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Business Theme 1 Marketing and people > 1.3 Marketing mix and strategy > Flashcards

1.3 Marketing mix and strategy Flashcards

1
Q

Define price

A

The money charged for a product or service

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2
Q

Financial objectives that influence price:

A

-Maximise profit
-Achieve target rate of return
-Maximise sales revenue
-Improve cash flow

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3
Q

Marketing objectives that influence price:

A

-Maintain/improve market share
-Beat/prevent competition
-Increase sales
-Build a brand

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4
Q

Factors that influence price:

A

-Cost
-Market positioning
-Competitor pricing
-Price elasticity of demand

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5
Q

Define cost based pricing?

A

Price must be more than the costs in order to make a profit

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6
Q

Benefits of cost based pricing

A

-Easy to calculate
-Price increases can be justified when costs rise
-Managers can be confident each product is being sold at a profit

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7
Q

Drawbacks of cost based pricing

A

-Ignores price elasticity of demand
-Many not take account of competition
-Sales lost if price to high
-Profit lost if price to low

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8
Q

Describe price skimming

A

-Setting a price high to maximise profits then lowering price later on
-Works well for products that create excitement amongst “early adopters”
-Best used in introduction or early growth stage
-E.g Electronics

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9
Q

Describe penetration pricing

A

-Opposite of price skimming
-Offers a product at a low introductory price
-AIm to gain market share quickly, build customer loyalty
-Price increased when target market share is reached

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10
Q

Describe predatory pricing

A

-When a business sets a price with the intention of removing a rival and/or lettering other potential competition
-Used when competitors threaten to reduce market share and profitability

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11
Q

What are price wars?

A

-Competitive price reduction
-Process contuinues until weaker firm goes out of business
-Good for customers short term but harmful long term if competition is reduced

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12
Q

Describe psychological pricing

A

Charging a price that ends in 99p is a way of deceiving customers into believing that the product is cheaper than it really is

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13
Q

Describe a loss leader

A

-A product sold at a low even loss making price in order to encourage customers to buy other items at full price

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14
Q

Define Dynamic pricing

A

Businesses set flexible prices for products or services based on current market demands

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15
Q

Benefits of dynamic pricing

A

-Increases revenue
-Consumers who travel at unpopular times benefit form lower prices
-Pay employees higher wage to work during peak times

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16
Q

Drawbacks of dynamic pricing

A

-Consumers who pay high price may feel ripped off
-Surge pricing = bad headlines
-Consumers might not trust a company who constantly changed prices

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17
Q

Define Distribution

A

Making products available in the right place, right time and in the right quantities

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18
Q

Define distribution channel

A

a distribution channel moves a product through stages from production to final consumption

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19
Q

What is each part in a distribution Chanel called?

A

intermediary

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20
Q

What are the 4 distribution channels

A

Producer - consumer
Producer - retailer - consumer
Producer - wholesaler - retailer - consumer
Agents

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21
Q

Describe Retailers

A

Retail is the last step in the chain - deals directly with the customerFocused on consumer markets

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22
Q

Advantages of retail distribution

A
  1. convenience for customers
  2. retailer chooses the final price
  3. retailer handles the financial transaction
  4. retailer holds the stock
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23
Q

describe wholesalers

A

-wholesalers bulk buy then break into smaller quantities to sell to retailers
-make money by buying at a lower price from the producer amd adding a profit margin onto price paid by the retailer

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24
Q

describe distributors

A

-distribute products and serve as local sales point
-usually specialise in particular industry
-offer products from many producers
-different from agents in that a distributor holds stock

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25
Q

Describe agents

A

-agents are a specialist type of distributor that does not hold stock
-tend to operate in tertiary sectors
-earn commission based on sales achieved

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26
Q

Define direct distribution

A

channels where a producer and consumer deal directly with each other without the involvement of an intermediary

