Business, Unit 2- Marketing Flashcards
What is a product portfolio?
The range of different products a firm sells.
Most large businesses will have products at different stages of the product life cycle, giving them a balanced portfolio.
They’ll have some products that have reached the peak of their sales- bringing in lots of money with little investment.
At some point these will decline and need to be replaced.
What are the 5 stages of the product life cycle?
- Development-
- Introduction- product is launched
- Growth- product grows until is established
- Maturity- sales at their peak
- Decline- sales start to fall, rival products take over, and product becomes obsolete.
How could a firm try to extend the life of products in decline?
Might use an extension strategy during decline, e.g. Making changed to the design or offering discounts.
This means spending more money on the product- which takes money away from other parts of the business.
Have to have a balance between investing money in old products, and in designing new ones.
How can a firm broaden their product portfolios?
Adding products to an existing range, by developing products similar to their current ones. E.g. New flavours of smoothies.
Increasing their range of products by developing products that are different from their current ones. E.g. Smoothie ice-lollies.
This is diversification.
What is penetration pricing? (Market led pricing)
Where a firm charges a very low price when the product is new to get lots of people interested in it.
What is loss leader pricing? (Market led pricing)
When the price is set below cost.
Once the product is established the price is increased.
What is price skimming? (Market led pricing)
Opposite of penetrations pricing.
Firms charge a high price to begin- desirable to people with large incomes.
Once established, price is reduced.
What is competitive pricing? (Market led pricing)
Where firm has to charge prices similar to other firms.
Happens most when there is lots of choice and not much product differentiation e.g. Petrol
What is cost plus pricing and when is it used?
It is used when a firm is not in price competition with other producers.
2 main ways it can be worked out:
1. Using a mark up- work out how much the product costs to make then add a percentage mark up.
2. Using a profit margin- work out how much product costs to make and increase by the required profit margin (20% profit margin)
What are some promotional methods?
Advertising
Sales promotion: discounts, free gifts, product trials, BOGOF.
Business can sponsor organisations and events, in return for its name being displayed at the event.
What is direct marketing? Advantages and disadvantages?
Goes straight to the customer. E.g. Vouchers mailed out to customers. The customer might want to use the voucher next time they’re at the business.
Ad: A business can measure their success with this by seeing how many people use the vouchers.
Disad: However, it creates junk mail and spam email which gets some people annoyed.
What are 4 different channels of distribution?
- Manufacturer- wholesaler- consumer: consumers buy the product from a cash and carry warehouse.
- Manufacturer- wholesaler- retailer- consumer: traditional route, most commonly used in food and drink industry.
- Manufacturer- retailer- consumer: becoming more common, most commonly used in clothing industry.
- Manufacturer- consumer: DIRECT CHANNEL, now very popular, factory shops, mail order, telesales, Internet selling, fastest.
