Marketing strategy 1.3.5

Question 1

What is the product life cycle?

Answer 1

The product life cycle is a graph that shows the different stages a product passes through.

Question 2

Name the stages of the product life cycle.

Answer 2

. Development
. Introduction
. Growth
. Maturity
. Decline

Question 3

Development stage impact on cash flow

Answer 3

Negative cash flow because large sums of money is usually spent on research and development during which time no sales are made

Question 4

Development stage impact on the marketing mix.

Answer 4

Limited promotion available to alert retailers and consumers before introduction.

Question 5

Introduction stage impact on cash flow.

Answer 5

Still negative due to low initial sales but less than before.

Question 6

Introduction stage impact on the marketing mix.

Answer 6

Heavy promotion used to create awareness and increase demand.

Question 7

Growth stage impact on cash flow.

Answer 7

Should become positive during this time.

Question 8

Growth stage impact on the marketing mix.

Answer 8

Promotion used to increase brand loyalty.

Question 9

Maturity stage impact on cash flow.

Answer 9

Sales begin to peak so cash flow should be maximised, average costs will begin to fall.

Question 10

Maturity stage impact on the marketing mix.

Answer 10

Promotion begins to ease as brand becomes established, possibly with occasional bursts in promotion to compete against rivals.

Question 11

Decline stage impact on cash flow.

Answer 11

Sales will fall however still positive as average costs are still low.

Question 12

Decline stage impact on marketing mix.

Answer 12

Little or no promotion, price likely to fall to try keep demand and maintain sales until the product reaches the end of its life.

Question 13

What is an extension strategy?

Answer 13

Method used when sales are slowing to increase sales by either re-launching the product with a new image, aesthetic or function or by promoting it at a new market using fresh promotional strategies such as re-positioning, repackaging or re-branding.

Question 14

What is the product portfolio?

Answer 14

The range of products that a business produces, sometimes referred to as the product mix.

Question 15

What is product portfolio analysis?

What is a product portfolio?

Answer 15

A method that helps businesses make plans for the future and ensure long-term profits.

Is the collection of a business or products that make up a business.

Question 16

What are the factors that affect extension strategies?

Answer 16

• Product adjustment:
  ○ This involves making improvements to the product such as updating, repackaging or extending a range.
• Promotion:
  ○ Gives a boost in sales by investing more in promotion campaigns.
  ○ Investment in a sizeable advertising campaign can rejuvenate sales.

Question 17

What are 3 ways of adjusting a product?

Answer 17

• Updating
• Adding value
• Extend range

Question 18

Two ways to normally prolong life of product?

Answer 18

• Make adjustments to the product.
• Invest in the promotion.

Question 19

What are two types of promotion?

Answer 19

Above-the-line promotion – paid for communication in the independent media e.g. advertising on TV or in the newspapers. Though it can be targeted, it could be seen by anyone outside the target audience.

Below-the-line promotion – promotional activities where the business has direct control e.g. direct mailing and money off coupons. It is aimed directly at the target audience.

Question 20

What is the Boston matrix as well as the pros and cons?

Answer 20

The Boston Matrix is a model which helps businesses analyse their portfolio of businesses and brands. The Boston Matrix is a popular tool used in marketing and business strategy.

Categories according to market growth and market share.

+ Model is easy to understand.
+ Help make strategic decisions.
+ Provides a base for management to decide and prepare for future actions.
+It is a useful tool for analysing product portfolio decisions.

• Model neglects small competitors that have fast-growing markets.
• Model only uses two dimensions.
• But it is only a snapshot of the current position
• It has little or no predictive Value
• Focus on market share and market growth ignores issues such as developing sustainable competitive advantage.

Question 21

What are the four stages of the Boston Matrix?

Answer 21

• Stars
• Question marks/ problem child
• Cash cows
• Dogs

Question 22

What are stars in the BM?

Answer 22

high market growth

high market share

▪Invest to sustain growth
▪Maintain or build market share
▪Repel challenges from competitors
▪Create barriers to entry (e.g branding, customer loyalty, quality advantages)

Stars are high-growth products competing in markets where they are strong compared with the competition. Often Stars need heavy investment to sustain growth. Eventually, growth will slow and, assuming they keep their market share, Stars will become Cash Cows

STARS will become CASH COWS.

Question 23

What are cash cows in the BM?

Answer 23

high market share

low market growth

▪ Defend Market Share
▪ Reduce investment in order to maximise cash flow and profits
▪Use profits from cash cows to invest in question marks and stars.

If there is not a Cash cow, this could lead to financial difficulty in supporting other products. They’re considered a market leader.