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27
Q

define indirect distribution

A

involves the use of intermediaries between the producer and consumer

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28
Q

What are direct channels of distribution

A

-increasingly popular
-various methods e.g direct mailing, E commerce, telemarketing
-E.g direct line (insurance online)

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29
Q

Reasons to use indirect distribution channels

A

-Customers may live too far away to be reached directly
-Lack of retailing expertise
-Different segments of market best reached by different channels

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30
Q

Define multi - channel distribution

A

involves a business using more than one type of distribution channel

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31
Q

Benefits of multi channel distribution

A

-Allows more target market segments to be reached
-Customers increasingly expect products to be available via more than one channel
-Enables higher revenues

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32
Q

Drawbacks of multi- channel distribution

A

-Potential for channel conflict
-Can be complex to manage
-Cuts profits

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33
Q

Define product life cycle

A

a theoretical model which describes the stages a product goes through over its life

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34
Q

Stages of the product life cycle

A
  1. Development
  2. Introduction
  3. Growth
  4. Maturity
  5. Decline/ End
35
Q

Describe the development stage

A

Focus on design and development of product, high R&D costs

36
Q

Drawbacks of product development

A

-Time consuming
-High costs of development
-Market research to do before launch

37
Q

Why new products are scrapped before launch?

A

-Inadequate demand
-Action of competitors
-Change in external environment
-Production problems
-High costs

38
Q

Describe the Introduction stage

A

Product launched into market, low levels of sales growth.

39
Q

Strategies at introduction stage

A

-Create brand awareness and interest for product
-Either skimming or penetration pricing
-Demand initially from “early adopters”

40
Q

Describe the growth stage

A

-Expanding market
-Arrival of competitors
-Fast growing sales

41
Q

Strategies in growth stage

A

-Advertising to promote brand awareness
-Differentiate product
-Go for market penetration and price leadership

42
Q

Describe the Maturity stage

A

-Slower sales growth as rivals enter the market = competitor and fight for market share
-Higher level of capacity utilisation
-High profits
-Chas flow positive
-Weaker competitors leave market

43
Q

Strategies for mature products

A

-Slowing sales growth
-Product at its peak

44
Q

Describe the decline stage

A

-Falling sales
-Decline in profits and weak cash flows
-Product becomes obsolete

45
Q

Reasons why products enter decline stage

A

-Technological advances
-Changes in consumer tastes and behaviours
-Increased competition
-Failure to innovate and develop the product

46
Q

Strategies for decline stage

A

-Price cutting to maintain competitiveness or clear products

47
Q

Ways to extend product lifecycle

A

-Product improvements
-Line extensions eg diet coke
-Reposition and change target market
-Change advertising
-Price promotions
-Sales promotions eg loyalty schemes

48
Q

Weaknesses of product life cycle model

A
  1. Duration of cycle varies from product to product
  2. Strategic decisions can change life cycle
  3. Difficult to recognise exactly where a product is in life cycle
  4. length can’t be reliably predicted
  5. decline is not inevitable
49
Q

Define the Boston Matrix

A

A tool used to analyse product portfolios and make strategic decisions.

50
Q

What are the categories of the Boston matrix?

A

Question marks (problem children)
Stars
Cash cows
Dogs

51
Q

Comparisons of Boston Matrix and Product life cycle

A

Product life cycle is concerned with individual products and sales over time

Boston matrix concerned with firm’s portfolio of products and focuses on cash flow of produces

52
Q

Define brand

A

a brand is a product that is easily distinguished from other products

53
Q

Objectives of promotion and advertising

A

-Increase sales
-Attract new customers
-Create awareness

54
Q

Main aims of promotion

A

-Create awareness and interest for product
-persuade customers that the product is better then competitors

55
Q

Factors influencing promotion decisions and strategy’s for the product lifecycle

A

-Stage in products life cycle
-Nature of the product
-Competition
-Marketing objectives and budget
-Target market

