GCse Bussines 2.2

Question 1

What is price elasticity?

Answer 1

Demand changes when price changes.
-customer will be more willing pay for lower prices
-this will not change the demand

Question 2

Explain the 5 stages of the product life cycle?

Answer 2

(1) research and development :
-where invention and innovation takes place[ helps develop USP.]
-packaging is costly and if product isn’t popular then there is no sale.

(2) introduction
-Product is introduced into market. May require promotion and possibly lowering prices for sales

(3) growth
-sales rise at a quick rate. Business gains good sale revenue and product is popular, which decreases cost mode on product

(4) maturity: sales begin to slow down. Customer interested have bought product(market saturation)
-
(5) decline
-sales have fallen due to customer needs changing, which leads to an increase in competition. Causing product to be discontinued.

Question 3

How can a bussines extend there product maturity from declining?

Answer 3

They can adapt the product to maintain customer interest(design mix)

Question 4

What pricing strategies can a business use to attract customers?

Answer 4

•Price discrimination: products are sold at different prices to different customers

•Penetration pricing: product offered at a low price when first introduced into market

•Price skimming: price is set at high level when product is introduced

•promotional pricing: the price is lowered temporarily

• psychological pricing: when product appears to good for value, whilst proving similar profit levels to original product

•competitive pricing

•loss leader pricing

•cost-plus pricing

Question 5

What is a product?

Answer 5

A tangible item used to meet customers wants and needs

Question 6

What is promotion?

Answer 6

Changing public perception of a brand or product

Question 7

What is above the line promotion?

Answer 7

Paid for advertising(billboards)
Which will he seen by lots of people. Is expensive

Question 8

What is below-the-line promotion?

Answer 8

Allows business to target market more directly
-sponsorship (athletes)
Therefore raises awareness of product and improve brand image.
-free samples
Customers like free items, as they can try it before spending money on product
-viral marketing

[must consider marketing costs, product sold and target market]

Question 9

What is meant by the term place?

Answer 9

The distribution channel on how products get from manufacturer to consumer.

Question 10

What is the traditional model of distribution ?

Answer 10

1. Manufacturer
2. Wholesaler (buy product in bulk)
3. Retailer
   4.consumer

Question 11

What are the benefits of direct selling websites?

Answer 11

Used by large/small companies
-can communicate diercetly to manifacurer
-lower costs
-improve brand image
-be more competitive

Question 12

What is multi-channel distribution?

Answer 12

Where business reaches as many customers as possible. Meaning they are able to maximize sales. Leading to an increase in profit.

Question 13

What is competitive pricing?

Answer 13

Firm charge similar price to other firms. (Only used when there is lots of choice)

Question 14

What is loss leaders pricing?

Answer 14

Product price is set below cost. So firms makes no profit, but encourages customers to buy other products instead in business.

Question 15

What is cost-plus pricing?

Answer 15

When the product is sold when adding the total cost and amount of profit

So either still have reasonable demand, usually used not in competition

Question 16

What are the 2 equations for cost plus pricing?

Answer 16

Cost + percentage mark up

Or

Cost + profit margin

Question 17

What is price penetration? And why?

Answer 17

Firm charge lower price for product

-usually used to establish market share in competitive market

At first low profit but over time rises
As
They gain customer loyalty

Question 18

What is price skimming?

Answer 18

Firm increases prices temporarily

1.At first, firma charge high price when demand is high
-only used when there is loyal customers
-increased revenue and covers research and development costs

2. The higher prices attract people with higher income. Increasing status and brand image
3. Price is lowered making it mass market product

Question 19

How do you make a profit?

Answer 19

Selling price higher than costs.

Question 20

What usually happens when a price is higher or lower?

Answer 20

Higher price will create a lower demand

Lower price will create a higher demand for product as well as additional products sold

Question 21

What are the internal factors that affect price?

Answer 21

• technology: ** at first is expensive, so will increase price, but long term reduces manual costs**

• methods of production ** production expensive “flow production” but will benefit from economies of sales**

•product life cycle ** may charge low prices/high to encourage people to buy it in introduction. MATURITY: Sell similar price to competitors. Declining phase, reduces price**

Question 22

What are the external factors affecting price?

Answer 22

-competition: about what a competitor charges for product. If buddy sets price to high, then customer buy competitors product. If too low. Then they’re query about quality

Market segmentation: affect price. Exp: people with higher income, afford higher prices

Cost of raw materials: effects cost of each unit. Higher quality leads to high unit costs. So higher price is needed

Question 23

What happens to the price as business grows?

Answer 23

It may increase as it gains more loyal customers and good reputation.

Less costs as it benefits from economies of scale.

Question 24

How does the marketing mix affect each other? (Promotion and quality)

Answer 24

-method of distribution affect price and promotion. (Sold online, then usually cheaper)(stores have displays, more expensive)

-quality affects promotion( low quality is cheap. So emphasized by promotion)

(High quality is more expensive. Emphasize promotion material is quality)

Question 25

What is differentiation?

Answer 25

Making products distinctive in market. To make customer want to buy your product, not competitors

Question 26

How can a business differentiate there products?

Answer 26

-gives product unique selling point

• promote to make it seem different
• change price so its cheaper so more appealing to mass market

-change price so it’s expensive m, so more luxurious, makes it appeal to more niche market

-product design:
•involves function(fit for purpose)
•cost((low manufacture cost, cheaper
•aesthetic (distinctive and appealing