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

1.3 Marketing mix and strategy Flashcards

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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
Describe agents
-agents are a specialist type of distributor that does not hold stock -tend to operate in tertiary sectors -earn commission based on sales achieved
26
Define direct distribution
channels where a producer and consumer deal directly with each other without the involvement of an intermediary
27
define indirect distribution
involves the use of intermediaries between the producer and consumer
28
What are direct channels of distribution
-increasingly popular -various methods e.g direct mailing, E commerce, telemarketing -E.g direct line (insurance online)
29
Reasons to use indirect distribution channels
-Customers may live too far away to be reached directly -Lack of retailing expertise -Different segments of market best reached by different channels
30
Define multi - channel distribution
involves a business using more than one type of distribution channel
31
Benefits of multi channel distribution
-Allows more target market segments to be reached -Customers increasingly expect products to be available via more than one channel -Enables higher revenues
32
Drawbacks of multi- channel distribution
-Potential for channel conflict -Can be complex to manage -Cuts profits
33
Define product life cycle
a theoretical model which describes the stages a product goes through over its life
34
Stages of the product life cycle
1. Development 2. Introduction 3. Growth 4. Maturity 5. Decline/ End
35
Describe the development stage
Focus on design and development of product, high R&D costs
36
Drawbacks of product development
-Time consuming -High costs of development -Market research to do before launch
37
Why new products are scrapped before launch?
-Inadequate demand -Action of competitors -Change in external environment -Production problems -High costs
38
Describe the Introduction stage
Product launched into market, low levels of sales growth.
39
Strategies at introduction stage
-Create brand awareness and interest for product -Either skimming or penetration pricing -Demand initially from “early adopters”
40
Describe the growth stage
-Expanding market -Arrival of competitors -Fast growing sales
41
Strategies in growth stage
-Advertising to promote brand awareness -Differentiate product -Go for market penetration and price leadership
42
Describe the Maturity stage
-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
Strategies for mature products
-Slowing sales growth -Product at its peak
44
Describe the decline stage
-Falling sales -Decline in profits and weak cash flows -Product becomes obsolete
45
Reasons why products enter decline stage
-Technological advances -Changes in consumer tastes and behaviours -Increased competition -Failure to innovate and develop the product
46
Strategies for decline stage
-Price cutting to maintain competitiveness or clear products
47
Ways to extend product lifecycle
-Product improvements -Line extensions eg diet coke -Reposition and change target market -Change advertising -Price promotions -Sales promotions eg loyalty schemes
48
Weaknesses of product life cycle model
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
Define the Boston Matrix
A tool used to analyse product portfolios and make strategic decisions.
50
What are the categories of the Boston matrix?
Question marks (problem children) Stars Cash cows Dogs
51
Comparisons of Boston Matrix and Product life cycle
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
Define brand
a brand is a product that is easily distinguished from other products
53
Objectives of promotion and advertising
-Increase sales -Attract new customers -Create awareness
54
Main aims of promotion
-Create awareness and interest for product -persuade customers that the product is better then competitors
55
Factors influencing promotion decisions and strategy’s for the product lifecycle
-Stage in products life cycle -Nature of the product -Competition -Marketing objectives and budget -Target market
56
Define advertising
paid for communication of products
57
Benefits of advertising
-Wide coverage -Control of message -Repetition means that the message can be communicated effectively -Effective for building brand awareness and loyalty
58
Disadvantages of advertising
-Often expensive -Impersonal -One way communication -Lacks flexibility -Limited ability to close a sale
59
Elements of the design mix
Function Aesthetics Cost
60
Role of product design
Product design is about more than style Good design contributes to a products usefulness as well as its looks
61
Describe function
The way a product works
62
Define aesthetics
How the product appeals to the customer in terms of how it looks and feels
63
Define economic manufacture
Does design allow product to be made and sold profitably How much value is added during production process
64
Features of products that emphasize function
-More predictable and stable demand -Longer product life cycles -Bild a reputation Economic manufacture through economies of scale
65
Features of products that emphasize aesthetics
-High added value -Demand fueled by customer aspiration -Potential shorter product life cycle
66
How is the design mix changing to reflect social trends?
-Sustainability -Waste minimization -Ethical Sourcing
67
What is sustainability?
-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
What environmental issues does product design have to consider?
-Use of raw materials -Energy usage and impacts on climate -Waste and pollution -Impact business has on employees
69
Examples of ethical sourcing?
-Fairtrade -Ethical supply chain -Organic products
70
Describe “question mark” products
1. Low market share high growth 2. Negative cash flow 4. Could become either a star or a dog
71
Strategies for “question marks”
1. Invest to increase market share 2. Invest in promotion and other aspects of marketing
72
Describe “Star Products”
High market share, high growth market, positive cash flows
73
Strategy for “Star” products
-Focus on building brand recognition -Maintain position in market
74
Describe “Cash cow” product
High market share, slow growth rate, significant positive cash flow
75
Strategy for “Cash Cows”
1. Defend market share 2. Use profits from cash cows to invest in new products
76
Describe “Dog Products”
-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
Strategy for “Dogs”
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
Why is the Boston Matrix valuable?
-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
What marketing strategies should a mass market business take?
-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
What marketing strategies should a niche market business take?
-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
What marketing strategies should a B2B use?
-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
What marketing strategies should a B2C business use?
-Emphasis on brand loyalty and creating a positive customer experience -Messages more emotional -Focus on lifestyle benefits of product
83
What does developing customer loyalty do for businesses?
-Helps businesses grow in long term -Drives repeat purchases and helps reduce marketing costs web launching a new product
84
What are some ways businesses can develop customer loyalty?
-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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