56
Q

Define advertising

A

paid for communication of products

57
Q

Benefits of advertising

A

-Wide coverage
-Control of message
-Repetition means that the message can be communicated effectively
-Effective for building brand awareness and loyalty

58
Q

Disadvantages of advertising

A

-Often expensive
-Impersonal
-One way communication
-Lacks flexibility
-Limited ability to close a sale

59
Q

Elements of the design mix

A

Function
Aesthetics
Cost

60
Q

Role of product design

A

Product design is about more than style
Good design contributes to a products usefulness as well as its looks

61
Q

Describe function

A

The way a product works

62
Q

Define aesthetics

A

How the product appeals to the customer in terms of how it looks and feels

63
Q

Define economic manufacture

A

Does design allow product to be made and sold profitably
How much value is added during production process

64
Q

Features of products that emphasize function

A

-More predictable and stable demand
-Longer product life cycles
-Bild a reputation
Economic manufacture through economies of scale

65
Q

Features of products that emphasize aesthetics

A

-High added value
-Demand fueled by customer aspiration
-Potential shorter product life cycle

66
Q

How is the design mix changing to reflect social trends?

A

-Sustainability
-Waste minimization
-Ethical Sourcing

67
Q

What is sustainability?

A

-Making a product without affecting the long term supplies of the inputs into the product
-Source inputs that don’t damage environment
-Designing a product so it can be consumed sustainably

68
Q

What environmental issues does product design have to consider?

A

-Use of raw materials
-Energy usage and impacts on climate
-Waste and pollution
-Impact business has on employees

69
Q

Examples of ethical sourcing?

A

-Fairtrade
-Ethical supply chain
-Organic products

70
Q

Describe “question mark” products

A
  1. Low market share high growth
  2. Negative cash flow
  3. Could become either a star or a dog
71
Q

Strategies for “question marks”

A
  1. Invest to increase market share
  2. Invest in promotion and other aspects of marketing
72
Q

Describe “Star Products”

A

High market share, high growth market, positive cash flows

73
Q

Strategy for “Star” products

A

-Focus on building brand recognition
-Maintain position in market

74
Q

Describe “Cash cow” product

A

High market share, slow growth rate, significant positive cash flow

75
Q

Strategy for “Cash Cows”

A
  1. Defend market share
  2. Use profits from cash cows to invest in new products
76
Q

Describe “Dog Products”

A

-Products that have failed or
-Products that are in the decline phase of their life cycle
-Low share of a slowly growth market
-Not going anywhere & no real potential

77
Q

Strategy for “Dogs”

A
  1. Phase out or sell off (divest)
  2. Not worth investing in
  3. Any profit made has to be re-invested just to maintain market share
78
Q

Why is the Boston Matrix valuable?

A

-A useful tool for analysing product portfolio decisions
-But it is only a snapshot of the current position
-Has little or no predictive value

79
Q

What marketing strategies should a mass market business take?

A

-Focus on building brand awareness to appeal to largest possible market eg advertising campaigns using mass market TV
-Create a strong brand identity that resonates with a large segment

80
Q

What marketing strategies should a niche market business take?

A

-Target a specific segment and create relationships with them
-Many use social media to reach target audience
-Messages include more technical information relevant to specific needs of target market

81
Q

What marketing strategies should a B2B use?

A

-Build relationships with other businesses and demonstrate how your product can help them
-Messages focus on benefits and features that are relevant to other business

82
Q

What marketing strategies should a B2C business use?

A

-Emphasis on brand loyalty and creating a positive customer experience
-Messages more emotional
-Focus on lifestyle benefits of product

83
Q

What does developing customer loyalty do for businesses?

A

-Helps businesses grow in long term
-Drives repeat purchases and helps reduce marketing costs web launching a new product

84
Q

What are some ways businesses can develop customer loyalty?

A

-Positive customer service leads to returning customers
-Loyalty cards helps encourage repeat purchases
-Saver schemes

Business Theme 1 Marketing and people (5 decks)

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