Marketing Flashcards
What is meant by marketing?
Meeting the needs and wants of customers so that marketing’s primary aim of increasing sales can be met. (not concerned with profit)
State the marketing mix/4 p’s of marketing
- Product
- Price
- Place
- Promotion
Why is it known as a marketing ‘mix’?
It is known as a “mix” because each ‘ingredient’ affects the other and the mix must overall be suitable for the target customer
What is meant by promotion?
The collection of techniques used to inform and persuade customers to purchase products/services. Promotion falls into 2 categories: above and below the line.
What is meant by above the line promotion?
Promotion uses media where there is no direct contact with the potential customer. For example, Television
What are the advantages and disadvantages of using television as above the line promotion?
+ Reaches a mass audience, exposing more people to the product
+ Visual and audio aspects are easy to remember
- However it is very expensive compared to other mediums
What are the advantages and disadvantages of using billboards as above the line promotion?
+ Busy roads and traffic lights can be good locations for billboards in terms of exposure and reach
+ They are more cost effective then TV adverts
- Their static nature means content reaches a much smaller audience than other mediums such as TV
- Content needs to be concise and eye-catching. It cannot be changed easily if it is not having a positive effect on sales
What is meant by below the line promotion?
A promotion technique where the business can directly contact the potential customer. This includes: email, personal selling, telephone, product sampling, leaflet distribution and trade fairs
What is meant by personal selling?
When there is a direct link between the customer and the sales person. It includes sales assistants, door to door sales and telesales
What are the advantages and disadvantages of personal selling?
+ Can directly target customers who have shown interest
+ Can offer a personalised/tailored service
- Can annoy customers, some of the promotional techniques like leaflets can often be ignored
What are the disadvantages of promoting via social media?
- Lots of resources are dedicated to creating/posting the content as well as responding to customer feedback
- Brand reputation may be damaged by in appropriate posts, failing to respond to customers or not attempting to engage with customers
- Businesses may be negatively affected by influencer controversy
What is the definition of ‘price’?
The amount of money a customer needs to give up in order to obtain a product or service
What is meant by cost plus pricing/full cost based?
This is a pricing method that adds a percentage to the cost of making the product to give the selling price
What are the advantages and disadvantages of cost plus pricing?
+ Straightforward, quick and easy method
- Disregards elasticity
- Ignores influence of competitors
What is meant by competitor pricing?
This is when a price is set based on the prices that are being charged by competitors. This price is often lower in order to gain sales from rivals
What is meant by price skimming?
A price is set high because customers are willing to pay more for that product, they are usually made before other competitors come into the market
What is meant by penetration pricing?
When a business is new to the market, a new price is set lower than competitors. This is a short term strategy to help break customer loyalties from trusted brands
What is meant by marginal pricing?
Setting the price above the variable cost of producing one extra unit as this would then be profit
What is contribution pricing?
Setting a price based on the variable cost of the product, the aim is to ensure the selling price generates an acceptable contribution towards covering the fixed costs of a business
What is meant by psychological pricing?
A pricing tactic that is designed to appeal to customers who use emotional rather than rational responses to pricing measures. The aim is to make the customer believe that the product is cheaper than it is. For example, £12,995 rather than £13,000 as a price of a car
What is the formula for price elasticity of demand?
% change in demand / % change in price
How do you interpret price elasticity of demand?
Over 1 = elastic
Between 0 and 1 = inelastic in relation to price change
0 = perfectly inelastic, demand does not change at all in relation to price change
What is meant by income elasticity of demand?
Measures the reponsiveness of demand to a change in income
What is the formula of income elasticity of demand?
% change in quantity demand / % change in income
How do you interpret income elasticity of demand?
More than 1 = As income grows, proportionally more is spent on luxuries
Less than 1 = proportionally more is spent on necessities
What is meant by cross price elasticity of demand? (XED)
This measure the responsiveness of demand for ‘Good X’ following a change in price for ‘Good Y’
What is the formula for XED?
% change in demand for Good X / % change in price for good Y
How might you evaluate elasticities of demand?
+ It can help marketers decide whether to or how much to increase/decrease prices by
- Assumes you know what will happen to demand which is difficult if it is a brand new product
What is meant by the product life cycle?
A theoretical model which describes the stages that a product goes through over time
What is meant by introduction? (product life cycle)
Researching, developing and then launching the product
What is meant by growth? (product life cycle)
When sales are increasing at their fastest rate
What is meant by maturity? (product life cycle)
Sales are near their highest point but the rate of growth is slowing down
What is meant by decline? (product life cycle)
The final stage of the cycle when sales begin to fall
State the characteristics of introduction (product life cycle)
- Low sales
- Heavy promotion
- Cash flow problems
- Use of penetration pricing
State the characteristics of growth (product life cycle)
- Sales increasing quickly
- Competitors become interested
- High promotional spending
- Adoptions to the product may be made
- Wider distribution of the products
State the characteristics of maturity (product life cycle)
- Weaker rivals will leave the market
- Competitive pricing is likely
- Further improvements might be made
- Cash flow is likely to be positive
State the characteristics of decline (product life cycle)
- Technological advances, economic conditions and fashion trends might be the cause of this stage
- Prices may be drastically reduced
- Distribution may be limited to a smaller number of stores
What is meant by an extension strategy?
