Short Answer Exam Questions Flashcards
Describe price.
Price is a statement of value for products or services.
Price = list price - incentives and allowances + extra fees
eg. price of tuition = published tuition - scholarship aid + books, room and meals
Profit = total revenue - total cost
Explain how the price is set. (2020 S1 and 2021 S1)
1) Identify pricing objectives and constraints.
Objectives = profit, sales revenue, market share, survival, social responsibility.
Constraints = demand, stage in the PLC, cost of production and marketing, single product or product line, type of market eg. monopoly.
2) Estimate demand and revenue.
Use the demand curve (affected by consumer tastes, price and availability of similar products and consumer income). TR = P x Q
3) Determine cost, volume and profit relationships. Use break-even analysis. (BEP = FC/unit price - unit variable cost)
4) Select an approximate price level.
Demand-oriented approach (focused on the consumer but only as a predictor of sales) eg. skimming pricing - setting a higher price to maximise profit margins, high price = high quality, penetration pricing - setting a relatively low price initially to increase market share or maximise sales volume, prestige pricing - setting a high price to attract quality and status-conscious consumers, price lining - setting different price points among products offered, odd-even pricing, target pricing, bundle pricing eg. McDonald’s Happy Meal, yield management pricing eg. airlines.
Cost-oriented approach (focused on the perspective of the company).
eg. standard markup pricing (adding aa fixed percentage markup to the cost of all items in a product class), cost plus pricing (retail price = cost + markup) and experience curve pricing (setting a lower than average cost on the basis that cost will decrease as production experience increases).
Profit-oriented approach.
eg. target profit pricing, target return-on-sales pricing.
Competition-oriented approach (eg. customary pricing - setting price based on historical price point, above, at or below-market pricing and loss-leader pricing eg. One Pound Shop).
5) Set list or quoted price.
Fixed-price policy or dynamic pricing policy (changing price in real time in response to supply and demand).
6) Make special adjustments to list or quoted price.
Discounts, allowances or geographical adjustments.
Product Life Cycle (PLC). (2021 S1, 2022 S2)
Stages of the PLC:
1) Introduction
Promotional objective; to inform eg. advertising, promotional free samples, publicity in magazines.
2) Growth
Promotional objective; to persuade eg. advertising with an emphasis on the products difference from competing brands.
3) Maturity
Promotional objective; to remind eg. reminder advertising, sales promotions such as coupons, direct mail and SMS reminders.
4) Decline
Promotional objective; to phase out. Little money spent on promotion.
Branding
A brand conveys many tangible (physical) and intangible features such as symbols, values, culture, design, perceived customer image and personality. More practically a brand is a consumers collection of perceptions.
Branding is an organisation’s use of a name, phrase, design, symbol or combination of these to identify its products and distinguish them from those of competitors.
Brand equity is the perceived worth of the brand.
Explain the benefits of a brand.
Benefits for company:
- Customer loyalty
- Premium pricing
- Increased distribution
- Increased market share
- International expansion
- Brand extensions
- More shelf space
- Increased revenue
- Greater profitability
Benefits for customers:
- Increased trust
- Lower perceived risk
- Reduced search costs
- High perceived value
- Status/prestige
- Social safety
Explain the components of a brand.
- Icon
Transcends product/service categories to become a part of pop culture eg. Rolex’s five pointed crown, symbolising luxury, precision and heritage. - Image
The set of beliefs that a consumer has regarding a particular brand (corporate, user or CEO/owner image) eg. Lego brings to mind fun, imagination and creativity. We associate it with our childhood. - Name
What is spoken - letters, words or numbers eg. Gucci. Should suggest the product benefits, be memorable, distinctive and positive, fit the company or product image, have no legal restrictions, be simple and emotional and be transferrable to other languages. - Term or slogan
A short phrase that a business uses to make its company and products stick in the consumers’ mind eg. Kellog’s Rice Bubbles - “snap, crackle, pop”. - Brand mark
The part of a brand not made up of words - often consists of symbols and designs eg. McDonald’s golden arch. - Brand personality
The set of human characteristics associated with a brand name (sincerity, excitement, competence, sophistication, ruggedness) eg. Patagonia is associated with ruggedness due to the outdoor nature of its products.
