Marketing

Question 1

What happens in Research and development?

Answer 1

Product @ its trial stage and not yet available for sale. High cash outflow spent on developing the product.

Question 2

What happens in Introduction?

Answer 2

Product launched and put on sale for the first time (usually backed up with lots of advertising and sales promotions).

Question 3

What happens in Growth?

Answer 3

Sales and profitability increase until product is established.

Question 4

What happens in Maturity?

Answer 4

Sales near their highest rate of growth (peak).
Firms continue to advertise it and as popularity grows, they try to make the product more available.
Towards the end, market becomes saturated and there’s no more room to expand.

Question 5

What happens in Decline?

Answer 5

Eventually sales start to fall as rival products take over and the product becomes obsolete.

Question 6

What happens in Research & Development and Introduction (to sales and profit)?

Answer 6

Firm spends money on research and promotion but sales of product are usually low.
Business expects to make a loss at this point.

Question 7

What happens in Growth and Maturity (to sales and profit)?

Answer 7

Business hopes to earn enough profit to pay back their initial investments and make a profit.

Question 8

What happens in Decline (to sales and profit)?

Answer 8

Firm will probably spend less money supporting the product - sales fall (begins to make a loss).

Question 9

Define product portfolio

Answer 9

Range of products that a business sells.

Wide = Lots of different products.
Narrow = Few products.

Question 10

What are the benefits of a product portfolio?

Answer 10

1) Less risky: more products to gain revenue from.
2) If the original product declines, increasing sales of new product can replace it.
3) Firms may attract wider target market (target different products @ different customers).
4) Offer a range of goods and services to support the original product or service so a customer will spend more.

Question 11

What are the problems of a product portfolio?

Answer 11

1) Many managers may need to be employed to manage the larger number of products.
2) Bad publicity on 1 product can negatively effect the company’s image.
3) High cost to develop and sell a wide range of goods.

Question 12

What is a balanced portfolio?

Answer 12

Large firms have many products at different stages of the product life cycle.

Balanced because declining products are easily replaced.

Question 13

What is an extension strategy?

Answer 13

Firms extend the life of some products in the decline phase:

E.g. change the design or offer discounts on the price so the product can make profit for longer.

However, this requires money (taken from other parts of the business).

Question 14

How can firms broaden their product portfolios?

Answer 14

1) Add products to an existing range by developing new products based on current ones.
2) Increasing range of products by developing different products.

Question 15

Define diversification

Answer 15

Designing and producing more products.

Reduces risk that a decline in sales of 1 product will harm the business (less threat to firm’s profits).

Question 16

Define cost plus pricing

Answer 16

Adding a mark up or profit margin to the cost of producing a product.

Works well w/ little competition and ensures profit is made.

Question 17

Define market-led pricing

Answer 17

Pricing used if the product price helps customers decide whether to buy it (this is most of the time).

Question 18

What are the types of market-led pricing?

Answer 18

1) Penetration pricing - Charge a low price with a new product to gain customers interest.
2) Loss leader pricing - Charge price below production cost until sales are established and then increase prices.
3) Price skimming - Charge high price to make product more desirable to people with large incomes. When the product is established, reduce the price to help it become a mass market product (everyone can buy it).
4) Competitive pricing - Charge similar prices to competitors. Used when customers have lots of choice and products are similar.

Question 19

What are the methods of promotion?

Answer 19

1) Advertising - Paying media to promote the business.
2) Direct marketing - Business contact customers directly.
3) Sales promotion BOGOF, discounts.
4) Sponsorship 0 Businesses help to pay for or help fund events and organisations.

Question 20

Name 2 pros and cons for advertising

Answer 20

Advantages: Wide range of customers & can go global.

Disadvantages: Expensive & may not reach target market.

Question 21

Name 2 pros and cons for direct marketing

Answer 21

Advantages: Goes to potential customers & always seen.

Disadvantages: Annoys customers & time consuming.

Question 22

Name 2 pros and cons for sales promotion

Answer 22

Advantages: Attracts potential customers & increases profit.

Disadvantages: Short-term & customers may go elsewhere if offer ended.

Question 23

Name 2 pros and cons for sponsorship

Answer 23

Advantages: High profile and gives firms a better image.

Disadvantages: Negative publicity and people may disagree.

Question 24

What happens when a product goes from:

Manufacturer –> Wholesaler –> Consumer

Answer 24

Consumers buy product from cash & carry warehouse.

Good for manufacturer - gets bulk orders.

Wholesaler takes on cost of storing products and the risk of not selling.

Consumer often pays lower prices than if they bought from a retailer; levels of customer service may be lower.

Question 25

What happens when a product goes from:

Manufacturer –> Wholesaler –> Retailer –> Consumer

Answer 25

Good for manufacturer - gets bulk orders.

Retailer benefits from dealing with wholesaler - reduce risk by allowing retailers to buy in smaller quantities and giving them a wide range of goods.

Problem: Goods can take a long time to get from:
Manufacturer –> Consumer.

Question 26

What happens when a product goes from:

Manufacturer –> Retailer –> Consumer

Answer 26

Faster than previous one (dealing with retailers through wholesalers).

Manufacturer gets better consumer feedback about product.

Harder for small retailers to avoid having to hold lots of stock.

Question 27

What happens when a product goes from:

Manufacturer –> Consumer

Answer 27

Fastest and often cheapest for consumer.

Harder for consumers to shop around.

Manufacturers usually only sell their own products; retailer would probably stock goods from a range of manufacturers.

Customer service may not be as good.