Making marketing decisions Flashcards
Product design mix
The product design mix refers to the combination of elements that make up a product’s design.
These elements include function, aesthetics, and cost.
Products can be tangible goods (they can be held) or intangible services (something the customer pays for but cannot necessarily touch).
Balancing the elements of function, aesthetics, and cost, helps the product design to be both functional and attractive, while also being cost-e ffective for both the manufacturer and the consumer.
Function of a product
The function of a product refers to its intended purpose and the specifi c tasks it is designed to perform.
A product’s function is the most important aspect of its design because it determines how well the product will meet the needs of its intended users.
Aesthetics of a product
Aesthetics refer to the product’s visual and sensory appeal, including its form, shape, colour, and texture.
Aesthetics play an important role in attracting customers, creating brand loyalty, and generating word of mouth recommendations.
Cost of a product
The cost of production must be considered when designing a product, as it directly affects the price point at which it can be sold.
A well-designed product should balance cost and value, ensuring that customers perceive the product as valuable enough to justify its cost while still maintaining profi tability for the manufacturer.
Product life cycle
The product life cycle describes the di fferent stages a product goes through from its conception to its eventual decline in sales.
There are typically fi ve stages in the product life cycle: development, introduction, growth, maturity, and decline.
Development stage of a product
The focus is on designing and developing the product.
The business usually incurs high costs for research and development, market research, and product testing.
Cash flow is usually negative during this stage, as the company is investing heavily in the product without generating any revenue.
The marketing strategy during this stage is focused on creating awareness and generating interest in the product.
Introduction stage of a product
The stage begins when the product is launched.
Characterised by slow sales growth as the product is still new and unknown to most consumers.
Cash flow is usually negative as the business usually incurs high costs for promotion, advertising and distribution.
Marketing e fforts are focused on creating awareness and generating interest in the product.
Growth stage of a product
The product enters this stage when sales begin to increase rapidly.
The business focus shifts to building market share and increasing production to meet the growing demand.
Cash flow usually turns positive during this stage as sales revenue increases and costs are spread out over a larger volume of production.
The marketing strategy is to diff erentiate the product from its competitors and build brand loyalty.
Maturity stage of a business
Characterised by slowing sales growth as the product reaches its peak in terms of market penetration.
Cash flow is usually positive during this stage as sales revenue continues to come in and costs are reduced through economies of scale and e fficient production processes.
The marketing strategy aims to maintain market share and increase pro tability by cutting costs and finding new markets.
Decline stage of a business
Starts when sales begin to decline as the product becomes obsolete or is
replaced by newer products.
The business focus shifts to managing the product’s decline and reducing costs.
Cash fl ow usually turns negative as sales revenue declines and costs associated with the product’s decline increase.
The marketing strategy may involve discontinuing the product, reducing its
price to clear inventory, or finding new uses for the product.
Extension strategies to a product life cycle
Extension strategies refer to the techniques used by businesses to extend the life of a product beyond its natural life cycle.
These strategies are designed to boost sales and maintain profitability for a product that has reached the decline stage of its life cycle.
There are two types of extension strategies:
Product-related extension strategies
Promotion-related extension strategies
Product related extension strategies
Involves changing or modifying the product to make it more appealing to customers and extend its life cycle and can be achieved in one of three ways:
Product improvements, line extensions and repositioning.
Promotion related extension strategies
Involves changing the marketing and promotion of the product to extend its life cycle and could include one or more of the following changes:
Changes to advertising, price promotion, sales promotion.
Purpose of product differentiation
Product di fferentiation is an attempt by a business to distinguish its products from those of competitors.
This involves creating functions or features of the product (or firm) which help it to stand out from its competitors.
Strong product di fferentiation helps the firm to develop its competitive advantage.
The development of product di fferentiation often helps a fi rm to create a unique selling point for its product which can be used in marketing.
Product diff erentiation may be tangible (clearly visible) or it may be a perception that is created about the product in the consumer’s mind.
Successful product di fferentiation helps the business to increase demand for its products, increase brand loyalty, and allow the business to charge higher prices.
Pricing strategies
Choosing the right pricing strategy is essential for a business to be profitable, competitive, and successful in the long run.
Businesses usually focus on one of two options:
High profi t margin, lower volume pricing strategies (price skimming strategy)
Lower pro t margin, higher volume strategy (penetration pricing strategy)