Describe branding strategies. (2020 S2)
- Multiproduct branding strategy
One name for all its products in a product class eg. Sony televisions, Sony headphones, Sony cameras. - Multibranding strategy
Each product has a distinct name for a different market segment eg. Meta (Facebook) owns Instagram (social networking) and WhatsApp (customer communication). - Private branding strategy
Company manufactures products but sells them under a wholesaler or retailer eg. Homebrand by Woolworths. - Mixed branding strategy
Company markets products under its own name and that of a reseller (because the segment of the reseller is different) eg. Apple makes Apple products and Beat products
Marketing Environment. (2023 S2, 2023 S1, 2022 S2, 2021 S1)
- Internal marketing environment.
- External marketing environment (within this both micro and macro influences).
Micro: Marketers, Competitors, Suppliers, Intermediaries, Consumers (McSic).
Macro: Environmental scanning through PESTLE analysis (political, economic, social, technological, legal/regulatory and environment) and Porter’s Five Forces (1. Threat of new entrants, 2. Threat of substitutes, 3. Bargaining power of suppliers, 4. Bargaining power of buyers, 5. Rivalry among existing competitors).
Marketing Mix (in relation to. . .)
Marketing Mix for Products
1) Product (PLC)
2) Price (Pricing Strategies)
3) Promotion (Communication)
4) Place
Marketing Mix for Services
Same as above but also. . .
5) Physical environment
6) People - people define a service
7) Process
Describe the process of promotion within the Marketing Mix. (2023 S2)
Promotion is used as a method of communication. Communication requires 6 elements; a source, a message, a channel of communication, a receiver and the process of encoding and decoding.
There are many different models of communication. These include . . .
Laswell’s Model
AIDA Model
Hierarchy of Effects Model
Persuasion Model
Promotional elements include advertising, personal selling, public relations, sales promotion and direct marketing.
Influences on Demand Curves
- Consumer tastes
- Price and availability of similar products
- Consumer income
If price is elastic it is very responsive to changes in demand. If price is inelastic it is not very responsive to changes in demand (eg. necessities such as prescription drugs).
Demand curves are revenue generated. TR = P x Q
Movement along the demand curve is caused by a change in price. A shift in the demand curve is caused by consumer income, price of other related goods eg. substitutes or complements and consumer taste or preferences.
Market Research
Does a quantifiable gap exist in the market?
1) Define the problem
2) Develop the research plan
3) Collect relevant information
4) Develop findings
5) Take marketing actions
Market research helps us to understand what is happening in the micro-environment. Sources of market research information are both primary and secondary.
Consumer Decision Making Process
1) Problem recognition.
Perceiving a need for a product. Extended problem solving or routine/limited problem solving.
2) Information search.
Seeking value. Both an internal eg. memories and external search eg. word of mouth.
3) Alternative evaluation
Assessing value eg. price, quality, country of origin, availability, service. Both objective and subjective.
4) Purchase decision.
What, where (from whom), when.
5) Post purchase behaviour (can include cognitive dissonance).
Is performance equal to, above, or below expectations? Do you doubt the purchase?
What are influences on the consumer decision making process?
Psychological influences
eg. Maslow’s hierarchy of needs, personality and self concept, perception, learning, values/beliefs/attitudes/lifestyles.
Marketing mix influences
eg. product, price, promotion, place.
Sociocultural influences
eg. personal influences, reference groups, social class, family (consumer socialisation), culture and sub-culture.
Situational influences
eg. purchase task, social and physical surroundings, temporal effects and antecedent states.
Describe the types of organisational markets.
- Government
- Industrial
- Institutional/not-for-profit
- Reseller
