4.5.1

Question 1

what is a product cycle?

Answer 1

describes the stages a product goes through from when it was first thought of until it is finally removed from the market. Not all products reach this final stage. Some continue to grow, and others rise and fall.

Question 1

what are the 7ps of marketing

Answer 1

Product
Price
Promotion
Place
People
Processes
Physical evidence

Question 2

what six stages of product cycle exists?

Answer 2

Development

Introduction

Growth

Maturity

Decline

Question 3

can you expand on development as a stage of the product cylce?

Answer 3

at this stage the product is designed. Generating and screening ideas, creating prototypes, carrying out market tests and commercializing the product for a successful launch. R&D has high costs and since the product is still not in the market there are no profits at this stage. Hence, cash flow is negative.

Question 4

can you expand on introduction as a stage of the product cycle?

Answer 4

• This is the stage where the product is launched and could be the most expensive for a company. The share of the market for the product is small, which means sales are low, although they will be increasing. Cash flow is still negative.

Question 5

can you expand on growth as a stage in the product life cycle?

Answer 5

– this stage is typically characterized by a strong growth in sales and profits, and because the company can start to benefit from economies of scale in production, the profit margins, as well as the overall amount of profit, will increase. This makes it possible for businesses to invest more money in the promotional activity to maximize the potential of this growth stage.

Question 6

can yu expand on maturity as a stage in the product life cycle?

Answer 6

• the product is established and the aim for the manufacturer is now to maintain the market share they have built up. This is probably the most competitive time for most products and businesses need to invest wisely in any marketing they undertake. They also need to consider any product modifications or improvements to the production process which might give them a competitive advantage.Saturation – at this stage many competitors have entered the market and saturated it. Sales are at their highest point but begin to fall. Cash flow is positive, but prices might have reduced. However, profits are stable.

Question 7

can you extend on decline as a part of the product cycle?

Answer 7

due to the market saturation or because the consumers are switching to a different type of product there will be a significant drop in sales. While this decline may be inevitable, it may still be possible for companies to make some profit by switching to less-expensive production methods and cheaper markets.

Question 8

what are the characteristics of the introduction faze of the product life cycle?

Answer 8

low sale

high cost per cutomer

finaicial losses

Question 9

what are some characteristics of the growth faze of the product life cycle?

Answer 9

increasing sale,

cost per customer falls

increasing numbers of customers

Question 10

what are some characteristics of the maturity faze of the product life cycle?

Answer 10

peak sales,

cost per customer lowest,

profits high

Question 11

what are some characteristics of the decline faze of the product life cycle?

Answer 11

falling sales,

cost per custmer low

profits fall

Question 12

look at a picture of the product life style graph and try to pin point take of point and saturation point.

Answer 12

.

Question 13

what are extention stratagies?

Answer 13

Extension strategies are marketing plans that extend the maturity stage of a product before a brand-new product is needed. These are techniques aimed to try to delay the decline stage of the product life cycle.

Question 14

when are extention stratagies done?

Answer 14

This is done at the maturity or saturation stage since the costs of developing the product and establishing it in the market are paid and the product tends to be at a profitable stage. The longer the company can extend this stage the better it will be for them.
However, spending money in a terminally declining product is a waste of resources

Question 15

what are some methods that a firm could use to extend their products life?

Answer 15

Selling their products into new markets
Find new uses for the product
Change the products packing
Target different market segments
Develop new promotional strategies

Question 16

what is the boxton matrix?

Answer 16

The Boston Matrix is a method of analysing the product portfolio of a business in terms of market share and market growth.

It is one of the most powerful tools a firm can use to assist strategic decision-making. It allows not only for an analysis of the existing product portfolio but also what future strategies the firm could take.

Question 17

what are the catagories in th boston matrix?

Answer 17

The matrix classified in 4 categories: stars, cash cows, questions marks (or problem children) and dogs .

Question 18

Look at a picture of the boston matrix, memeoriese what goes where and the titles of the axises.

Answer 18

.

Question 19

talk about the start on the BM?

Answer 19

Star (high market growth/high market share) – A successful product in an expanding market. The firm will be keen to maintain the market position for this product in a fast-changing market. Promotion costs will be high to help differentiate the product and reinforce its brand image.
Despite the promotion costs, a star will generate a lot of income. If their status and market share can be maintained, they should become the cash cows of the future

Question 20

talk abu the cash cown on the BM?

