Term 2 Marketing Mix

Question 1

Define cost-plus pricing

Answer 1

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

Question 2

Define penetration pricing

Answer 2

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

Question 3

Define price skimming

Answer 3

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

Question 4

Define competitive pricing

Answer 4

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.

Question 5

Define promotional pricing

Answer 5

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

Question 6

Define psychological pricing

Answer 6

• 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

Question 7

Define price

Answer 7

Price is what the business charges for a product or service.

Question 8

Define product

Answer 8

This is the “thing” that companies sell in order to make profit - it can be a product or a service

Question 9

Define function of the product

Answer 9

What does the product do, what is it used for?

Question 10

Define features of the product

Answer 10

Physical characteristics like shapes, size, colour, weight, speed, and durability

Question 11

Define unique selling point

Answer 11

What is special about the product, how does it differ from other products that are the same, and what is its point of difference?

Question 12

List stages of a product life cycle

Answer 12

Introduction, growth, maturity, decline

Question 13

Define the introduction stage of the product life cycle graph

Answer 13

The product is not officially on the market at this stage. Sales will start to grow slowly (low product awareness) - No profits

Question 14

Define the growth stage of the product life cycle

Answer 14

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.

Question 15

Define the maturity stage of the product life cycle

Answer 15

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.

Question 16

Define decline in a product life cycle

Answer 16

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

Question 17

Define “Place”

Answer 17

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.

Question 18

Store in mall

Pros and cons

Answer 18

Pros:
* Ample parking
* Comes with advertising to bring in more customers
Cons:
* rents are higher
* shoplifting

Question 19

Stand alone store

Pros and cons

Answer 19

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

Question 20

Online shopping

Pros and cons

Answer 20

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

Question 21

TV infomercials

Pros and cons

Answer 21

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

Question 22

Types of distribution channels

Answer 22

Selling directly = Producer -> consumer

Selling through retailer = Producer -> retailer -> consumer

Selling through wholesalers = Producer -> wholesaler -> retailer -> consumer

Question 23

Types of promotion strategies

Answer 23

Advertising, sales promotion, public relations, and personal selling

Question 24

Define advertising

Answer 24

Advertising is non-personal communication by the business to the target market

Ex: newspaper, social medial, direct email

Question 25

Define sales promotion

Answer 25

Sales promotion involves short-term tactics used to achieve sales.

Used to increase sales, brand or product awareness

Price reductions, samples, coupons

Question 26

Define public relations

Answer 26

Public relations includes sponsorships, new stories, and newsletters that create a feeling of goodwill around a product or service.

Ex: Publicity, trade shows, celebrities.

Question 27

Define personal selling

Answer 27

Personal selling is face-to-face communication that attempts to inform and persuade others to purchase the goods of the seller

Ex: Door to door sales, home parties

Question 28

Define primary sector

Answer 28

Involves raw materials like oil, ores, fruit, meat, vegetables, grain

Question 29

Define secondary production

Answer 29

Manufacturing and assembly process, it involves converting raw materials into components. Like building houses, bridges, tunnels, and roads.

Question 30

Define tertiary production

Answer 30

Commercial services that support the production and distribution process like insurance, architecture, teaching, and health care.