unit 5 + 6 (AO1 & AO4) Flashcards
what are the 7 Ps
- product
- price
- promotion
- place
- people
- processes
- physical evidence
what is product - 7Ps mean
goods and services that the business sells
- can be tangible (goods) or intangible (services)
- can be consumer goods (bought by consumers) vs. producer goods (bought by businesses)
what is the product life cycle
a diagram showing the stages that a product (good or service) goes through from launch to decline in terms of sales revenue
what are the stages of a product life cycle (5 - one optional one)
- research and development
- introduction
- growth
- maturity
- decline
what does introduction stage of the product life cycle entail
- high costs - lots of promotion needed
- no economies of scale in production
- low sales - cash flow problems
what does growth stage of the product life cycle entail
- increasing revenue as shops are willing to stock the product
what does maturity stage of the product life cycle entail
- high, but flat, sales and market share
- more economies of scale so profits made (lower unit costs)
- most consumers already own the product
- saturation - competition enters the market
what does decline stage of the product life cycle entail
- sales and profits fall
- (could be because the product is out of date etc.)
what does research and development stage of the product life cycle entail
- design and testing
- high costs - prototype and test marketing to help success
what is a brand?
- something that differentiates one product from another (image, name or logo)
- creates a perception in the mind of consumer
what is brand awareness?
- the extent to which a product is recognized and remembered by customers
what is brand development
- the process of building brand identity to maximise sales and profits
what is brand value/equity
- when customers are willing to pay a premium price for a brand above a non-branded product
what is brand loyalty
Faithfulness of customers to a brand as shown by repeated purchases.
what are advantages of Branding
- Instant recognition and product differentiation (USP)
- Brand loyalty and brand value
- Emotional attachment
- Employee motivation
- Easier to enter international markets
what are disadvantages of Branding
- Bad news may affect the whole brand even if the products are the same
- Marketing cost to build and maintain the brand is high
- Cultural and language differences - increase in costs for market development
what are extension strategies - how can a company implement an extension strategy?
- marketing strategies that lengthen the maturity stage of the product life cycle and prevent decline in sales.
- new packaging
- entering a new market
- adding new features to the product
what is a marketing mix
the key decisions that a firm takes to persuade consumers to buy their goods or services
what are all the pricing methods / strategies
Cost plus (mark up) pricing
Penetration pricing
Loss leader
Predatory pricing
Premium pricing
Dynanmic pricing (HL)
Competitive pricing (HL)
Contribution pricing (HL)
Price elasticity of demand (HL)
What is Penetration pricing?
- When entering a new market, setting a relatively low price for the product in order to gain market share
- Suitable when the product is price elastic - sensitive to changes in price
- The low price will attract proportionally more demand
- They can then increase the price when they gain market share
What is Loss Leader?
- Product sold at a very low price below cost price, with the intention on making more money on other products
- E.g. Razors and razor blades
- E.g. game consoles and games
- Supermarkets can also do it to lure consumers in their store
What is Predatory pricing?
- Setting prices lower than the competition with the intention of driving them out of the market
- Usually by a firm with more resources or a lower cost of production
- Then can raise the price when the competition has left increasing monopoly power
- Illegal in many countries, but difficult to prove
What is Premium pricing?
- Setting a high price in order to show that the product is high quality or luxury
- Consumers can buy the product to show their success, wealth ect.
- High profit margins
- Fewer customers and requires an exclusive image
What is Dynamic Pricing (HL ONLY)?
- When a business changes prices according to time and the level of demand
- E.g. cinemas often give discounts during the week
What is Competitive pricing (HL ONLY)?
- Setting the price at a similar level to other products in the market
- Or can undercut the competition
- Easy to set the price
- Suitable in markets where consumers can easily compare prices
What is Contribution pricing (HL ONLY)?
- Ensuring that the price charged is higher than the variable cost of production
- Contribution per unit = Price - Varibel cost
- Then this “profit” (CPU) can be used to pay towards the fixed costs
What is Price elasticity of demand (PED) (HL ONLY)?
- Revenue = PxQ
- PED shows how sales will change with a change in price
- As price increases, sales (Quantity Demanded) will go down
What is promotion and all the methods / strategies.
Promotion is communicating with current and potential customers about their product in order to raise sales.
Methods are:
- Above the line promotion
- Below the line promotion
- Through the line promotion
- Social media marketing as a promotional strategy
What is an appropriate marketing mix?
What is a BCG Matrix
A tool that helps businesses analyse and manage their product portfolio
Product portfolio = the different products that a business has. Can be ?, star, Cash-cow, Dog.
?, Star, Cash-cow and Dog on a product Lifecycle
how to calculate payback period
- with all investment appraisal calculations, add a third column called accumulated cash flow
- answer in years and months
- calculate between the months
(1. find the months between which the money is payed back
2. divide the difference needed to get to 0 by the total amount of money received for that month)
what is the formula for ARR
can also use the triangle method
how does an ansoff matrix look (what are in each of the boxes?)