Answer 20

Cash Cow [low market growth/high market share]- This is a well-established product in a mature market. Typically this type of product creates a high positive cash flow (as per its name!).
Sales are high and promotion costs are low as a result of high consumer awareness. The cash from this product can be “milked” and put into some other products in the portfolio. The business will want to maintain cash cows for as long as possible

Question 21

talk more about the questionmark/problem child?

Answer 21

Problem Child/Question Mark [high market growth/low market share] - The problem child consumes resources, but it generates little return. If it is a newly launched product it is going to need heavy promotional costs to become established (money from cash cow)
The future is uncertain, so quick decisions need to be made if sales do not improve such as revised design, relaunch or even a withdraw from the market. It should have potential as it is a growing market sector.
Businesses need to look carefully at which problem children are worth developing and investing in and which need to be dropped and stop selling.

Question 22

talk more about the dog on the BM?

Answer 22

Dogs [low market growth/low market share] -
Dog products offer little to a business either in terms of existing sales and cash flow or future prospects because the market is not growing.

They may need to be replaced shortly or the firm could decide to withdraw from the market sector altogether and position itself into faster growing sectors.

Question 23

what are Boston matrix stratagies?

Answer 23

Boston Matrix Strategies - by identifying the position of all of the firm’s products a full analysis of the portfolio is possible. This should help focus on which products need support or which need corrective action.

Question 24

what are the diffrent BM stratagies?

Answer 24

Holding strategy - continuing support for star products so that they can maintain their good market position. Work may be needed to “freshen” the product in the eyes of the consumers so that high sales growth can be sustained.

Building strategy – supporting problem child products with additional advertising or further distribution outlets. The finance for this could be obtained from established cash cow products.

Harvesting (or milking) strategy - taking the positive cash flow from established products and investing in other products in the portfolio.

Divesting - identifying the worst performing dogs and stopping the production and supply of these. This strategic decision should not be taken lightly as it will involve other issues such as the impact on the workforce and whether the spare capacity freed up by stopping production can be used profitably for another product.

Question 25

what are the limitatuon of the BM?

Answer 25

It focusses on the current market position

It can be time-consuming and complex

High market share does not necessarily equal profits

Question 26

what is a brand and branding?

Answer 26

Abrand is a name, symbol, sign or design that differentiates a firm’s products from its competitors.Branding is the process of distinguishing one firm’s product from another and can add great value to a product.

Question 27

why is branding important?

Answer 27

Branding can have a real influence on marketing. It can create a powerful image in the minds of consumers - either negative or positive - and it can give a firm’s products a unique identity.

Question 28

what are the four aspects of branding?

Answer 28

Brand awareness - the extent to which a brand is recognized by potential customers and is correctly associated with a particular product (i.e. McDonalds “big M”)

Brand development - any plan to improve or strengthen the image of a product in the market. It is a way of enhancing brand awareness of a product by increasing the power of its name, symbol or sign leading to higher sales and market share.

Brand loyalty - the faithfulness and commitment of consumers to a particular brand as shown by their repeat purchases irrespective of the marketing pressure from competing brands

Brand value - This refers to how much a brand is worth in terms of its reputation, potential income and market value.

Question 29

what are some arguments for that branding is very important?

Answer 29

Promotes instant recognition of a company and product, especially through the use of logos and images.

Helps differentiate the company and its products from rivals

Aids in employee motivation since they can be committed to the brand.

Generates referrals from customers, especially in the use of social media.

Question 30

what is packeing and what is its role?

Answer 30

packagingrefers to the designing and production of the physical container or wrapper of a product. Packaging plays a significant role in marketing and can help in distinguishing one product from another

Question 31

what important functions does packging have in marketing?

Answer 31

It provides physical protection - packaging protects a product from getting spoiled or damaged, especially during transportation. It must also provide a good cover against, dust, direct light, or high temperatures

It offers convenience - A good package should make it easy for consumers and distributors to handle the product. This could include the ability to reuse, recycle and easily dispose of the product.

It provides information - The labels on packages are used to relay important information to the consumer. Food and cosmetics will provide information on the ingredients a product contains. Technological products may include information on how to use the item (It is often a legal requirement for companies producing cigarettes and alcohol, to provide warnings on their packages regarding the consumption of these products).

