3.3.4 Making marketing decisions: using the marketing mix

Question 1

What is the Marketing Mix?

Answer 1

• the combination of marketing elements used by a firm to enable it to meet the needs and expectations of the customer

Question 2

What are the 7P’s of the marketing mix?

Answer 2

• Product – the good or service that the customer buys
• Price – how much the customer pays for the product
• Place – how the product is distributed to the customer
• Promotion – how the customer is found & persuaded to buy
• People – the people who make contact with customers in delivering the product
• Process – the systems and processes that deliver a product to a customer
• Physical – the elements of the physical environment the customer experiences

Question 3

What are influences on the marketing mix?

Answer 3

• Economic influence (e.g. trends; domestic and international trade)
• Competitive influence (e.g. market structure; competitive strategy and position)
• Social and demographic influence (e.g. demographic trends; multiculturalism; lifestyles; ecological concerns)
• Technological influence (e.g. advances; research and development investment
• Information technology (e.g. legal and regulatory influence; federal laws/regulations; provincial laws/regulations; self-regulation)

Question 4

What is product of the Marketing Mix?

Answer 4

the essence of what a business is trying to sell (it can be either a good or a service)

Question 5

What is the Boston Matrix?

Answer 5

a portfolio of products is analysed using this as it categorises the products into one of four different areas based on market share and market growth

Question 6

What is Market Share?

Answer 6

whether the product has a high or lower share of the industry

Question 7

What is Market Growth?

Answer 7

the numbers of potential customers and whether this number is growing or not

Question 8

What does the Boston Matrix look like?

Answer 8

Question 9

Explain stars.

Answer 9

• (high market growth and high market share)
• Often need heavy investment
• They will eventually become cash cows in investment isn’t retained and they lose their market share

Question 10

Explain cash cows

Answer 10

• (low market growth and high market share)
• Mature and successful products with little need for investment
• Have to be managed for continued profits

Question 11

Explain question marks

Answer 11

• (high market growth and low market share)
• Have potential but need substantial investment to growth their market share

Question 12

Explain dogs.

Answer 12

• (low market growth and low market share)
• Only really generate enough cash to breakeven
• Rarely worth investing in

Question 13

What is the Product Life Cycle?

Answer 13

this describes the stages a product goes through from when it was first thought of, until it is finally removed from the market

Question 14

What does the Product Life Cycle look like?

Answer 14

Question 15

What are the stages of the Product Life Cycle?

Answer 15

Introduction – launching the developed product into the market place
Growth – when sales are increasing at their fastest rate
Maturity – sales are near their highest but the of growth is slowing down
Decline – the final state when sales begin to fall
Extension strategy – devised by a business to extend its life cycle

Question 16

What are examples of extension strategies?

Answer 16

Advertising
Price reduction
Adding value
Exploring new markets
New packaging

Question 17

What is price?

Answer 17

the money charged for a product or service

Question 18

What is penetration pricing?

Answer 18

Aim to increase market share by setting an initial low entry price to attract new customers
For this to be successful, the process has to be price elastic

Question 19

What are advantages of penetration pricing?

Answer 19

• Capture market share
• Create brand loyalty
• High inventory turnover
• Gain a foothold in the market

Question 20

What are disadvantages of penetration pricing?

Answer 20

• Low customer loyalty risk
• Price expected to be kept low
• Poor brand image
• Price wars
• Inefficient long term strategy

Question 21

What is price skimming?

Answer 21

involves setting a high price before competitors come into the market

Question 22

What are the advantages of price skimming?

Answer 22

A high price establishes the product as a must have item
Customers want exculsivity
Innovation is expensive so charging high prices will be able to pay off those costs

Question 23

What are the disadvantages of price skimming?

Answer 23

• Customers may be detered by high prices
• Customers may become disloyal to the brand after prices fell from such a high price
• When firms decide to cut prices their image may suffer

Question 24

What is promotion?

Answer 24

the way a firm makes it products known to the customers, both current and potential

Question 25

What are methods of promotion?

Answer 25

* Advertising * Public relations and sponsorship * Personal selling * Direct marketing * Sales promotion

Question 26

List factors that influence which promotional method is used

Answer 26

Stage in the product life cycle Nature of the product How much information is required by customers before they buy Competition Marketing budget Marketing strategy Other elements of the mix Target market

Question 27

What is above the line promotion?

Answer 27

paid for communication in the independent media (e.g. advertising on TV or in the newspapers). Though it can be targeted, it could be seen by any one outside the target audience

Question 28

What is below the line promotion?

Answer 28

promotional activities where the business has direct control (e.g. direct mailing and money off coupons)

Question 29

What is place?

Answer 29

this is about how a business gets its products to the customers

Question 30

How is distribution achieved?

Answer 30

* Distribution is achieved by using one or more distribution channels, including: * Retailers * Distributors/sales agents * Direct (e.g. via e-commerce) * Wholesalers

Question 31

What is people?

Answer 31

all companies are reliant on the people who run them from front line Sales staff to the Managing Director. Having the right people is essential because they are as much a part of your business offering as the products/services you are offering

Question 32

What is process?

Answer 32

the delivery of your service is usually done with the customer present so how the service is delivered is once again part of what the consumer is paying for.

Question 33

What is physical environment?

Answer 33

almost all services include some physical elements even if the bulk of what the consumer is paying for is intangible.

Question 34

List influences on an integrated marketing mix

Answer 34

The position in the product life cycle The Boston Matrix The type of product Marketing objectives The target market Competition Positioning

Question 35

List the impacts of ecommerce on marketing

Answer 35

Marketing strategy of differentiation increasingly effective (easier to reach niche markets online) Product life cycles are shortened (note the link with technological disruption) Greater use of digital promotion (much easier now to track effectiveness of promotion) Brands and retailers increasingly using multiple distribution channels Greater use of dynamic pricing (easier to maximise revenues, but is it fair for customers?) Increased need for localisation (but on its own, not enough) Ability to sell a much wider product range (the ‘long tail’)