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Business > 4.5 > Flashcards

4.5 Flashcards

1
Q

Marketing Mix - Product

A

The actual item that a customer purchases, including the packaging, image, guarantee/warranty and after-sales. Most important part of the marketing mix as it determines price, how it will be promoted and where it is sold. Includes consumer and capital goods.

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2
Q

Consumer Goods

A

Goods bought for personal use and consumption.
E.g. washing machine

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3
Q

Capital (industrial) Goods

A

Goods used by businesses, including machinery and equipment, that are used to produce goods to be sold to final consumers.
E.g. truck

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4
Q

Product Life Cycle

A

A graph that shows the different stages a new product passes through over time and the sales that can be expected at each stage.
Development
Introduction
Growth
Maturity
Decline

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5
Q

Development

A
  • Finding finance for the product
  • Complying with legal requirements
  • Launch on a test market in a local area
  • Make any alterations required
  • Promotion and launch
  • No revenue generated and high costs
  • Costly and time-consuming period
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6
Q

Introduction

A
  • The product has just een launched after development and testing
  • Sales low
  • Growth slow
  • Heavy advertisement and promotion
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7
Q

Growth

A
  • Higher product awareness
  • Rapid increase in sales
  • May have a little competition
  • Cost of promotion can be reduced
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8
Q

Maturity or Saturation

A
  • Fully established product
  • Sales reach their highest point, this stage can last for years or indefinitely
  • More competition
  • New marketing strategy required to hold market share
  • Development costs should have been paid back and product is at its most profitable
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9
Q

Decline

A
  • Sales and profit in decline
  • Product old, consumer tastes are changing
  • New products enter market
  • Consumers may switch loyalty
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10
Q

Product Extension Strategies

A
  • Adding features to the original product
  • Repackage the product
  • Discount the price
  • Rebrand
  • Selling into new markets
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11
Q

Product Portfolio Analysis Boston Matrix

A

A method of analysing the product portfolio of a business in terms of market share and market growth. Highlights the position of each of a firm’s products and analyses the existing product portfolio.

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12
Q

Dog

A

Low Growth - Low Market Share
- Usually in decline (CD’s)
- Need to be replaced or the firm should withdraw from this market sector altogether

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13
Q

Cow

A

Low Growth - High Market Share
- Usually in the maturity stage and creates positive cash flow
- Promotional costs are low due to high customer awareness
- Don’t require as much investment as they are established in the market
- Income generated is used to sustain stars and question marks
- Want to maintain cash cows for as long as possible

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14
Q

Question Mark

A

High Growth - Low Market Share
- Consumes resources but generates very little in return
- If this is a newly launched product, it is going to need heavy promotional costs to help establish it
- Have the potential to become stars but will require substancial investment

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15
Q

Stars

A

High Growth - High Market Share
- A successful product as it is performing well in an expanding market
- Require a lot of investment to keep them in a strong position
- Generate a high amount of income
- If status and market share are maintained, they should become cash cows in the future

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16
Q

BCG Matrix and Strategic Analysis

A
  • Building: supporting problems with extra finance or more advertisement
  • Holding: continuing support for star products so they can maintain their good market position
  • Milking: taking the cash flow from established products and ivesting in other products in portfolio
  • Divesting: identify the worst performing dogs and stopping production
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17
Q

Evaluation of Boston Matrix

A
  • Helps establish the current situation of the firm’s products (cannot predict success or failure)
  • Detailed and continuous market research is needed
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18
Q

Branding

A

An identifying symbol, name, image or trademark that distinguishes a product from its competitors. It can create a powerful perception of the brand in the minds of consumers. Is often expensive and brand loyalty and awareness are the goal.

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19
Q

Brand Awareness

A

Extent to which a brand is recognised by potential consumers and is correctly associated with a particular product. Can be expressed as a percentage of the target market.

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20
Q

Brand Loyalty

A

Faithfulness of consumers to a a particular brand shown by their repeat purchases, irrespective of the marketing pressure from competitor brands.

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21
Q

Brand Development

A

Measures the infiltration of a product’s sales, usually per tousand of the population; if 100 people in 1000 buy a product, it has a brand development of 10.

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22
Q

Brand Equity

A

The premium that a brand has because consumers are willing to pay more for it than they would for a non-branded generic product.

