Economics Theme 2.2.3 Flashcards
What is non price competition
Non price competition is where a firm differentiates its product from a competitor
inc promotion, branding, quality and customer service
What is product differentiation
Product differentiation provides a competitive advantage to a firm and shifts the demand curve to the right as more people are attracted to buying the product
Differentiation includes
Quality features the competitors don’t have
Functional and design features that competitors’ products do not have
imperfect information where consumers are more aware of one firm’s products over those of the competition
Advertising creating perceived differences in the mind of the consumer
Location, where the product can only be bought geographically through one supplier
What is advertising an example of
A sunk cost and deters new entrants
Why do firms spend a lot on advertising or promotion
Firms will spend heavily trying to establish brand loyalty and repeat custom
By investing in new product development the firm can increase demand and maintain brand loyalty
what is a marketing policy
Marketing policy is how the firm differentiates itself from the competition
What is media advertising
Media Advertising is communication used to inform potential customers about products and persuade them to buy the products.
What are different forms of media
television and radio
Newspapers and magazines
Posters and bill boards
Does a firm have to be big in order to advertise
As they grow businesses can afford to pay for more expensive advertising that will reach a wider market
This will lead to an increase in the potential customer base and higher sales revenue
What are sales promotion
Sales promotions are short-term method designed to attract customers into purchasing a product
What are the forms of sales promotion
competitions
special offers e.g buy one get one free
samples
What is direct marketing
Direct marketing is any marketing activity that is aimed directly at the customer.
What are the forms of direct marketing
Direct mail – sometimes referred to as junk mail
Electronic mail – may be seen as spam
Door to door selling
why is direct marketing important to a firm
A business can target and engage customers directly. Specific market segments can be targeted leading to a higher success rate in turning potential customers into sales
New technologies have made it easier and cheaper for businesses to communicate with target markets
Which factors influence the promotional mix
The nature of the market
The nature of the product
Activities of competitors
Budget available
How does the nature of the market have an influence on the promotional mix
The type of market that a business operates in will affect its use of the promotional mix
Local v National
As a firm grows, moving from local to national markets, the type of promotion will differ. Advertising is more effective in meeting national markets than direct marketing
Physical v Electronic
Through growing use of technology businesses are finding it easier to directly target individual consumers through electronic mail
How does the nature of the promotional mix
The type of product that a business sells will affect its use of the promotional mix
general public the type of media used to promote the product will reflect this. Television, radio and newspapers might be used by an expanding business targeting the whole country
Business To Business (B2B) – where firms sell between each other we are more like to see direct marketing with businesses targeting other businesses with specialist information giving greater insight and detail of the product being sold. There will be greater use of informative, rather than persuasive, advertising.
How does activities of competition effect promotional mix
Businesses respond to the actions of their competitors
If a competitor brings out a national advertising campaign a business is likely to respond with their own advertising
Failure to do so might see a fall in market share and sales revenue and could compromise the growth of the company
What is distribution
Distribution is the process of getting the firm’s product to the market
What is a short distribution channel
Short distribution channels are where the producer sells either directly to the customer or through a retailer
What is a long distribution channel
Long distribution channels are where there are more than one intermediary (middle person) between the producer and the customer
What is direct selling
when the producer sells straight to the customer
What is a wholesaler
Wholesalers buy large quantities of supplies from producers and sell them on in smaller quantities. For example, a corner shop might go to a wholesaler to buy their products
What is multi-channel distribution
Multi-channel distribution is when a firm chooses to use a combination of methods
What is a distribution channel
The route to a market that a product takes from producer to final customer
What are the steps of a traditional (long) distribution channel
1- manufacturer
2- wholesaler
3- retailer
4- customer
What are the steps of a modern (medium length) distribution channel
1- manufacturer
2-retailer
3- customer
What are the steps of a direct (short) distribution channel
1- manufacturer
2-consumer
What is distrobution affected by
Type of product
Market
Quantity and frequency
How does type of product affect distribution
The characteristics of the product need to be taken into account. For example Coca Cola do not ship their product to the UK from the USA. Instead, they ship over the syrup and the actual product is then made in the UK using British water
How does the market affect distribution
It is important that the customers being targeted can access the product. High streets are accessible by public transport so that all customers can shop, not just those with cars
How does quantity and frequency effect distribution
If only a few low cost items are being delivered it would not be cost effective to send them hundreds of miles. If a product is regularly being delivered then a firm might invest in a delivery system
What are distribution decisions effected by
Geographical location
costs
degree of control
How does geographical location effect distribution decision
How far is the target market from the firm? The firm will have to take into account the nearness of the market. Regional markets are far more accessible than international markets
How does costs effect distribution decisions
This is very important for a firm. An expensive distribution method will reduce the contribution being made to a firm’s profit. Therefore, the firm must ensure that the method is cost effective
How does degree of control effect distribution decisions
Businesses may want to protect their brand by limiting the spread of the product and keeping tight control of where it is available and at what price
