5.4 Marketing Mix Flashcards
What are the 4 Ps in the marketing mix
- Product
- Place
- Price
- Promotion
What are the 5 pricing strategies?
- Price skimming
- Price Penetration
- Competetive Pricing
- Loss Leader
- Cost Plus
The marketing mix is…
The marketing mix is different for different products
What is price skimming?
Price skimming is when a business charges a high price to begin with but then gradually lowers it down over time
Why might a business use price skimming?
A business may use price skimming when they know there will be a high demand for the product
Which industry typically uses price skimming and why?
The techology industry as it changes rapidly
Give 2 impacts that price skimming has on a business?
- It allows the business to increase revenue and to cover any research and development costs
- It increases a brand’s image as having a high price attracts people with high income
What is price penetration?
Price penetration is when a business starts a very low initial price for a product
When & Why may a business use price penetration?
A business might use price penetration when a product is new to get lots of people to try it
Give 2 benefits of a business using price penetration?
- It increases market share and attracts customers from competitor businesses
- It builds loyal customers who will contiue to buy the product when the price increases
What is the drawback to price penetration?
In the short term, there will be very little profit
What is competitive pricing?
Competetive pricing is when a business charges similiar prices to other firms
When does competitive pricing usually happen?
Competetive pricing happens when the products in the market are similar and there is not much product differentiation
i.e. Petrol
What is the impact of competitive pricing?
The firm may make very little profit and will have to find other ways to attract customers
What is loss leader?
Loss leader is when the price of a product is set below the cost
Why may a business use loss leader?
To attract customers in the hope that they make additional purchases as well
What is drawback of loss leader?
The business may make a loss
What is cost plus?
Cost plus is a strategy where the business works out the cost to produce a product or service , and then adds an additional price (which will be the profit) on top
When might a business use cost plus pricing?
A business may use cost-plus pricing when they are not in competition
Give one benefit of a business using cost plus pricing?
Gives the business flexibility on the price and how much profit they want to make
What internal factors influence pricing decisions?
- Costs
- Product Life Cycle
Explain how costs influence pricing decisions?
Costs influence pricing decisions as businesses aim to make profit, and the amount of profit they recieve is determined by the price and internal costs
How does the product lifecycle influence pricing decisions?
- When a product is in the introduction or growth phase, a business may charge a very low or very high price
- When a business is maturity phase, a business may need to align its pricing with competitors
- When a business is in the decline phase, a business may need to reduce the price in order to increase demand for the product again
What external factors that influence pricing decisions?
- Nature of the product
- Degree of competition
Give 2 examples of how the nature of the product influence pricing decisions?
- If the product is aimed at a high-end luxury market, the business will likely charge a higher price than similar products with lower quality
- If the product is hard to differentiate from competitors, then the business will likely align itself with the pricing of competitors
How does the degree of competition influence pricing decisions?
The degree of competition influences pricing decisions as the more competition a business faces, the more options customer has. Therefore, businesses have to compete to attract customers by lowering the price
When the pricing of a product rises, what tends to happen to the demand?
When the pricing of a product rises, the demand tends to fall
What are the benefits of developing new products?
- It can improve a business’ image and reputation, which will make a person likely to buy future products
- It increases a business’ overall sales
- Diversifies and expands a business’ products into other markets
What is diversification?
Diversification is when a business designs and produces more products
- Not putting all the eggs in one basket
What are the risks of developing new products?
- The research and development process is very time consuming and costly
- There is a risk of losing money if the product fails
- It can damage brand image if the product is not good quality
What should be taken into consideration when designing new products?
- Product design
- Brand image
- The needs of the target market
Why should product design be taken into consideration when designing new products
If the product is not well designed, consumers will go for competitor products instead
List and explain the 3 main aspects of the product design mix?
- Cost - The product design and features will influence the manufacturing costs
- Aesthetics - A good product will look more attractive and distinctive
- Function - The way the product works and its unique features will give it a better product design
Why should brand image be taken into consideration when designing new products
Having a good brand image gives great marketing success as they are easily recognised and liked by customers
Why should the needs of the target market be taken into consideration when designing new products
It helps to find out what the target market wants and what will be useful to customer wants
What is product differentiation?
Product differentiation is about making your products different to other competitor products in the market
Name the 2 ways product differentiation happens through
- Unique Selling Point (USP)
- Brand Image
Why is it important to have a Unique Selling Point (USP) in a competetive market?
It makes your product look different to competitors’
What is the product lifecycle?
The product lifecycle series of stages that a product goes through over its lifetime
What are the stages of the product lifecycle?
- Research and Development
- Introduction
- Growth
- Maturity
- Decline
What happens during the Research and development phase of a product?
The business invests a lot of money and time into the research and development of the product.
Businesses usually make temporary losses during this stage
Explain what is the introduction stage of the product life cycle
The introduction stage of the product lifecycle is when the product is launched and introduced to the market
What is usually done during the introduction stage of the product lifecycle?
Lots of advertising and marketing are usually done during the introduction stage of the product lifecycle to inform people about the product and let them know that the product exists
What happens during the Growth stage of the product lifecycle?
- The product’s demand increases and experiences a period of growth
- Businesses hope to earn enough money to pay back fo their inital investment
Explain happens during the Maturity stage of the product lifecycle?
- Lots of people are buying the product, the number of customers buying the product slowly stops increasing
- Promotion becomes less important as the product becomes well known
Explain what is the decline stage of the product life cycle
The decline stage of the product lifecycle is when the demand for the product starts to fall
What are extension strategies?
Extension strategies are ways a business try to postpone or delay a product from reaching the decline stage
List all the extension strategies that a business could use
- Updating the packaging to make it look more eye-catching and fresh in the consumer’s minds, & possibly attract a new target market
- Adding more or different features to keep people interested and make it more useful or attractive to customers
- Changing the target market
- Advertising
- Lowering the price
What is a product portfolio?
A product portfolio is a range of different products that a business sells
What does it mean to have a balanced portfolio?
A balanced product portfolio is when a business sells a variety of products at different stages of the product lifecycle
What are the advantages of having a balanced portfolio?
A balanced product portfolio means that if one product fails, the business is able to depend on the others
What is the boston matrix?
The Boston matrix is a way for firms to analyse their product portfolios
Add Boston Matrix flashcards here
What are the different types of promotional methods?
- advertising
- PR
- sales promotion
- sponsorship
- social media
Reasons for promotion
- inform/remind customers about the product
- create or increase sales
- create or change the image of the product
- persuade customers to buy the product
Factors influencing the selection of the promotional mix
- finance available
- competitor actions
- the nature of the product or service
- the nature of the market
- target market