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23
Q

Advantages of Branding

A
  • Allows instant recognition
  • Increased customer loyalty
  • Possibility to charge premium prices
  • Opportunity to enter new markets
  • Easier to launch new products on strength of the brand name
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24
Q

Disadvantages of Branding

A
  • Takes a lot of time to establish
  • High promotion costs to establish and maintain
  • Bad publicity can affect whole brand
  • Possibility of imitations and fake products
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25
Q

Types of Branding

A

Family
Product
Company or Corporate
Own-label
Manufacturers Brands

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26
Q

Family Branding

A

Selling several related product under one brand name. E.g. Mars bars was the original but now there are ice creams and milkshakes.
✅ Marketing economies of scale when promoting the brand
❌ Poor quality of one product may damage the perception of all

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27
Q

Product Branding

A

Each individual product in the portfolio is given its own unique identity and brand image. E.g. Proctor and Gamble produce Head&Shoulders and Pantene.
✅ Increased sales revenue as can appeal to different target markets
❌ Expensive to advertise each brand

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28
Q

Company or Corporate

A

The company name is applied to products and this becomes the brand name. E.g. Virgin (airlines, rail services)
✅ Easier to launch new products
❌ Poor quality of one product can damage whole company

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29
Q

Own-label Branding

A

Retailers create their own brand name and identify for a range of products. E.g. Walmart and Wong have numerous own brands.
✅ Often cheaper than branded products
❌ Perceived as lower quality

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30
Q

Manufacturers Branding

A

Producers establish the brand image of a product or family of products under the company’s name. E.g. Coca-Cola, Mercedes-Benz.
✅ Unique personality of the brand which many consumers want to be associated with
❌ The brand has to be constantly promoted and defended

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31
Q

The importance of packaging

A

Protection
Attracting Customers
Promotion and Information
Differentiation and Brand Support
Reinforce the image of the brand

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32
Q

The importance of packaging - Protection

A

Protecting the product fom damage. Includes transport from manufacturer to retailer and also when product is finished to retailer shelves.

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33
Q

The importance of packaging - Attracting Customers

A

When customers are confronted with choice in a store, packaging may be one of the key influences over their choice.

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34
Q

The importance of packaging - Promotion and Information

A

Ingredients and also information about the history of the brand, directions on how to make or use it.

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35
Q

The importance of packaging - Differentiation and Brand Support

A

Display the logo, colour scheme so it is easy to identify on a shelf.

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36
Q

The importance of packaging - Reinforce the image of the brand

A

If there is a focus on sustainability the packaging should reflect this.

37
Q

Marketing Mix - Price

A

The amount paid by consumers for a product. It impacts consumers demand for a product. It deermines the value added to products by the business.

38
Q

Factors Affecting Pricing

A
  • Competition: price may be determined by other sellers
  • The organisation’s objectives: maximise sells, maximise profit
  • Stage in the product life cycle: price must reflect the products market position
  • Costs
  • Consumer perceptions: too low a price may raise suspicions
  • Legal constraints
39
Q

Cost Based Pricing Strategies

A

Cost Plus Pricing

40
Q

Marketing Based Pricing Strategies

A

Penetration Pricing
Market Skimming

41
Q

Cost Plus Pricing

A

A manufacturer or retailer will calculate the price of making or buying the product and add a set percentage profit to arrive at their selling price.
- Often used by small businesses as it is a simple method
- Also used by supermarkets
- The size of the mark-up will depend on the demand, number of competitors, age and stage of the product

42
Q

Penetration Pricing

A

When launching a new product, it is priced much lower than the competition. Used when introducing a new product to an established market where competition is high and the product is mass market. Used when the business objective is growth. When product is established, firm will raise its price in line with competition.

43
Q

Market Skimming

A

Using a high price initially for new products where there is little to no competition. Aims to maximise short-run profits, before competitors enter the market with a similar product. Price reduced when competition enters the market or technology overtakes.

44
Q

Psychological Pricing

A

Two Aspects:

-> Setting prices just below key price levels in order to make the price appear much lower than it actually is. Therefore $999 is used instead of $1002.

-> Also used in relation to avoiding setting prices that consumers consider inappropriate for the style and quality of the product.

45
Q

Loss Leader

A

Products priced at very low, unprofitable levels to attract customers to enter store. Widely used by supermarkets. E.g. lower water price but increase meat price.

46
Q

Price Discrimination

A

A business sells the same product to different consumers at different prices. Takes place where sub-groups of consumers exist and it is possible to charge different prices.
E.g. train tickets are cheaper for kids and students

47
Q

Promotional Pricing

A

Special low prices to gain market share or sell off existing stock. Used to boost sales temporarily and is only used for a limited time.

48
Q

Premium Pricing

A

Exists when a company is the dominant firm in the market, has the biggest market share, and therefore may benefit from economies of scale and has the lowest cost per unit. They set the price for smaller businesses and competition.

