2.3: The marketing mix Flashcards
Define the term product
The product is the actual item a customer purchase. Brand, logo, guarantee, after sales service
Prepare a product life cycle explaining what happens at each stage
Development:
- No sales have been done yet
- Business is doing research
Introduction:
- Product launch into the market
- Customer awarness or brand recognition is low
- sales are low
- costs are higher, promotion, advertising
- no or little competitors
Growth:
- Sales increase
- Customers awarness and brand recognition increase
- some competitors enter to the market
Maturity:
- Growth and sales begins to slow
- Competition increases
- price is lowered
Decline:
- Customers tastes change
- Sales fall rapidly
- The price is reduced
- The product is eventually withdrawn from the
market
Explain extension strategies a business can use
- Launch different flavours
- create promotions (2x1)
- Change the price
- change the channel of distribution, open new stores
- change the packaging
- change the name
Branded product
A brand is a name, symbol, design or
combination of these given to a product to help
customers identify the product.
Instantly recognisable to customers
Believed to be a guarantee of quality
Advantages:
- Higher prices can be charged
- Brand loyalty is developed – customers repeat
purchase and buy associated products
- Easier to launch new products with the same
brand name. E.g. Coke Zero
Disadvantages:
- High levels of advertising are required to
establish and maintain a brand
- Issues with one product in the brand portfolio
can affect sales of other products
- Some brands are susceptible to being
copied/faked. E.g. clothing and
own label product
Retailer’s own brands ex: Wong line
Not manufactured by retailer
Sold only in retailer’s stores
Less expensive than branded goods
Need little advertising
Cheaper as they are seen as inferior
quality
Advantages:
-Own brands are often cheaper
- No need of advertisment
Disadvantage:
- seen as low quality
- bad experience with the product may associate the manufacture
Explain pricing strategies a business can use
- Penetration pricing
- Destroyer pricing
- market skimming
- cost-plus pricing
- premium pricing
- promotional pricing
- competitors pricing
Penetration Pricing: (when entering the market lower prices)
- When companies want to enter a competitive market
- Set a lower price to make the customers by it
- Once the product becomes popular price raise
Destroyer Pricing: (eliminate competition)
- Company that wants to eliminate competition
- Prices are lowered to unprofitable levels to force competitors prices down
- Once weaker competition leaves the market prices
are raised
- Only be used by large companies who can make
losses until the competition has been eliminated
Market Skimming: (launching a product at high price)
- A company launch a new product at a high price
when the product has little competition
- Allows the company to make a profit and recover some of the research and development costs
- The price is gradually lowered
Cost-Plus Pricing: (calculating the price of producing a product)
- adding a set percentage of profit onto the
product to arrive at the selling price
Premium Pricing: (High Price Strategy)
- High prices are set and maintained to create an
exclusive image for a product
- Used by high end clothing retailers, e.g. Gucci
Promotional Pricing:
- Prices are reduced for a short period of time
- Customers are attracted to the lower prices
Competitive Pricing:
- Companies charging similar prices as competitors
Select the most appropriate pricing strategies in various scenarios and justify your choice
Describe channels of distribution a business can use
Shop
Wholesalers (cash and carry)
Market stall
TV – shopping channel
Internet
Newspaper and Magazines
Mail order
Direct mail
Factory shop
channels of distribution
manufacturer –> consumer
manufacture –> retailer –> consumer
manufacture –> wholesaler –> retailer –> consumer
Explain the advantages and disadvantages of selling direct to the
customer
Advantages: of selling direct to the
customer
- Less staff required
- Can reach a global market if selling online
meaning a wider customer base
- More convenient for the customer as they
can buy products from home
Disadvantages: of selling direct to the
customer
- branding and packaging costs can be
expensive
- Customers cannot see and touch the
product leading to a high number of
returns
Explain the advantages and disadvantages of selling through retailers
Advantages: selling through retailers (shops):
- They are often close to customers
- They may offer more facilities,
delivery, after-sales service and guarantees
- have an established customer base
- no costs of staff, promotion, shops
Disadvantages:
- The manufacturer has no control over the promotion and pricing of the product
Explain the advantages and disadvantages of selling through wholesalers
Advantages of selling through wholesalers (makro):
- reduce transportation, sales staff and paperwork costs for the manufacture
- Manufacturer does not need to worry of holding stocks.
- offers smaller quantities to retailer.
Disadvantages of selling through wholesalers:
- Wholesaler keeps part of the profit – less
profit for the manufacturer
- The manufacturer has no control over the
promotion and pricing of the product
Distinguish between above and below the line promotion and provide examples
Above the line promotion targets everyone, even those not interested in the product.
example:
- TV
- Radio
- Newspapers
- Magazines
- Billboards
Below the line promotion targets its specific target customers
examples:
- mail
- trade fairs
Explain the costs and benefits of various promotional activities
Billboards
ex:
May get damaged in bad weather. This is a disadvantage as the business has paid for the advertisement but customers may not see the advert as it has been damaged.
Direct mail
Television advertising
Text message advertising
Product endorsement
PRODUCT/CELEBRITY ENDORSEMENT
When a celebrity is paid to wear and use a particular product
Advantages:
- Higher prices can be charged
- Products can be targeted towards a particular market
segment using particular celebrities
Disadvantages:
- If the celebrity receives negative publicity sales of the
product may suffer
- to expensive
