is a ‘channel of distribution’?

Answer 22

a chain of businesses or intermediaries through which a good or service passes until it reaches the end consumer

Question 23

Name the advantages + disadvantages of ‘Producer → Consumer’

Answer 23

ads:
- All of profit is earned by producer
- Producer controls all parts of the marketing mix
- Quickest method

disads:
- Consumers are not always able to see or try product before they buy it
- Delivery costs may be high
- All storage costs must be paid for by producer
- All promotional activities must be carried out and financed by producer

Question 24

Name the advantages + disadvantages of ‘Producer → Retailer → Consumer’

Answer 24

ads:
- Consumers can see and try product before buying it
- Cost of holding inventories of product Is paid by retailer
- Retailer will pay for advertising + other promotional activities
- Retailers are more conveniently located for consumers

disads:
- Retailer takes some of the profit away from the producer
- Producers lose some control of marketing mix
- Producer must pay for delivery costs to retailers
- Retailers usually sell competitors’ products as well

Question 25

Name the advantages + disadvantages of 'Producer → Wholesaler → retailer → Consumer'

Answer 25

ads: - Wholesaler buys in bulk from the producer - Wholesalers will advertise - Wholesalers pay for transport costs + storage costs disads: - more profit is taken away from the producer - Producer loses even more control of the marketing mix

Question 26

Name the advantages + disadvantages of 'Producer → Agent → Wholesaler → Retailer → Consumer'

Answer 26

ads: - The agent has specialist knowledge of the market disads: - Another middleman is added so even more profit is taken away from the producer

Question 27

What is 'promotion'?

Answer 27

Marketing activities used to communicate with customers and potential customers to inform and persuade them to buy a business's products

Question 28

What are the purposes of promotion?

Answer 28

Attract attention of consumers by making them aware of the product Persuading consumers to buy to product

Question 29

What are the methods of promotion?

Answer 29

advertising sales promotion sponsorship Below the line promotion

Question 30

What is 'sales promotion'?

Answer 30

Incentives used to encourage short-term increases in sales or repeat purchases

Question 31

What is 'below-the-line promotion'?

Answer 31

Promotion that is not paid for, uses incentives to encourage consumers to buy.

Question 32

What is 'personal selling'?

Answer 32

Sales staff communicate directly with consumer to achieve a sale and form a long-term relationship between firm + consumer

Question 33

What is 'direct mail'?

Answer 33

Also known as mail shots, printed materials which are sent directly to addresses of customers

Question 34

What is 'sponsorship'?

Answer 34

Payment by a business to have its name or products associated with a particular event

Question 35

What is 'marketing budget'?

Answer 35

the amount of money made available by a business for its marketing activities during a particular period of time

Question 36

What is 'e-commerce'?

Answer 36

Use of internet and other technologies used by businesses to the market and sell goods and services to customers.

Question 37

What are the opportunities of e-commerce to businesses?

Answer 37

Increased market Reduced costs Better information