49
Q

Predatory Pricing

A

An illegal pricing strategy in the European Union and some other countries as it favours strong, established companies compared to new entrants. An established product is priced well below that of competitors. Difficult to prove, business might say they are adopting a loss leader strategy.

50
Q

Marketing Mix - Promotion

A

Any form of communication used in an attempt to draw attention to a product or service. Involves the use of advertising, sales promotion, personal selling, direct mail, sponsorship to inform customers and persuade them to buy.

51
Q

Aims of Promotion

A

Persuading
Informing
Reminding

52
Q

Types of Promotion

A

Above the Line
Below the Line

53
Q

Above the Line Promotion

A

Paying for communication with customers. E.g. advertising using independent media such as TV and newspapers.
Persuasive
Informative
Reassuring
✅ Enables businesses to reach large audiences easily
❌ Sometimes the promotion can be lost if it fails to target the correct segment

54
Q

Persuasive Advertising

A

Getting customers to buy a product. Using a celebrity to endorse the product, comparing the product with another similar product. May lead to people buying items without thinking about their actual needs.

55
Q

Informative Advertising

A

Telling customers about the product. Passing on technical information, allows customer to make an informed decision.

56
Q

Reassuring Advertisement

A

Confirms customer decisions. Aimed at existing customers and persuades them that they have made the right decision and should continue to buy the product.

57
Q

Advertising Media will be affected by

A

Cost
Target audience
The type of product and message it transmits
Competitors’ Advertising
Impact Required
The Law

58
Q

Product Endorsement

A

Famous sport of showbiz personalitie are paid to wear and use a particular product. E.g. Harry Styles Adidas x Gucci.
✅ Higher prices can be charged
✅ People buythem to be like the celebrity
✅ Can be targeted to particular market segments using specific celebrities
❌ If the celebrity receives negative publicity, sales of the product may suffer
❌ Can be expensive to retain the celebrity

59
Q

Product Placement

A

An advertising techique used by companies to subtly promote their products through non-traditional advertising techniques, usually through appearances in films, TV, or other media.
✅ Product is seen by millions of potential customers
✅ Can select specific TV shows or films that the target market watches
❌ Expense involved in product placement

60
Q

Below the Line Promotion

A

Sales Promotion

61
Q

Sales Promotion

A

Aims to achieve a short-term increase in sales. Includes incentives such as special offers or special deals directed at consumers or retailers to achieve repeat purchases by customers.
Can be directed to:
-> The final consumer to encourage purchase (PULL STRATEGY)
-> The distribution channel (retailer), to encourage stocking and display of the product (PUSH STRATEGY)

62
Q

Sales Promotions from Retailers to encourage customers to purchase

A

Free Samples
Credit Facilities: allowing customer to pay at a later day in instalments
Demonstrations
Buy one get one free
Bonus Packs
Coupons and vouchers
Loyalty Cards

63
Q

Sales Promotions to encoura Retailers to Stock a Brands Products

A

Point of Sale Materials: poster, winow display materials or in-store displays are often free
Sale or Return: encourages retailer to stock untried products as it removes the fear of being left with unsold stock.
Credit Facilities: retailers pay for goods at a later date. Encourages retailers to stock a product (trade credit)

64
Q

Limitations of some Sales Promotions

A
  • Price Promotions: the gross profit margin will be negatively affected, impact on reputation if price is -
  • Money-off Coupons: retailers will need to increase output to meet demand, if reduction in price is small there might not be an increase in demand
  • Customer Loyalty Schemes: the gross profit margin will be negatively affected, most customers have many loyalty cards so their actual loyalty is reduced
  • Buy one get one free: substancial decrease in GP margin, customers may stock up in a aproduct impacting future sales
  • Point of sale displays: best display points are often given to market leaders, new products may struggle for best position in stores
  • Public Relations: not easily controllable, some publicity may be negative towards the company
  • Sponsorship: success of sponsorship is out of firm’s hands, very expensive
65
Q

Public Relations

A

Activities of an organisation which help it improve its image locally, nationally and internationally:
Press Conferences
Press Releases
Deals with bad publicity
Organises charitable events
Liaises with celebrities regarding their endorsement
Sponsorship

66
Q

Promotion Mix

A

Part of the wider marketing mix. Should use a balance of advertising, public relations, sales promotions, direct marketing and personal selling in a structured way. A single tool doesn’t work well in isolation.