At some point sales begin to decline and the business has to decide to either withdraw the product or devise a plan to try and prolong the life cycle of a product
What are the features of an extension strategy?
- ADVERTISING - gaining a new audience or reminding the current audience
- PRICE REDUCTION - more attractive for customers
- ADDING VALUE - add new features to the current product
- EXPLORE NEW MARKETS - selling the product in new geographical areas
- NEW PACKAGING - brightening up old packaging or making subtle changes
Pros of the product life cycle
+ Helps with planning and decision making in terms of the product and its marketing
+ Trends can be spotted and businesses can respond accordingly
Cons of the product life cycle
- It can lead to businesses becoming too rigid in their strategies as they expect sales volumes to follow a script written in stone. Products may not always follow this
- Businesses may discontinue products when in decline, however this could just be a dip in sales as a result of economic conditions and may eventually lift
What is a product positioning chart?
Also known as Market Mapping
A grid where each product sits on scales based on 2 important features of a specific market.
e.g) price and quality
What is the purpose of a product positioning chart?
Also known as Market Mapping
- Identifies gaps in the market
- It may also be to identify crowded segments, as the suggest a high sales volume for that particular product
What is a product portfolio?
Many businesses produce a range of products, the collection of products is known as the product portfolio. A business can analyse this on a product positioning chart
Why might a business want multiple products in their portfolio?
- Increase sales
- Meet the needs of multiple groups of customers
- Compete with rivals
- Reduce risk
- Increase visibility thus enhancing visibility of the brand
What is the Boston Matrix?
Categorising products into one of four different areas, based on market share and market growth. It helps to decide how to allocate investment across the product portfolio
What are the 4 quadrants of the Boston Matrix?
- Question Marks/Problem Child
- Stars
- Dogs
- Cash Cows
What are the characteristics of Stars? (Boston Matrix)
- High growth products
- Need heavy investment to sustain growth
- Eventually growth will slow and product will become a cash cow
What are the characteristics of Dogs? (Boston Matrix)
- Low market share
- Low growth markets
- Generate enough cash to just break even
- Rarely worth investment
What are the characteristics of Question Marks? (Boston Matrix)
- Low market share
- High growth markets
- Has potential but needs substantial investment
- Management have to think hard about whether to invest
What are the characteristics of Cash Cows? (Boston Matrix)
- Low growth markets
- High market share
- Mature, successful products with relatively little need for investment
- Managed for continued profit
- Continue to generate cash that can be used for Stars
Why are cash cows important for big businesses such as Apple?
- Little need for investment or advertising
- Profits can be used to feed question marks or stars
- Helps to keep cash flow positive
Why can the Boston Matrix be useful?
- Can identify which Stars and Question Marks are worth investment
- Can identify cash cows where money can be saved by reducing investment
Why can the Boston Matrix be limited?
- No figures, doesn’t say exact revenue/profit or market share figures
- Assumes there is no fluctuation in market conditions which is unrealistic and unreliable
- Businesses might want to compare and consider indicators other than market growth and share
- Some businesses might not want to reduce cash cow investments
What is meant by place?
Part of the marketing mix. Refers to how the product I distributed
What are channels of distribution?
The route between production and consumption
What are the 5 main channels of distribution?
1 = Producer - Wholesaler - Retailer - Consumer 2 = Producer - Retailer - Consumer 3 = Producer - Consumer 4 = Producer - Wholesaler - Consumer 5 = Producer - Agent - Consumer
Who is the retailer?
The business responsible for selling the final product to the customer;
- department stores
- convenience stores
- independents
- franchises
What are some key retail trends?
- Growth in out of town stores and retail parks
- Decline in independent stores
- Increased use of technology
What is the role of a wholesaler?
The wholesaler is the middle man, they act as a third party to break bulk
What are some characteristics of a wholesaler?
- Useful for big producers that don’t need to deal directly with every shop
- Beneficial for small shops that can’t store large quantities of goods
- They use their own logistics to move goods around the country (this reduces costs for producers)
- Wholesalers enable manufacturers and retailers to focus their efforts on specialist areas
What is meant by an agent?
A third party negotiates between the producer and the buyer
e.g) travel agent, estate agent
What are some characteristics of an agent?
- Tend to operate in the tertiary sector
- Agents sell the product/service in return for commission
- Do not hold stock themselves
- Significantly reduce marketing costs for producers
What is Channel 3? (Direct Marketing)
A sale is made directly between the producer and the consumer. This usually occurs via e-commerce where a customer can buy a product from the manufacturers website (Apple, iPhone)
What is meant by online distribution?
Refers to a tangible product being purchased online and then delivered to the customer through means of physical distribution
What are the advantages of online distribution?
+ Geographical reach to customers is increased
+ Overheads are lower
+ ‘Store’ can be open at all times
What are the disadvantages of online distribution?
- Shipping/returns can be complicated and costly
- Large initial investment
- Customers might prefer to physically try a product before purchase
- Opens up business to more security problems such as fraud
What is meant by digital distribution?
Refers to electronic methods being used to deliver goods to the customer
What are the advantages of digital distribution?
+ Businesses don’t have to hold physical stock which helps to reduce costs
+ Can be purchased and consumed at any time
+ No delivery/shipping fees
What are the disadvantages of digital distribution?
- Not suitable for all businesses and products
- Relies on internet access
- High initial investment
- Ongoing software/website maintenance which is costly
- Problems with illegal streaming providers
