4.5 The Four P's

Question 1

What is an “extension strategy”?

Answer 1

“Extend the life of the product before it goes into decline”

Question 2

What are the 5 stages in a product lifecycle?

Answer 2

1. Development
2. Introduction
3. Growth
4. Maturity
5. Decline

Question 3

What is the “Boston Matrix”?

Answer 3

The Boston Consulting Group (BCG) matrix is a tool to help companies with multiple products decide their marketing strategies. Products are placed onto the matrix depending on two variables: market share and market growth.

Question 4

What does the Boston matrix look like?

Answer 4

-

Question 5

What are “Stars” in the Boston matrix?

Answer 5

Products in markets experiencing high growth rates or increasing share of the market
–> Potential for high revenue growth

Question 6

What are “Cash Cows” in the Boston matrix?

Answer 6

• High market share
• Low growth markets (Maturity stage of PLC)
• Low cost support
• High cash revenue

Question 7

What are “Problem Child/ ?” in the Boston matrix?

Answer 7

• Products having a low market share in a high growth market
• Needs money spent to develop them
• May produce negative cash flow
  –> (Potential for the future?)

Question 8

What are “Dogs” in the Boston matrix?

Answer 8

• Products in a low growth market
• Have low or declining market share (decline stage of PLC)
• Associated with negative cash flow
• May require large sums of money to support
• Surpluses should be reinvested into star products

Question 9

Why is branding important?

Answer 9

• clearly delivers a message
• emotionally connects your target prospects with your product
• motivates the buyer to buy
• creates user loyalty
• confirms your credibility

Question 10

What are some types of branding?

Answer 10

1. Family Branding (eg. Unilever)
2. Individual Branding (eg. Duracell, Dove..)
3. Company Branding (eg. Disney)
4. Own-Label Branding (eg. supermarkets)
5. Manufacturer’s brands (eg. Coca Cola)

Question 11

What are the 6 pricing strategies?

Answer 11

1. Competition based pricing
2. Promotional pricing
3. Cost-Plus pricing
4. Psychological pricing
5. Penetration pricing
6. Skimming pricing

Question 12

What is “Competition based pricing”?

Answer 12

Base their prices on their competitors.

Question 13

What is “Promotional pricing”?

Answer 13

This is a lower price for a short period of time to boost sales or reduce stock

Question 14

What is “Cost-Plus pricing”?

Answer 14

Also called “mark-up pricing”. Includes both fixed and variable costs to determine average costs. Predetermined profit (amount of percentage) is the mark up added to the average cost.

Question 15

What is “Psychological pricing”?

Answer 15

“setting prices that take into account of customers’ perception of value of that product”
This is pricing just below the whole number
EG. $9.99

Question 16

What is “Penetration pricing”?

Answer 16

Lower price for a new product enabling them to establish market share
This price will increase over time though.
(ONLY applicable to NEW firms!)

Question 17

What is “Skimming pricing”?

Answer 17

The opposite of “penetration pricing”
These are very innovative, high quality, products.
The price decreases over time.
EG. game consoles like playstations

Question 18

What is “price discrimination”?

Answer 18

“occurs when a business sells the same product to different consumers at different prices”

Question 19

What is “price leadership”?

Answer 19

The setting of prices by a dominant firm, which is followed by others in the same market.

Question 20

What is “predatory pricing”?

Answer 20

Reducing price with the purpose of removing competition.
AKA. Destroyer price

Question 21

What are the three channels of distribution?

Answer 21

• Zero level –> No one between producer and consumer (eg. buying directly from a business’ website)
• One level –> One intermediary
• Two level –> Two intermediaries

Question 22

Why do some firms use wholesalers?

Answer 22

• carry the storage costs
• breaking bulk
• lower transaction costs
• handle distribution

Question 23

What is “above the line” promotion?

Answer 23

• Use of mass media to promote to a wide audience rather than a specific market
  –> Radio, tv, billboards, newspapers

Question 24

What is “above the line” promotion?

Answer 24

Use of mass media to promote to a wide audience rather than a specific market
–> Radio, tv, billboards, newspapers

Question 25

What is “below the line” promotion?

Answer 25

Promotion not carried out on mass media:
E.g. loyalty cards and direct marketing

Question 26

What is “online marketing”?

Answer 26

Refers to advertising and marketing activities that use the internet, email and mobile communications to encourage direct sales via e-commerce

Question 27

What is “viral marketing”?

Answer 27

The use of social media sites or text messages to increase brand awareness or sell products

Question 28

What is “Guerilla marketing”?

Answer 28

An unconventional way of performing marketing activities on a very low budget

Question 29

Why would firms use advertising?

Answer 29

• Increase sales by raising consumer awareness of a new product
• Remind consumers of an existing product and its distinctive qualities
• Encourage increased purchases by existing consumers or attract new consumers
• Demonstrate the superior specification or qualities of a product compared to those of competitors - often used when the product has been updated or adapted in some way
• Create or reinforce the brand image or ‘personality’ of the product
• Correct misleading reports about the product or the business and reassure consumers after a ‘scare’ or an accident involving the product
• Develop or adapt the public image of the business
• Encourage retailers to stock and actively promote products to the final consumer