3.4 - Marketing mix Flashcards
Name all 7p’s from the marketing mix.
People. Place. Product. Price. Process. Physical environment. Promotion.
State all six stages of the product life cycle.
Research / development Introduction Growth Maturity - sales slow down Saturation - sales reach peak and no longer increase but remain steady Decline - Demand falls
Describe all types of products mentioned in the Boston matrix.
A dog product has a low market share and is in a market of low growth, for example, DVD and CD discs.
A cash cow product has a high market share and is in a market of low growth, for example, Apple TV products.
A star product has a high market share and is in a market of high growth, for example, new iPhone smartphones.
A question mark product has a low market share and is in a market of high growth.
What factors may affect a business’s marketing mix?
The business’ marketing objectives may affect decisions made about the marketing mix.
The target market may affect decisions made about the marketing mix.
The presence and size of competitors may affect decisions made about the marketing mix.
The type of product may affect decisions made about the marketing mix, for example, whether the product is a convenience good.
State four factors that influence a business’s pricing decsions.
Product life cycle - A product’s position in the product life cycle helps to determine if a business will charge a high or low price for the product.
When a new product is launched, businesses may charge higher prices to take advantage of exclusivity.
Nature of the product - Whether a good is a luxury good or not, will affect how much a business charges.
Whether the product is hard to differentiate from competitors affects how much a business can charge.
Competition - When customers have lots of options for similar products, businesses must compete to attract customers using a lower price.
Costs - A business’ price and costs determine how much profit the business will make. Businesses cannot afford to set a price lower than their costs forever.
What is price skimming?
Price skimming is a pricing method where a business sets a relatively high initial price and then gradually lowers it over time. This is often used before a business faces competition in the market. Once competition arrives, there will be downward pressure on the price to fall.
Why would a business use price skimming?
Maximise revenue
Cover fixed costs (Price skimming can help to recover the costs of research and development, which can be expensive for technology products.)
Why might a business not use price skimming?
A disadvantage of price skimming is that it can slow down the growth of a product and this can give competitors more time to launch a competing product or service.
A business does not maximise the number of sales at the start so competitors can get more of a chance to enter the market.
What is price penetration?
Price penetration is where a business tries to increase market share by offering a low initial price. Loss leaders work in a similar way to price penetration.
Why might a business use Price penetration?
Increase market share and brand awareness - When these goods or services enter the market, a business can attract customers from established competitors.
What is a loss leader?
Loss leaders are products or services that are sold by a business at a price where the business makes a loss (average revenue < average cost).
Loss leaders can attract new customers or sell to existing customers, in the hope that they make extra (incidental) purchases.
Loss leaders often use Price Penetration as a pricing method.
Why might a business not use price penetration?
In the short term, price penetration can lead to lower average profits than would be earned with a higher price.
However, market share may be more important for the long-term profitability of a business.
What is competitive pricing?
Competitive pricing is when a business sets its prices for its products and services based on what other businesses in the market are charging.
Competitive pricing is used when the products in a market are similar.
What is cost-plus pricing?
Cost-plus pricing is a pricing strategy where a business charges the customer based on what it costs to produce the product or service.
They work out exactly what it costs to produce the product (or service) on average and then add a “mark-up” (extra amount) on top of this cost to make sure that the business makes a gross profit.
What was the strategy referenced by Palich et al (2000) in his research paper?
The long pocket strategy.
Palich et al (2000) published a research paper describing the ‘Long Pocket Strategy’. Their research concluded that the business with the most money in the bank normally wins a price war between businesses.
