UNIT 3. Chapter 16: Marketing mix - product and price Flashcards

1
Q

Def. Marketing Mix

A

The four key decision that must be taken in the effective marketing of a product. Place, Promotion, Product and Price.

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2
Q

What are the 4Cs?

A

The 4Ps are more centred on the firm and its product rather than the Customers - 4Cs.
• Customer solution: what the firm needs to provide to meet the customer’s needs and wants (Product)
• Cost to customer: the total cost of the product including extended guarantees, delivery charges and financing costs (Price)
• Communication with customer: providing a 2 way communication links to both promote the product and gain important market research information (Promotion)
• Convenience to customer: Providing easily accessible pre-sales information like demonstrations or locations for purchasing the product. (Place)

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3
Q

Def. CRM

A

Customer relationship marketing: using marketing activities to establish successful customer relationships so that existing customer loyalty can be maintained.

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4
Q

Def. Product

A

The end result of the production process sold on the market to satisfy a consumer need. Can be both tangible (goods) and intangible (service).

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5
Q

Def. Consumer durable

A

Manufactures product that can be reused and is expected to a reasonably long life, such as a car or washing machine.

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6
Q

Def. Brand

A

An identifying symbol, name, image or trademark that distinguishes a product from its competitors.

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7
Q

Def. Product positioning

A

The consumer perception of a product or service as compared to its competitors.

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8
Q

Def. Product life cycle

A

The pattern of sales recorded by a product from launch to withdrawal from the market.

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9
Q

What are the stages of product life cycle? (5)

A

• Development: No sales as the product is not launched yet.
• Introduction: Launching of the product, sales are often quite low.
• Growth: When sales start increasing rapidly.
• Maturity/Saturation: Sales fail to grow but they do not decline either.
• Decline: Sales decrease.
Graph: pg. 294

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10
Q

Def. Extension strategies

A

These are marketing plans to extend the maturity stage of the product before brand new one is needed.

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11
Q

What are the possible extension strategies? (5)

A
  • Sell into new market
  • New advertising campaign
  • New improved version of the product
  • Sell through additional retail outlets
  • Change packaging
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12
Q

Uses of product cycle? (3)

A
  • Assisting with planning of marketing-mix decisions e.g. at which stage is advertising most important?
  • Identifying how cash flow might depend on the product life cycle (Graph pg. 296). Cash flow is negative during the development of the product because costs are high etc.
  • Identifying the need for a balanced product portfolio (graph pg. 296). For cash flows to be balanced as positive cash flow of one product can finance negative cash flows of other product. Or in factory capacity as declining output of some goods replaced by increasing demand of other output.
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13
Q

Def. Price Elasticity

A

Measure the responsiveness of demand following a change in price. Percentage change in quantity demanded / Percentage change in price.
Interpretation of graph pg. 298

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14
Q

Elastic or Inelastic?

A

0-1 is inelastic
>1 is elastic
(absolute value/magnitude)

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15
Q

What are the factors that determine price elasticity? (4)

A
  • How necessary the product is. e.g Salt is inelastic
  • Number of competitors: the higher the number the more elastic
  • The level of consumer loyalty: The more loyal the less elastic
  • The price of the product as a proportion of consumer’s incomes e.g. matches or toothpicks are inelastic
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16
Q

What are the applications of PE? (2)

A
  • Making more accurate sales forecasts: If the price were to go up or down, how will it affect the revenue.
  • Assisting pricing decisions: Could be used in price discrimination.
17
Q

Limitations of PE? (3)

A
  • If the business were to lower it’s price, but at the same time a competitor leaves the industry, the increase in revenue may not only be due to the change in price.
  • PE only calculates change in prices, but the product may be out of fashion and original PE is no longer applicable.
  • PED is hard to calculate accurately because by the time they are calculated, market conditions might have altered.
18
Q

What are the determinants of pricing? (6)

A
  • Cost of production
  • Competitive conditions in the market e.g monopolist or high market share
  • Competitors prices
  • Business and marketing objectives e.g. to grow or to survive
  • Price elasticity of demand
  • Whether it is a new or existing product e.g. if new, it needs to decide whether to use ‘skimming’ or ‘penetration’.
19
Q

What are the pricing methods (just names)? (5)

A
  • Cost based pricing
  • Competitor pricing
  • Price discrimination
  • Penetration pricing
  • Market skimming
20
Q

Cost based pricing

Def, ad and disad

A

• Setting price by calculating the unit costs for the product, and then adding fixed cost margin.
Ad: Easy and fast to calculate. Price set will cover all costs of production.
Disad: Does not take the market’s competitive conditions into account. Opportunity cost - might have been opportunities for higher pricing.

21
Q

Competitor pricing

Def, ad and disad

A

• Setting price upon the price set by its competitors
Ad: Flexible for market and competitive conditions
Disad: Price set may not cover all costs of production. Have to vary a lot due to changing market’s conditions.

22
Q

Price discrimination

Def, ad and disad

A

Charging different groups of consumer’s different prices for the same product.
e.g. Train stations sell more expensive tickets in the morning.
Ad: Uses price elasticity knowledge to charge different prices in order to increase total revenue
Disad: Consumer paying higher prices may object and look for alternatives.

23
Q

Penetration pricing

Def, ad and disad

A

• A low price is used to enter the market and build up customer loyalty. Once costumer loyalty is established, the price goes up.
Ad: Dominates the market and reduces competition
Disad: Only works short term

24
Q

Price skimming

Def, ad and disad

A

• A high price is used to enter the market and profits and skimmed off. Usually happens with technology.
Ad: Gives the product a good image and impression of high quality.
Disad: Competitors with lower pricing take away the market.

25
Q

What is a method for product portfolio analysis?

A
  • Boston Matrix: a method of analysing product portfolio of a business in terms of market share and market growth.
  • High market share - High market growth product: Star
  • High market share - Low market growth product: Cash Cow
  • Low market share - High market growth product: Problem child
  • Low market share Low market growth product: Dog