It can help reduce security risks - especially during transportation. Packages designed with tamper-proof features can deter intentional tampering with the product.

It aids promotion - The package should be eye-catching and appealing to the consumer. The colour and shape of the package is key in reinforcing and projecting a brand image of the product.

Question 32

what is a key characteristics fimrs hsould consider when desighning packaging?

Answer 32

Firms should also consider the impact their packages have on the environment and fulfil growing environmental concerns from customers

Question 33

how is price differencated to the other marketing Ps?

Answer 33

Price has a significant role in the 4 Ps since it’s the only “P” that generates revenuefor the business. In contrast, the other “Ps” are associated with costs.

Question 34

what is price?

Answer 34

Price refers to the money customers pay or give up for having or using a good or service.

Question 35

what are the pricing stratagies we use in SL?

Answer 35

Cost-plus pricing (mark-up pricing)
Penetration pricing
The loss leader
Predatory Pricing
Premium pricing

Question 36

what are the pricing stratagoes we use in HL?

Answer 36

Dynamic pricing (HL)
Competitive pricing (HL)
Contribution pricing (HL)
Price Elasticity of Demand (PED)

Question 37

what is cost-plus pricing (mark up pricing)?

Answer 37

refers to adding a mark-up to the average cost of producing a product. The mark-up is a percentage of the profit a firm wishes to gain for every product it sells.

Question 38

what are the advanatges and disadvanatges of cost-plus pricing (mark up pricing)?

Answer 38

The main advantage of the Cost-plus pricing is that it is a simple and quick method of calculating the selling price of a product. It is also a good way to ensure that a business covers its costs and makes a profit.
However, the disadvantage is that it fails to consider the market needs or customer value when setting prices. Since competitors’ prices are not considered, a firm could lose sales if it sets a selling price that is higher than its competitors

Question 39

what is penitration pricing?

Answer 39

Penetration pricing – when the firm sets a low initial price for a product with the aim of attracting a large number of customers quickly and gaining a high market share.

This could be used by businesses either introducing a new product in an existing market or entering new markets with existing products. As a firm gains market share it can start to raise its prices slowly.

Question 40

what are the advantages of penitration pricing?

Answer 40

As the prices are low, consumers are encouraged to buy the products, and this leads to high sales volume and market share for the business.

The high sales volume can lead to decreases in the cost of production and increases in stock turnover.

Question 41

what are the disadvantages of penitration pricing?

Answer 41

Gaining high sales volume does not necessarily mean achieving high profits.

Customers may perceive the product to be of low quality if the price is kept too low.

Penetration pricing is only suitable for markets that are very price sensitive. Therefore, as businesses increase their prices over time they risk losing potential customers, who may seek lower-priced products from rival firms.

Question 42

what is the loss leader?

Answer 42

The loss leader – when businesses that charge a low price for a product, usually below cost, refer to that product as aloss leader.
The aim of this strategy is to attract many customers.

Question 43

what are the advanatges and disadvamates of the loss leader?

Answer 43

Advantages of loss leader :
Businesses selling a large number of frequently purchased products may attract many customers and benefit from higher overall profits.
Businesses may use loss leaders as a promotional strategy to encourage consumers to switch to their brand instead of buying the competitors’ brand.
Disadvantage of loss leader :
Firms using this strategy may be accused by competitors of undercutting them by using unfair business practices.

Question 44

what is predtory pricing?

Answer 44

Predatory pricing – happens when a dominant company aggressively lower prices in order to try to force its smaller competitors out of the market.After most of the companies are out of the market then the firm increasers its prices and gets it profits back. Amazon and supermarkets use this strategy.

Question 45

what is done to restrict preditory pricing?

Answer 45

This is an illegal pricing strategy in some countries as it is unfair to new entrants trying to compete against established companies. However, it is difficult to prove and therefore many Governments impose anti-competitive laws, so firms can be fined for using predatory pricing with the intent to restrict competition.

Question 46

what are the advantges and disadvantges of preditory pricing?