These are mature, successful products with relatively little need for investment. They need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars

Question 24

What are question marks in the BM?

Answer 24

low market share

high market growth

▪Invest to increase market share
▪Try to build competitive advantage- e.g. through selective market segmentation and positioning
▪Build selectively and invest in the most likely to become stars
▪Cash flow likely to be NEGATIVE

This suggests that they have potential, but may need substantial investment to grow market share at the expense of larger competitors.

Question 25

What are dogs in the BM?

Answer 25

low market share

low market growth

▪Not worth investing in
▪Uses up more management time and resources that can be justified
▪Phase out, or sell off
This refers to products that have a low market share in unattractive, low-growth markets. Dogs may generate enough cash to break even, but they are rarely, if ever, worth investing in. Dogs are usually sold or closed. They are normally continued to just please their customer base.

Question 26

What are the strategies for B2B and B2C markets?

Answer 26

OUTBOUND:
- This involves directing marketing material at potential consumers which includes direct advertising.
- People are increasingly ignoring advertisements and so reject these methods.

INBOUND:
- Involves attracting consumers via ONLINE but it requires effort and resources to build online content.
- Recruitment is needed and is tricky to keep up to date with dynamic trends.

HYBRID:
- Involves a combination of outbound and inbound strategies which reduces costs and creates growth in the market share.

Question 27

What are niche market strategies?

Answer 27

They are marketing strategies which are targeted at the niche market. There are gaps in the market and sometimes are neglected by big firms.

• PRODUCT = likely to have differences and so will be designed to meet consumer’s needs.
• PRICE = More flexibility as there is less competition meaning that higher prices can be charged.
• PROMOTION = Tends to be targeted as they are smaller. They tend to use national media to promote their product.
• PLACE = Often more selective and so are likely to distribute privately.

Question 28

What are mass marketing strategies?

Answer 28

They are marketing strategies targeted at a mass market. They are usually competitive.

• PRODUCT = Will be many products envying for attention and so will be close substitutes. The most successful is to be differentiated from other products.
• PRICE = Are likely to be similar and so will start a price war which reduces revenue. The solution is to set prices at the ‘going rate’.
• PROMOTION = No competition means they will look for non-price competition. This means they are prepared to invest in advertising and promotion.
• PLACE = Uses multiple distribution channels and the internet is developing meaning they are shifting to online selling. This has allowed small/independent businesses to go to mass markets.

Question 29

What are marketing strategies?

Answer 29

A business’s overall game plan for reaching prospective consumers and turning them into customers of their products or services..

Question 30

What does a mass marketing strategy aim to do?

Answer 30

Aims is to appeal to the largest portion of the market while ignoring niche demographic differences, in order to reach the highest number of potential customers possible..

Question 31

What are the features of mass markets?

Answer 31

• low unit costs
• products have broad appeal
• high profit margin
• allows heavy promotion
• caters for all consumers

Question 32

What does a niche marketing strategy aim to do?

Answer 32

Designed to attract a specific subset of customers, a niche marketing strategy considers the narrow category into which your business falls. It focuses on a small group of buyers, instead of the broader market.

Question 33

What does a business to business marketing strategy aim to do?

Answer 33

The purpose of B2B marketing is to make other businesses familiar with your brand name, the value of your product or service, and convert them into customers.

Question 34

Which of the 4 p’s is most important in B2B marketing?

Answer 34

Personal selling – the sales team – is often the most influential part of the Promotions mix, and the most measurable.

Question 35

What does the business to consumer marketing strategy aim to do?

Answer 35

The tactics and strategies in which a company promotes its products and services to individual people: creating, advertising, and selling products for customers to use in their everyday lives.

Question 36

Why is Customer Loyalty important?

Answer 36

Increases profits, improves sales success and allows for sustainable growth. A well-designed and well-executed loyalty programme can help you retain existing customers, attract new customers, reduce turnover and drive profits.

Question 37

How is customer loyalty encouraged?

Answer 37

• Make customer service a priority – even on social.
• Reward your customers. through loyalty cards.
• Ask for advice and listen to it.
• Consistently engage your customers.

Question 38

How do businesses develop customer loyalty?

Answer 38

COMMUNICATION:
- Must keep them informed involving national advertising campaigns.
- Regular communication builds a relationship between business and consumers.
CUSTOMER SERVICE:
- More likely to return if there was high-quality customer service.
CUSTOMER INCENTIVES:
- Rewards customers if returned such as points and so it develops loyalty to go to the same providers.
PERSONALISATION:
- They deal with consumers on a personal level which builds relationships.
PREFERENTIAL TREATMENT:
- They offer VIP services to selective customers which gives them a good experience and so will return for more.