Making Marketing Decisions Flashcards
Marketing mix
Product, price, promotion, place
Design mix - elements
Function I
Aesthetics
Cost
Factors to consider - product
Manufacturers design product or service that meets needs and wants of target market
Retailers decide what product to sell
Over time product may need updating
Business chooses produce in line with its image
When deciding which product to develop, 4 factors are considered
Has gap in market been identified?
Launching a new inventions or idea
Does existing product have declining sales?
New fashions and changing customer needs
Design mix
Balances 3 aspects of aesthetics, function and cost when designing new products
Function
What product or service is meant todo
Aesthetics
How a product looks and feels
Cost
Amount of money spent on producing/ supplying service
Features of products that emphasise aesthetics in design mix
High added value
Demand fuelled aspirations
Shorter product life cycle
Attracts imitation
Need for greater promotional support
Features of products that emphasise function in design mix
Demand stable and predictable
Longer product life cycles
lower promotional costs
Reputation for quality based on reliability
Economic to manufacture; low average costs based on high production rates
reputation for quality based on reliability
Features of products that emphasise cost in design mix
Will focus on costs & aim to operate efficiently
Product life cycle
Illustrates stages of products life
Product life cycle stages
Introduction
Growth
Maturity
Deline
Product life cycle - introduction stage
Costs high
Low level of sales
Negative cash flow
Small scale distribution
High promotional spending
High price (price skimming) or low price ( price penetration )
Product life cycle - growth stage
Expanding market
Fast growing sales
Product becomes known
Cash flow may become positive
Market grows, profits rise
Wider distributions
Advertising
Product life cycle - maturity stage
Slower sales - rivals enter market = intense competition + fight for more market share
High profits for those w/ high market share
Cash flow strongly positive
Weaker competitors leave market
Advertising is persuasive
Promotion focused on differentiation
Attract new users, target new segments, develop new uses
Product life cycle - decline stage
Falling sales
Market saturation and/or
Decline in profits & weaker cash flows
More competitors leave market
Products withdrawn from production
Kemaning products sold at. reduced prize
Reasons why products enter decline stage
Tech advances
Changes in consumes tastes and behaviour
Increased competition
Failure to innovate & develop product
Key uses of product life cycle model
Forecast future sales trends
Helps correctly position product & successfully target right market
Help analyse & manage product portfolio
Extension strategies definition
Businesses use these to prolong life of product
Extension strategies
Advertising
Price reduction
Adding value
Explore new or different markets
New packaging
Product differentiation
Offering something different from competition
Importance to a business of differentiating, a product/service
unique selling point
allows businesses to charge higher price and create customer loyalty
Enables business to develop distinctive brand where customers will return to make repeat purchases
Major influences that will affect the price
market segments
Marketing objectives
Technology
Competitors
Costs
Products
when pricing a product, a business should consider what
how much it cost to make
The availability of the product or service – how many it can make and sell
How much customer is willing to pay?
Price competitors are charging
Quality of product or service
Why is price important?
Directly affect revenue
must be consistent with other elements of marketing mix.
Making the wrong decision could have serious effect on sales and cash flow.
Cost based pricing
involves business calculating the cost of making the product or service.
Business adds a markup percentage to the cost price to ensure a profit
cost plus pricing formula
Price= unit cost+ (mark up X unit cost)
Advantages of cost-based pricing
Ensure selling at profit as production costs already factored
Easy 2 calculate