4.5 The four Ps - product, price, promotion and place Flashcards

1
Q

Product

A

The end result of the production process sold on the market to satisfy a customer need

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2
Q

Consumer durables

A

Manufactured products that can be reused and are expected to have a reasonably long life, such as cars

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3
Q

Product life cycle

A

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

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4
Q

What are the first 3 stages of the product life cycles

A

Introduction

Growth

Maturity or saturation

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5
Q

Introduction

A

The product has just been launched after development and testing.

Sales are often quite low to begin with and may increase only quite slowly

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6
Q

Growth

A

Rapid volume increase due to better awareness and expansion of distribution channels

Starts to be profitable due to economies of scale in production and marketing

Competition begins becoming attracted to the market

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7
Q

Reasons for declining growth

A

Increasing competition

Technological changes making the product less appealing

Changes in consumer tastes

Saturation of the market

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8
Q

Maturity or saturation

A

Sales may begin to peak/stabilise (no significant changes)

Achieve highest market share, while competition continues to pour into the market

Companies will employ price reductions, product differentiation and extension strategies very aggressively to protect their market share

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9
Q

Extension strategies

A

Marketing plans that extend the maturity stage of the product before a brand new one is needed

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10
Q

Types of extension strategies

A

Adding features to the original product

Repackage a product

Discount the price

Rebrand

Sell into new markets

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11
Q

Advantage adding features to the original product

A

Can usually be developed and marketed more quickly - and at lower cost - than a completely new product

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12
Q

Limitation of adding features to the original product

A

The basic original product is still ageing and at maturity/decline so consumers may not ‘buy into’ a slightly revised product

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13
Q

Advantage of repackage a product

A

Relatively cheap and quick method

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14
Q

Disadvantage of repackage a product

A

Consumers may quickly realise the product is the same and feel that they are being misled

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15
Q

Advantage of discount the price

A

Lower income consumers can now afford the product = product promotion might actually target different market segments

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16
Q

Disadvantage of discount the price

A

Impact on long term image of the brand and the company - better to replace the product earlier to avoid discounting

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17
Q

Advantage of rebrand

A

Opens up new market segments. Can be presented as a substantially ‘new product’

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18
Q

Disadvantage of rebrand

A

Expensive - is this rebranding strategy really worthwhile if a product has the perception of being old fashioned and is shortly to be replaced?

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19
Q

Advantage of selling into new markets

A

Market development can increase sales especially if the product is not perceived as being too old or ‘mature’ in these markets

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20
Q

Sell into new markets

A

Product and promotion may need to be redesigned to meet local laws

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21
Q

Introduction price

A

May be high compared to competitors (skimming) or low (penetration)

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22
Q

Introduction promotion

A

High levels of informative advertising to make consumers aware of the product’s arrival on the market

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23
Q

Introduction place

A

Restricted outlets - possibly high class outlets if a skimming strategy is adopted

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24
Q

Growth price

A

If successful, an initial penetration pricing strategy could now lead to rising prices

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25
Q

Growth promotion

A

Consumers need to be convinced to make repeat purchases - brand identification will help to establish consumer loyalty

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26
Q

Growth place

A

Growing numbers of outlets in areas indicated by strength of consumer demand

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27
Q

Growth product

A

Planning of product improvements and developments to maintain consumer appeal

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28
Q

Maturity price

A

Competitors likely to be entering market - there will be a need to keep prices at competitive levels

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29
Q

Maturity promotion

A

Brand imaging continues - growing need to stress the positive differences with competitors’ products

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30
Q

Maturity product

A

New models, colours, accessories. As part of extension strategies

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31
Q

Decline price

A

Lower prices to sell off stock - or if the product has a small ‘cult following, prices could even rise

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32
Q

Decline promotion

A

Advertising likely to be very limited - may just be used to inform of lower prices

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33
Q

Decline place

A

Eliminate unprofitable outlets for the product

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34
Q

Decline product

A

Prepare to replace with other products - slowly withdraw form certain markets

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35
Q

Product life cycle and investment

A

Investment - capital spending which aims to return a profit - is likely to be heaviest towards the end of a product’s life cycle.