Answer 46

Advantages of predatory pricing:
Lowering prices to benefit consumers and likely increase demand for the business may reduce the number of competitors in the long term and increase monopoly power of the “predator”.
After using predatory pricing, the remaining firms in the market could potentially gain higher sales revenue due to the price increase.
Disadvantage of predatory pricing:
If proven, it is illegal in many countries and considered a form of anti-competitive behaviour, so heavy fines can be imposed. Consumers may try to find alternative products if the newly created monopoly increases prices in the long term.

Question 47

what is premium pricing?

Answer 47

Premium pricing – also known as image pricing or prestige pricing, this strategy permanently sets a high price for their products – generally higher than its competitors – to send the message that their product is superior. Examples include luxury brands, organic food or first-class traveling.

Question 48

how does premium pricing diffrer from price skimming?

Answer 48

This is different than price skimming, where the price is set high at first and then brought down. In the case of premium pricing, the price is set high to reflect the quality of the product.

Question 49

what are the advantages and disadvanatges of permium pricing?

Answer 49

Advantages of premium pricing:
Since the perception of the customer is that the product is high quality they won’t negotiate the price, which allows the firm to focus on quality.
The firm gains a high status in society since its products become a symbol of luxury
A high price send the message of exclusivity

Disadvantage of premium pricing:
Marketing cost are very high
The firm might miss whole sector of conscious consumers in the market.

Question 50

what is dynamic prcing?

Answer 50

also known as surge pricing, demand pricingortime-based pricing, this pricing strategy is flexible, and it adapts to factor such as demand, supply and other market conditions.

Question 51

what are the advantages of dynamic pricing?

Answer 51

Businesses can increase sales revenue by capturing the willingness of customers to pay more during peak periods and when demand of the product increases.

It helps with stock management; high prices can be charged for highly demanded products and low (slae) prices for overstock products that couldn’t be sold.

Dynamic pricing enables customers to avoid queues (caused by excess demand) and surpluses (caused by excess supply).

Without dynamic pricing, it may be harder to incentivize business to supply their services, such as trying to catch a taxi during off-peak times when taxi drivers are less willing to work.

Question 52

what are th disadtantages of dynamic prices?

Answer 52

Surge pricing is often associated with being unethical as it is perceived to exploit customers, such as pharmaceutical companies charging higher prices during a major pandemic.

There is also the potentially high cost to the business of monitoring and evaluating the data needed for dynamic pricing.

It can lead to significant price fluctuation in the markets

Consumers who are charged higher prices may feel disgruntled (ripped off or cheated).

Question 53

what is competative pricing?

Answer 53

when a firm sets thepriceof a product or service based on what thecompetitionis charging. Thispricingmethod is used more often by businesses selling similar products, since services can vary from business to business, while the attributes of a product remain similar.

Question 54

when and why is competative pricing benifitaial?

Answer 54

Competitive pricing is one of the simplest pricing methods available, especially for new and small businesses. This method simply requires the business to determine who their main competitors are and collect the prices charged by these firms before making a final pricing decision. However, it required in-depth market research analysis of competitors behaviour.

Question 55

what are the advantages of competative pricing?

Answer 55

It is a low-risk pricing strategy as the possibility of making a mistake with pricing decisions is minimized. This is because competitive pricing helps to ensure a firm’s prices are not too high or too low from the average price being charged in the market

Since nowadays customers tend to check online prices first, competitive prices will help keep and stable customer base.

There is flexibility as the business can make changes to prices to accommodate changes in the industry

Question 56

what are the disadvantages of competative pricing?

Answer 56

A firm might find difficult to differentiate form other companies in the marketing, since they are basing their pricing only on co-market players.
The task of collecting and comparing price data from competitors can be time consuming and expensive, especially for smaller businesses. This could include the cost of purchasing price monitoring software.

Question 57

what is contribution pricing?

Answer 57

is a pricing method that involves setting the price greater than the “variable costs per unit (𝑨𝑽𝑪)of production” to ensure that a positive contribution is made towards the firm’s fixed costs.

Question 58

what fornula do we need for contribution pricing?

Answer 58

We need to use the following formula:

𝒄𝒐𝒏𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 𝒑𝒆𝒓 𝒖𝒏𝒊𝒕=𝑷−𝑨𝑽𝑪

Question 59

how do we imerpate the contribution?

