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Business AS level 9609 > Chapter 19: Marketing mix - product and price > Flashcards

Chapter 19: Marketing mix - product and price Flashcards

1
Q

Product

A

Goods/services that are the end result of the production process and are sold on the market to satisfy customer needs

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2
Q

Marketing mix

A

Four key decisions on product, price, promotion and place that must be taken to enable effective marketing of a product

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3
Q

Utility

A

Satisfaction a customer gets from the product because it has the characteristics the customer wanted

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4
Q

Goods

A

Products which have a physical existence

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5
Q

Services

A

Products which have no physical existence

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6
Q

Intangible attributes

A

Subjective opinions of customers about a product which cannot be measured easily

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7
Q

tangible attributes

A

Measurable features of a product which can easily be compared with other products

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8
Q

New product development (NPD)

A

design, creation and marketing of new goods and services

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9
Q

Reasons for NPD

A

Changing customer tastes
Increasing competition
Technological advancements
New opportunities for growth
Risk diversification
Improved brand image
Use of excess capacity

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10
Q

Features of a successful product

A

Has desirable features
Offers a unique selling point

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11
Q

Unique selling point (USP)

A

A special feature of a product that makes it different from a competitors’ products

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12
Q

Product differentiation

A

Unique qualities of a product that make a difference between the product and competitors’ products

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13
Q

Benefits of USP

A

Promotion of differentiating features of the product
Higher prices for exclusive features
Free publicity from media reports
Higher sales compared to undifferentiating products

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14
Q

Product positioning

A

consumers’ view of a product or service as compared to its competitors

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15
Q

Product portfolio analysis

A

Analysing the range of a business’s products to help allocate resources effectively between them

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16
Q

Product life cycle

A

The pattern of sales for a product from launch to withdrawal from the market

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17
Q

4 stages of a product life cycle

A

Introduction
Growth
Maturity
Decline

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18
Q

Effects that introduction has on the 4 P’s

A

Price: Depends on competitors pricing
Promotion: High advertising to make consumers aware
Place: In restricted outlets
Product: Basic model with few variations

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19
Q

Effects that growth has on the 4 P’s

A

Price: Prices can grow if it is successful
Promotion: Consumers need encouragement to keep buying
Place: More in outlets where demand is high
Product: Improvements maintain customer appeal

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20
Q

Effects that maturity has on the 4 P’s

A

Price: Prices stay competitive as competitors enter
Promotion: Brand imaging shows differences to competitor’s product
Place: New distribution channels
Product: New models, and colours as part of extension strategies

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21
Q

Effects that decline has on the 4 P’s

A

Price: Lower prices needed to sell off inventory
Promotion: Limited advertising
Place: Unprofitable outlets eliminated
Product: Slowly withdraw from certain markets

22
Q

Impacts of product life cycle on marketing decisions

A

Assisting with marketing-mix decisions: When should prices be lowered? When is advertising important?

Identifying the need for a balanced product portfolio
When one product starts to decline, other products are introduced. Cash flow should be reasonably balanced, Factory capacity should be kept constant.

23
Q

Limitations of using product life cycle for marketing decisions

A

Based on past/current events: cannot predict the future
Sales could crash quickly
Sales of some products keep growing

24
Q

Boston Matrix

A

A method of analysing the product portfolio of a business in terms of market share and market growth

25
Q

Boston Matrix analysis

A

Low market growth, high market share: Cash cow
High market share, high market growth: Star
High market growth, low market share: Question mark
Low market growth, low market share: Dog

26
Q

Cash cow

A

Well-established product in a mature market
Profitable and high positive cash flow
High sales, low costs
Can be minted for money (cash cow)

27
Q

Star

A

Successful product in an expanding market
Business is keen to maintain market position
High promotion costs to build brand identity
Likely to generate high amounts of income

28
Q

Question mark

A

Consumes resources and generates little income
Heavy promotion costs
Future of a product is uncertain
Should have potential because it is in a fast growing market sector

29
Q

Dog

A

Offers little sales and cash flow to the business
May need to be replaced
The business could withdraw the products

30
Q

Impact of Boston Matrix analysis on marketing decisions

A

Building: supporting question mark products
Holding: Continuing support for star products
Milking: Investing in products with money from cash cow
Divesting: Identifying dogs and stopping production

31
Q

Limitations of Boston Matrix analysis on marketing decisions

A
  1. Cannot tell a manager about what will happen with a product
  2. Only a planning tool and simpliifes the complex factors that determine product success
  3. Assumes that higher profit rates are linked to higher market shares
32
Q

Price

A

Amount paid by the customers for a product

33
Q

What does the price do?

A

Impacts level of added value by the bought components
Affects revenue and profit made by the business
Help establish a psychological brand image of a product

34
Q

How is price determined?

A

Production costs
Competitive market conditions
Competitors prices
Business and marketing objectives
Price elasticity of demand
Is it a new product or not

35
Q

Pricing methods (Cost-based)

A

Mark-up pricing
Cost-plus pricing
Contribution-cost pricing
Loss leaders

36
Q

Pricing methods (Competition-based)

A

Price discrimination
Dynamic pricing

37
Q

Mark-up pricing

A

Adding a fixed mark-up for profit to the unit cost of buying a product

Gross profit
___________________ X 100
Cost of production

38
Q

Cost-plus pricing

A

Setting a price by calculating a total unit cost for the product and then adding a fixed profit mark-up

39
Q

Contribution-cost pricing

A

Setting prices based on the variable costs of making a product, in order to make a contribution towards fixed costs and profits

Selling price - Variable cost = contribution cost
contribution cost - Fixed costs = profit

40
Q

Loss leaders

A

Setting low prices for some goods to attract customers and hoping that they buy products that have high-profit margins

41
Q

Price discrimination

A

Charging different groups of consumers different prices for the same product

42
Q

Dynamic pricing

A

Offering products at a price that changes based on demand and customers ability to pay

43
Q

Advantages of cost-plus pricing

A

Price covers all production costs
Easy to calculate for single-product firms
Suitable for price-making businesses due to market dominance

44
Q

Disadvantages of cost-plus pricing

A

Inaccurate for businesses with multiple products
Does not account for marketing/competitive conditions
Tends to be inflexible
If sales fall, average costs rise which calls for higher prices

45
Q

Advantages of contribution-cost pricing

A

All variable costs are covered
Suitable for businesses with multiple products
Flexible prices adapt to market conditions

46
Q

Disadvantages of contribution-cost pricing

A

Fixed costs may not be covered
If prices vary too much, regular customers get annoyed

47
Q

Advantages of price discrimination

A

Uses price elasticity to increase revenue

48
Q

Advantages of competitor pricing

A

Almost essential for firms with little market power
Can be flexible to reflect competitive conditions

49
Q

Disadvantages of price discrimination

A

Administrative costs for different price levels
Customers may switch to lower-priced markets
Consumers paying high prices may look for alternatives

50
Q

Pricing methods for new products

A

Penetration: setting a low price to achieve high sales

Market skimming: Setting a high price for products with low price elasticity of demand or highly differentiated

51
Q

disadvantages of competitor pricing

A

The price set may not cover all production costs
Price may have to vary frequently

52
Q

Psychological pricing

A

Setting a price at a level which matches consumers’ views about a product’s perceived value.

Business AS level 9609 (19 decks)

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