67
Q

Stages in deciding a Promotional Mix

A
  • Decide on the image of the product
  • Develop a profile of the target market
  • Decide on the message to communicate
  • Set a budget
  • Decide how to communicate message
  • Establish how success of promotional mix will be assessed
  • Undertake the plan
  • Measure its success
68
Q

Promotion Mix and Product Life Cycle

A

Development:
- Informative advertising and PR to make consumers aware
- Sales promotion offering free samples or trial periods to encourage testing

Growth:
- Focus to brand building and persuasive advertising
- Sales promotion to encourage repeat purchases and build brand loyalty

Maturity:
- Sales promotion to encourage brand development and loyalty

Decline:
- Minimal advertising

69
Q

Online Marketing

A

Advertising and marketing activities that use the internet, email and mobile communications to encourage direct sales via electronic commerce.

70
Q

Benefits of Online Marketing

A
  • Improved audience reach
  • Targeted marketing
  • Interactivity
  • Performance metrics: assess which type of advertisement is attracting the most web traffic
  • Speed of transmission
71
Q

Disadvantages of Online Marketing

A
  • Time consuming
  • Negative feedback can damage brand’s reputation
  • Lack of skill, small firms may not afford to have a whole team monitoring and managing social media
72
Q

Viral Marketing

A

The use of social media sites or text messages to increase brand awareness and increase sales. Influencers create viral messages that appeal to target market and have a high chance of being shared.

73
Q

Guerrilla Marketing

A

Involves using an unusual or unexpected advertisement in a busy area to generate publicity for a product or brand often at low costs. Often carried out in a busy place for maximun exposure. Main purpose is to create buzz about the brand and gain the attention of the public in a memorable way.

74
Q

Marketing Mix - Place

A

Refers to how a product is taken from the production line and made available to consumers. Several channels of distribution are available for firms to use. There are 4 channels of distribution.

75
Q

Factors Affecting Choice of Distribution Channel

A

The Product
The Market
Buying Habits
Finance Available
Manufacturers Distribution Capability
Product’s Life Cycle
Legal Requirements

76
Q

Factors Affecting Choice of Distribution Channel - The Product

A

It it perishable, new, highly technical? If expert knowledge is required then the selling is often done directly from the manufacturer. E.g. medical equipment

77
Q

Factors Affecting Choice of Distribution Channel - The Market

A

Is the market large and spread throughou country or small and local?

78
Q

Factors Affecting Choice of Distribution Channel - Buying Habits

A

Growth in out-of-town shopping centres.

79
Q

Factors Affecting Choice of Distribution Channel - Finance Available

A

It is cheaper to deliver a bulk order to a wholesaler rather than making lots of small deliveries directly to customers if the business is facing cashflow problems.

80
Q

Factors Affecting Choice of Distribution Channel - Manufacturer Distribution Capability

A

If the manufacturer does not possess a delivery fleet they may distribute through a wholesaler.

81
Q

Factors Affecting Choice of Distribution Channel - Priduct’s Life Cycle

A

If the product is in the introductory phase, it may only be sold through exclusive retailers where a premium price is charged.

82
Q

Factors Affecting Choice of Distribution Channel - Legal Requirements

A

Certain medicines can only be sold via pharmacies via prescription.

83
Q

Direct Selling

A

No intermediaries, selling directly to consumer. E.g. mail order from manufacturer, farmers markets and e-commerce.

84
Q

Direct Selling Benefits

A
  • No profit margin is taken by other businesses
  • Producer has complete control over the marketing mix
  • Direct contact with consumers can offer market research
  • Quicker than other channels
85
Q

Direct Selling Disadvantages

A
  • All storage and stock costs need to be paid by producer
  • No retail outlets, limits the chances for consumers to “see and try” before they buy
  • May be expensive
86
Q

Wholesaler

A

Buy goods in bulk from the manufacturer and sell them on to the retailer. E.g. Costco, Makro

87
Q

Advantages of using a Wholesaler to the manufacturer

A
  • Buys in bulk, relieving manufacturer the cost of making large numbers of small deliveries
  • Breaks down bulk supplies and offers smaller quantities to retailers and pays for transportation
  • Provides advice to manufacturer (what is selling, what not to produce)
88
Q

Disadvantages of using a Wholesaler

A
  • Manufacturer can maintain greater control over marketing of products
  • Another intermediary takes profit mark-up
89
Q

Retailer

A

Local retail outlet for businesses’s products. Performs 4 functions:
- Breaks down bulk supplies for sale to public
- Provides info to consumers through advertising, displays and trained personnel
- Stores goods and prepared them for sale by displaying and pricing
- Physically sells goods to consumers and offers range of related services

Business (20 decks)

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