Answer 59

A firm must have a positive contribution to have any chance of earning a profit - the selling price must exceed the variable cost per unit (AVC). Only once sufficient units of the product are sold can the total contribution cover the Fixed Costs (FC). After that, more sales will generate a profit for the business.

Question 60

students often confuse cost plus (mark up) pricing with contrubution pricing, can you outline the differences?

Answer 60

cost plus pricing starts by taking ALL the costs (fixed and variable) and then adds a profit margine to determine the price.

contribution pricing starts with just the varible costs and then focuiese on the contribution that each sale makes towards covering both varible and fixed costs.

Question 61

there are even more diffrances btween cost plus prcing and contibution pricing, they fall under the catagories of focous, calcualtion and porpous, care to explain?

Answer 61

FOCOUS-

CP- focous on a firms total costs when setting the price of a product.
C-focuses on the contibution each sale makes towards covering a firms fixed costs indorder t generate a profit.

CALCULATION-

CP- add all costs assosiated with prodcut, then add desired profit to determine the price.
C- calculate the varible cost of producing the product, them subtract these from the selling price to find the contribution per unit.

POURPOSE-

CP- to ensure a firm covers all its costs and makes a pre-ditermined profit.
C- to make sure each sale contributes ejugh to cover varible costs, and towards covering varible costs so as to generate a profit.

Question 62

what are the advanatges of conribution prcing?

Answer 62

It is a useful pricing method for when deciding on the price to charge customers for a special or additional order.

Contribution pricing enables managers to determine which products from the firm’s product portfolio generates the highest (and the least) amount of total contribution.

Products with the highest total contribution are prioritised as these contribute the most towards paying the firm’s fixed costs.

Products that contribute the least amount or have a negative total contribution may need to be discontinued.

Question 63

what are the disadvantages of contibution pricing?

Answer 63

It can be extremely difficult to allocate fixed costs appropriately between the many products sold by a large business so this would lead to inaccurate prices being set.

Contribution assumes that the selling price of a product is constant, but in reality, customers are often given a price discount for larger orders (purchasing economies of scale).

Contribution pricing assumes that manufacturers produceandsell exactly the same number of units. However, in reality, producers often make more than they can sell, and there are often damaged stocks (inventories) which cannot be sold to customers.

Question 64

what is price elasitisity of demand?

Answer 64

PED measures how much the quantity demanded of a good responds to a change in the price of that good.
PED is measured as a percentage change in the quantity demanded divided by percentage change in the price.

Question 65

what is the formula for price elasitiy of demand?

Answer 65

persentage chnage in quantity over persentage chnage in price

Question 66

how do you interpate the result from ypu PED answer?

Answer 66

If the price of the candles drops by 10% and the quantity demanded increased by 20%. The change in the quantity demanded is Twice as large as the change in price.

Question 67

what is an inalastic demand? (graph is helpful)

Answer 67

Inelastic Demand
In this case 0 < PED < 1. If any good has an Inelastic Demand, then the change in the price leads to a proportionally smaller change in quantity demanded.

Question 68

what is an eleastic demand? (graph is helpful)

Answer 68

In this case PED > 1. When a product has an Elastic Demand the change in the price leads to a greater proportional change in the quantity demanded.

Question 69

what is price discrimination?

Answer 69

Price discrimination – when firms charges different prices to different groups of consumers for the same product.
This takes place in markets where sub-groups of consumers exist, and it is possible to charge different prices for the same product

Question 70

what are the three condinions that need to be met for a sucsefull price discrimination?

Answer 70

The business must have some degree of market power (monopoly) to set prices (i.e. energy companies, providers of water, etc)

Costumers must have different degrees of willingness to pay, otherwise businesses cannot set different prices to different segments of the market.

Markets must be kept separate to prevent resale (i.e. a child cannot sell his or her theatre ticket to an adult)

Question 71

what are the advanategs and disadvantes of price discrimination?

Answer 71

An advantage of price discrimination is that time-based discrimination can be of benefit to either consumers or producers. That is, during peak times businesses such as phone companies can charge high prices and so generate higher revenues, while during off-peak times consumers benefit from the lower prices charged (same example as airline tickets).
However, some disadvantages of price discrimination are:
Administrative costs of having different pricing levels
Customers may switch to lower-priced market
Consumers paying higher prices may object and look for alternatives