Marketing Mix Flashcards
PLC extension strategies:
Price reductions
Increases demand and offloads excess stock
Advertising
Attracts new customers, reminds old customers, and encourages repeat purchasing
Redesigning
Introduces special features or limited editions to current products
Repackaging
Redesigns the packaging for novelty
New markets (VERY GOOD STRATEGY :))
Selling existing products in new retail outlets or new regions, perhaps to different market segments
Brand extension
Use an existing, successful brand name to launch a new or modified version of an existing product
Coca-Cola → Coke Zero
Product differentiation
Distinguishes the product from its competitors by developing a USP
Change brand name
Avoid bad publicity associated with prior name (Facebook → Meta)
Reposition the product
Find new uses for the same product
Bubble Wrap goes from textured wallpaper to shipping protection
DRASTIC pricing model:
Demand, rivalry, aims, supply, time, image, cost of production
Cost-plus pricing is also known as:
mark-up pricing
Cost-plus pricing and attributes:
Work out the average cost per unit of a product, then add a percentage markup
Simplistic and easy to calculate
Does not consider customer needs (entirely internal in terms of consideration)
Penetration pricing and attributes:
Products are initially sold at a low price to try and break into the market and gain market share
Once the firm has enough market share, prices can raise
Suitable for mass market products sold in large volumes, or new firms trying to enter established markets
If prices are too low, customers may perceive the product to be poor quality
Loss leader pricing and attributes:
Selling a product at or below its cost value
Tempts customers into the store to buy more profitable products, and recoups the loss by selling complementary products
Incentivises customers to switch brands
Setting prices too low may damage the prestige and image of the brand
Loss leader pricing is suitable for the following markets:
Supermarket low-cost (unprofitable) ranges
Coffee machines with own-brand coffee pods
Video game consoles
Predatory pricing and attributes:
Temporarily reduce prices to kill a competitor
Used when an existing firm is threatened with new competition
Price wars ensue in a race to the bottom
Creates a monopoly (oligarchy)
Can earn customers in the short term
May not stay in the long term, not brand loyal
Can be illegal (anti-competitive)
Industries of predatory pricing:
Commonly used in supermarket, airline, and smartphone sectors
Premium pricing and attributes:
Price significantly higher than similar competing products
Usually because high quality, or unique properties that justify the price
Generates high profit margin
Creates higher barriers to entry for competitors
Limits numbers of customers due to high price
May lose status if they appeal to the mass market
Requires strong brand loyalty, which is expensive to establish and maintain
Dynamic pricing is also known as:
surge/real-time pricing
Dynamic pricing and attributes:
Varying the price of a good or service to reflect changing market demand
Businesses charge higher prices during peak periods and lower prices during off-peak periods
Capitalizes on changing market conditions
Gives greater control over pricing to maximize profits
Customers may feel unhappy about not knowing what price to pay
Can lead to price wars during off-peak periods, which is not sustainable in the long term
Dynamic pricing is used by:
Used by airlines, cinemas, hotels, taxis and ride-shares
Competitive pricing is also known as:
going-rate pricing
Competitive pricing and attributes:
A firm sets the price of its goods and services as the same or similar level to competitors
Commonly used where a product has been on the market for a while and there are many substitutes available
Simplistic and easy to calculate
Needs to find non-price methods to differentiate in competitive markets, which can add to a firm’s costs
Three methods of going-rate pricing:
Above the competition
Same as the competition
Below the competition, e.g. No Name