Newer replacement products will be needed to take over when the existing products cease to sell in sufficient numbers and profits are falling or non existent.

This time period required to research and develop new products will determine the timing of this new investment.

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36
Q

Product life cycle and profit

A

The profitability of products will vary considerably during the life cycle

High profit margins are most likely during the growth and maturity phase - but towards the end of the latter stage, prices might have to be made more competitive and this might start to lead to lower margins.

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37
Q

Product life cycle and cash flow

A

Cash flow is vital to business survival and ignoring the link between cash flow and product life cycles could lead to a lack of liquidity for the business.

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38
Q

Boston consulting group matrix

A

A method of analysing the product portfolio of a business in terms of market share and market growth

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39
Q

Low market growth - high market share: product A ‘cash flow’

A

A well established product in a mature market.

Typically the product creates high positive cash flow and is profitable.

Sales are high relative to the market, and promotional costs are likely to be low due to high consumer awareness

Product can be milked and profits used in other products

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40
Q

High market growth - high market share: product B ‘star’

A

Successful product as it is performing well in an expanding market.

The firm will be keen to maintain the market positive of this product

Promotional costs will therefore be high to help differentiate the product and reinforce its brand image

High income

Should become cash costs of the future when the market matures

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41
Q

High market growth - low market share: product C ‘problem child’

A

Consumes resources but generates little return

Future is uncertain

Requires a lot of promotion if it is new

Should have potential of selling

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42
Q

Low market growth - low market share: product D ‘dog’

A

Offers little to the business

Need to be replaced

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43
Q

When should the Boston Consulting Group matrix be used?

A

Analysing the performance and current potion of existing products

Planning action to be taken with existing products

Planning the introduction of new products

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44
Q

Issues with the Boston matrix

A

On its own it cannot tell a manager what will happen next with any product.

It is only a planning tool and it has been criticised as simplifying a complex set of factors determining product success

The assumption is made that higher rates of profit are directly related to high market shares - this is not necessarily the case if sales are being gained by reducing prices and profit margins.

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45
Q

Brand

A

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

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46
Q

Brand awareness

A

Extent to which a brand is recognised by potential customers and is correctly associated wit ha particular product - can be expressed as a percentage of the target market

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47
Q

Brand loyalty

A

The faithfulness of consumers to a particular brand as shown by their repeat purchases irrespective of the marketing pressure from competing brands

Benefits

Higher market share
Premium pricing by keeping loyal customers
Demand is more price inelastic
Customers are not sensitive to price changes
Brand extension and growth strategies
Raises barriers to entry
New players find it hard to gain a market

48
Q

Brand development

A

Measures the infiltration of a product’s sales, usually per thousand population

49
Q

Brand value

A

The premium that a brand has because customer’s are willing to pay more for it than they would for a non branded generic product

50
Q

Effective branding can lead to the following benefits

A

Promotes instant recognition of the company and product

Helps differentiate the company and its products from rivals

Aids in employee motivation - committed to the brand

Generates referrals from customers - especially using social media

Customers know what to expect from the company and products

An emotional attachment can develop between the brand and customers, increasing customer loyalty

Increases the value of the business above the value of its physical assets

51
Q

Family branidng

A

A marketing strategy that involves selling several related products under one brand name

52
Q

Product branding

A

Each individual product in a portfolio is given its own unique identity and brand image

53
Q

Company or corporate branding

A

The company name is applied to products and this becomes the brand name

54
Q

Own label branding

A

Retailers create their own brand name and identify for a range of products

55
Q

Manufacturers brands

A

Manufacturer’s brands: Producers establish the brand image of a product or a family of products, often under the company’s name

