Economics Theme 2.2.3

Question 1

What is non price competition

Answer 1

Non price competition is where a firm differentiates its product from a competitor
inc promotion, branding, quality and customer service

Question 2

What is product differentiation

Answer 2

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

Question 3

Differentiation includes

Answer 3

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

Question 4

What is advertising an example of

Answer 4

A sunk cost and deters new entrants

Question 5

Why do firms spend a lot on advertising or promotion

Answer 5

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

Question 6

what is a marketing policy

Answer 6

Marketing policy is how the firm differentiates itself from the competition

Question 7

What is media advertising

Answer 7

Media Advertising is communication used to inform potential customers about products and persuade them to buy the products.

Question 8

What are different forms of media

Answer 8

television and radio
Newspapers and magazines
Posters and bill boards

Question 9

Does a firm have to be big in order to advertise

Answer 9

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

Question 10

What are sales promotion

Answer 10

Sales promotions are short-term method designed to attract customers into purchasing a product

Question 11

What are the forms of sales promotion

Answer 11

competitions
special offers e.g buy one get one free
samples

Question 12

What is direct marketing

Answer 12

Direct marketing is any marketing activity that is aimed directly at the customer.

Question 13

What are the forms of direct marketing

Answer 13

Direct mail – sometimes referred to as junk mail
Electronic mail – may be seen as spam
Door to door selling

Question 14

why is direct marketing important to a firm

Answer 14

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

Question 15

Which factors influence the promotional mix

Answer 15

The nature of the market
The nature of the product
Activities of competitors
Budget available

Question 16

How does the nature of the market have an influence on the promotional mix

Answer 16

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

Question 17

How does the nature of the promotional mix

Answer 17

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.

Question 18

How does activities of competition effect promotional mix

Answer 18

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

Question 19

What is distribution

Answer 19

Distribution is the process of getting the firm’s product to the market

Question 20

What is a short distribution channel

Answer 20

Short distribution channels are where the producer sells either directly to the customer or through a retailer

Question 21

What is a long distribution channel

Answer 21

Long distribution channels are where there are more than one intermediary (middle person) between the producer and the customer

Question 22

What is direct selling

Answer 22

when the producer sells straight to the customer

Question 23

What is a wholesaler

Answer 23

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

Question 24

What is multi-channel distribution

Answer 24

Multi-channel distribution is when a firm chooses to use a combination of methods

Question 25

What is a distribution channel

Answer 25

The route to a market that a product takes from producer to final customer

Question 26

What are the steps of a traditional (long) distribution channel

Answer 26

1- manufacturer
2- wholesaler
3- retailer
4- customer

Question 27

What are the steps of a modern (medium length) distribution channel

Answer 27

1- manufacturer
2-retailer
3- customer

Question 28

What are the steps of a direct (short) distribution channel

Answer 28

1- manufacturer
2-consumer

Question 29

What is distrobution affected by

Answer 29

Type of product
Market
Quantity and frequency

Question 30

How does type of product affect distribution

Answer 30

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

Question 31

How does the market affect distribution

Answer 31

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

Question 32

How does quantity and frequency effect distribution

Answer 32

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

Question 33

What are distribution decisions effected by

Answer 33

Geographical location
costs
degree of control

Question 34

How does geographical location effect distribution decision

Answer 34

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

Question 35

How does costs effect distribution decisions

Answer 35

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

Question 36

How does degree of control effect distribution decisions

Answer 36

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