Term 2 Marketing Mix Flashcards
Define cost-plus pricing
Estimate how many of the product will be produced, then calculating the total cost of producing this product and finally adding a % mark-up for profit.
- Easy to calculate
- Possible loss of sales if the selling price is a lot higher than your competitor’s price
Define penetration pricing
Strategy is used when competitors have entered the market.
- Price is set low with the aim of establishing market-share for the product.
- Profits will be modest
- With experience of product, savings will be made resulting in a higher profit margin
Define price skimming
Strategy used for new products
- Price is set high (initally) to recover costs of research and development.
- Useful when competitors are not expected to enter market for a while.
- High price appropriate when a firm/product have a unique advantage
Define competitive pricing
Prices are set in line with your competitors or just below their prices.
- Sales are likely to be high as your price is at a realistic level and the product is not under or over-priced.
- In order to decide what this price should be, you would have to research what price competitors are charging which costs time and money.
Define promotional pricing
Products are packaged together and solar at a price that is lower than the combined price of the products
- Customers are encouraged to buy more
- Customers perceive the ‘product’ as being good value
Define psychological pricing
- Price based on value placed on the item by consumers and amount they are likely to pay for it
- Price may reflect ‘quality’ or ‘less expensive’
- high price tag indicates higher quality
Define price
Price is what the business charges for a product or service.
Define product
This is the “thing” that companies sell in order to make profit - it can be a product or a service
Define function of the product
What does the product do, what is it used for?
Define features of the product
Physical characteristics like shapes, size, colour, weight, speed, and durability
Define unique selling point
What is special about the product, how does it differ from other products that are the same, and what is its point of difference?
List stages of a product life cycle
Introduction, growth, maturity, decline
Define the introduction stage of the product life cycle graph
The product is not officially on the market at this stage. Sales will start to grow slowly (low product awareness) - No profits
Define the growth stage of the product life cycle
Sales start to grow rapidly supported by advertising. Profits start to be made. Competitors may enter the market with very similar offerings. Advertisement spending is high and focuses upon building brand.
Define the maturity stage of the product life cycle
Sales increase slowly now due to intense competition. A lot of advertising is used to maintain sales growth. Price wars and intense competition occur. Producers begin to leave the market due to poor profit margins.
Define decline in a product life cycle
Sales will decline as new products come along or the product has lost its appeal. The product will usually be withdrawn from the market as it becomes unprofitable to produce the product any further
Define “Place”
Where the customer can find your product or service. The place where you chose to sell your product must be appropriate in relation to your target market.
Store in mall
Pros and cons
Pros:
* Ample parking
* Comes with advertising to bring in more customers
Cons:
* rents are higher
* shoplifting
Stand alone store
Pros and cons
Pros:
* Cost of running a stand alone store is lower than shopping malls (rent, water, rates)
Cons:
* Limited parking
* Not usually covered
* Shoplifiting
*Own advertising
Online shopping
Pros and cons
Pros:
* Low costs - do not need a store
* Convenient - customer can shop when they want and where they want
* No shoplifting
Cons:
* Online payment security
* No cash payment option limits number of customers
* Privacy concerns
TV infomercials
Pros and cons
Pros:
* May appeal to niche market (people trying to lose weight, children, programmers)
Cons:
* because of high cost most infomercials screen at off peak time.
* Only large companies can afford traditional advertising
Types of distribution channels
Selling directly = Producer -> consumer
Selling through retailer = Producer -> retailer -> consumer
Selling through wholesalers = Producer -> wholesaler -> retailer -> consumer
Types of promotion strategies
Advertising, sales promotion, public relations, and personal selling
Define advertising
Advertising is non-personal communication by the business to the target market
Ex: newspaper, social medial, direct email