56
Q

Family branding benefits

A

Marketing economises of scale when promoting the brand

Makes new product launches easier

57
Q

Limitations of family branding

A

Poor quality of one product under the brand may damage them all

58
Q

Product branding benefits

A

Each product is perceived as its own unique and separate brand - unconnected in consumers’ minds with the parent company

59
Q

Disadvantage of product branding

A

Lose the positive image of a strong company brand

60
Q

Company or corporate branding

A

Similar point to family branding but applies to all products produced under the company’s brand name

61
Q

Disadvantage of company or corporate branding

A

Poor quality of one product may damage image of company

62
Q

Benefits of own label branding

A

Often cheaper than name brand products

Each own brand label appeals to different consumer groups and tastes

Often little spent on advertising

63
Q

Disadvantage of own label branding

A

Consumers often perceive products to have a lower quality image

64
Q

Manufacturer’s brands benefits

A

Successful branding by manufacturers establishes a unique personality for the product which many consumers want to be associated with - and will often pay premium prices to purchase

65
Q

Manufacturer’s brands disadvantage

A

The brand has to be constantly promoted and defended

66
Q

Importance of packaging

A

Protection

Attracting customers

Promotion and information

Differentiation and brand support

67
Q

Factors determining the price decision

A

Costs of production

Competitive conditions in the market

Competitors’ prices

Marketing objectives

Price elasticity of demand

Whether it is a new or an existing product

68
Q

Pricing strategies

A

Cost based pricing

Market based pricing strategies

Price leadership

69
Q

Cost plus pricing

A

Adding a fixed mark up for profit to the unit price of a product

70
Q

Penetration pricing

A

Setting a relatively low price often supported by strong promotion in order to achieve a high volume of sales

71
Q

Market skimming

A

Setting a high price for a new product when a firm has a unique or highly differentiated product with low price elasticity of demand

72
Q

Psychological pricing

A

Setting prices that take account of customers’ perception of value of the product

73
Q

Loss leader

A

Product sold at a very low price to encourage consumers to buy other products

74
Q

Price discrimination

A

Occurs when a business sells the same product to different consumers at different prices

75
Q

Promotional pricing

A

Special low prices to gain market share or sell off excess stock - includes ‘buy one get one free’

76
Q

Predartory pricing

A

Deliberately undercutting competitors’ prices in order to try to force them out of the market

77
Q

Advantages of cost plus pricing

A

Price set will cover all costs of production

Easy to calculate for single product firms whether there is no doubt about fixed cost allocation

Suitable for firms that are ‘price makers’ due to market dominance

78
Q

Disadvantages of cost plus pricing

A

Not necessarily accurate for firms with several products where there is doubt over the allocation of fixed costs

Does not take competitive conditions into account

Tends to be inflexible

79
Q

Benefit of penetration

A

Low prices should lead to high demand - important to establish high market share for new products

80
Q

Disadvantage of penetration

A

Profit margin might be very low

Prices will need to grow in the future and might be consumer resistant

81
Q

Skimming advatantage

A

High profit margins that will help to pay for development costs of new product

82
Q

Disadvantage of skimming

A

High prices might discourage consumers

High prices might encourage more competitors to enter the market

83
Q

Psychological advantages

A

Prices reflect what consumers expect

84
Q

Disadvantage of psychological

A

price level and demand for the products need to be constantly reviewed as consumer expectation can change over time

85
Q

Loss leader advantage

A

Makes a loss on one product but more than compensated by profits on other products - perhaps complementary to the loss leader

Increases market share

86
Q

Disadvantage of loss leader

A

Cheaper generic alternatives might be sold by rival firms so the profit making complementary products are not purchased form the loss leading business

87
Q

Price discrimination disadvantage

A

Administrative costs of having different pricing levels

Customers may switch to lower priced market

Consumers paying higher prices may object and look for alternatives

88
Q

Price discrimination advantage

A

Uses price elasticity knowledge to charge different price in order to increase total revenue

