The Marketing Mix Product

Question 1

Product life cycle introduction

6 points

Answer 1

1. The product is launched either on one market or several - often the product is sold with complimentary gifts
2. Businesses often promote the product heavily to help increase sales
3. The initial price of the product may be high to cover the costs of the promotion etc - price skimming
4. Alternatively the price could start of low to encourage sales - penetration pricing
5. Sales go up, but sales revenue had to pay for the high fixed costs of developing before the product makes a profit
6. There aren’t many outlets for the new product yet and competition is limited

Question 2

Product life cycle
Growth stage
6 points

Answer 2

1. Sales grow fast. There are new customers and repeat customers
2. Economies of scale mean the price of manufacturing a goes down the more you make so profits rise
3. Pricing strategies may change
4. Competitors may be attracted to the market. Promotion points out differences from competitors
5. The product is often improved and developed
6. Rising sales encourage more outlets to stock the product

Question 3

Product life cycle
Maturity
3 points

Answer 3

1. Sales reach a peak and profitability increases because the fixed costs of development would’ve been paid
2. Sales start to go down. The price is often reduced to stimulate demand
3. At this stage there aren’t many new customers. So products are forced out of the market

Question 4

Product life cycle
Decline
3 points

Answer 4

1. The product doesn’t appeal to consumes anymore. Sales fall rapidly and interest decreases
2. The product may just stay profitable if promotional costs stay low enough
3. If sales carry on falling the product is withdrawn or sold to another business

Question 5

Boston matrix

Problem child

Answer 5

1. Small market share with a high market growth
2. Aren’t profitable yet
3. Need heavy marketing for success

Question 6

What to do with problem child’s

Answer 6

Brand building
Harvesting (maximising sales or profit in the short term)
Divestment (selling the product off)

Question 7

Stars

4 points

Answer 7

1. Have high market growth and high market share
2. best future potential
3. Profitable growth phase
4. They’re future cash cows

Question 8

Cash cows

Answer 8

1. High market share but low market growth
2. They’re in the maturity phase
3. They’ve already been promoted and are produced in high volumes so costs are low.
4. Cash cows bring in plenty of money

Question 9

Dogs

Answer 9

1. Low market share and low market growth
2. Pretty much a lost cause
3. Business will either harvest profit in the short term or sell them off

Question 10

Product life cycle development

4 points

Answer 10

1. Research and development team develops product
2. Marketing department does marketing research
3. The costs are high and they’re aren’t any sales yet to cover the costs
4. New product development has a high failure rate. This is because there’s often not enough demand or because they can make the product cheap enough to make a profit

Question 11

What is value analysis

Answer 11

1. Where a business try’s to make their product good value for money
2. looks at ways of reducing costs of making, warehousing, distributing and selling the product
3. It’s risky if the customers notice a change and think that the quality of the product has fallen