89
Q

Price leadership advantage

A

Smaller businesses know what price they have to aim to set

Price leader may have lower unit costs so it remains more profitable than competitors even with low prices

90
Q

Price leadership disadvantage

A

Can be perceived as being predatory

Only really operates effectively for products that are undifferentiated

91
Q

Predatory advantage

A

Drives down prices to benefit consumers and likely to increase demand for the business

May reduce the number of competitors in the long term and increase monopoly power of the predator

92
Q

Predatory disadvantage

A

If proven it is illegal in many countries

Consumers may try to find alternative products if the newly created monopolist increase prices in the long term

93
Q

Promotional advantage

A

Attracts new customers who may continue to buy when price is restored to original level

Allows selling off of out of season stock

94
Q

Disadvantage of promotional

A

If this method is used frequently, consumers may suspect that the higher non discounted price can never be justified

Lower prices might become established for the consumer

95
Q

Promotion

A

The use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorship and public relations to inform consumers and persuade them to buy

96
Q

Promotional objectives should aim to

A

Increase sales by raising consumer awareness of a new product

Remind consumers of an existing product and its distinctive qualities

Encourage increased purchases by existing consumers or attract new consumers

Reinforce brand image

97
Q

Above the line promotion

A

A form of promotion that is undertaken by a business by paying for communication with consumers

98
Q

Informative advertising

A

Give information to potential purchasers of a product

Products that consumer is unaware of

99
Q

Persuasive advertising

A

Create a distinct image for the product

Little difference between products

100
Q

Above the line (ATL) info

A

Use of mass media for promotions

Very wide reach, but also very expensive

Also called “pull promotions”

e.g. TV, radio, newspaper, magazine, outdoor, cinema, etc.

101
Q

Below the line promotion

A

Promotion that is not a directly paid for means of communication but based on short term incentives to purchase

102
Q

Sales promotion

A

Incentives such as special offers or special deals directed at consumer retailers to achieve short term sales increases and repeat purchases

103
Q

Examples of sales promotion

A

price deals

loyalty rewards programmes

money off coupons

buy one get one free

104
Q

Promotion mix

A

The combination of promotional techniques that a firm uses to communicate the benefits of its products to customers

105
Q

What are the eight stage in deciding on a promotional mix

A

Decide on the image of the product

Develop a profile of the target market

Decide on the messages to communicate

Set an appropriate budget

Decide how the messages should be communicated

Establish how the success of the promotional mix is to be assessed

Undertake the promotional plan and the mix elements of it

Measure its success

106
Q

Introduction promotional options

A

Informative advertising to make the customer aware

Sales promotion offering free samples or trial period to encourage consumers to test the product

107
Q

Growth promotional options

A

Brand building and persuasive advertising

Develop brand loyalty

108
Q

Maturity promotional options

A

Advertising to emphasise the differences between this product and competitors

Sales promotion incentives to encourage brand development

109
Q

Decline promotional options

A

Minimal advertising

110
Q

Benefit of internet marketing

A

Improved audience reach

Targeted marketing

Interactivity

Performance metrics

Speed of transmission

111
Q

Disadvantage of internet marketing

A

Lack of skill

Time of investment

Negative feedback

Performance metrics

Security issues

112
Q

Viral marketing

A

The use of social media sites to increase brand awareness or sell products

113
Q

Guerrilla marketing

A

Use of unconventional, surprise, and memorable interactions in order to promote a product

Generally used by smaller businesses who have a smaller budget available for promotions

Uses smaller teams of promoters in a specific area, rather than through mass media campaigns or involving the use of traditional forms of media

Emphasises on attracting media attention and creating a good or memorable impression on the consumers

114
Q

Benefits of Guerrilla marketing

A

Relatively low in cost and risk

Helps engage in networking with not only customers, but even other potential business partners as well, depending on how viral the campaign becomes

115
Q

Disadvantage of Guerrilla marketing

A

Success depends highly on market research