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business vicky > 4.5 The 7 P's > Flashcards

4.5 The 7 P's Flashcards

1
Q

product

A

goods and services that the business sells
products can be tangible (goods) or intangible (services)
Consumer goods (bought by consumers) or producer goods (bought by businesses)

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2
Q

Product life cycle stages of a product - introduction

A

high costs - lots of promotion needed
no economies of scale in production
low sales - cash flow problems

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3
Q

Product life cycle stages of a product - growth

A

increasing revenue as shops willing to stock the product
profits can start to be made

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4
Q

Product life cycle stages of a product - maturity

A

high, but flat, sales and market share
more economies of scale so profits made
most consumers already own the product
saturation - competition enters the market

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5
Q

Product life cycle stages of a product - decline

A

sales and profits fall

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6
Q

Product life cycle stages of a product - R&D

A

design and testing
high costs - prototype and test marketing help success

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7
Q

what is a brand

A

logo, name, image that differentiates one producer from another
creates a perception in the mind of consumers

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8
Q

brand awareness

A

extent to which a product is recognized and remembered by customers

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9
Q

brand development

A

the process of building a brand identity in order to maximize sales and profit

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10
Q

brand loyalty

A

faithfulness of customers to a brand as shown by repeat purchases

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11
Q

brand value/equity

A

when customers are willing to pay premium for a brand above a non-branded product

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12
Q

advantages of branding

A

instant recognition and product differentiation (USP)
brand loyalty and brand value
emotional attachement
employee motivation
easier to enter international markets

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13
Q

disadvantages of branding

A

bad news may affect the whole brand even if the product are the same
marketing costs to build and maintain the brand
cultural and language differences - increase in costs for market development

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14
Q

extension strategies

A

marketing strategies that lengthen the maturity stage of the product life cycle and prevent a decline in sales

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15
Q

examples of extension strategies

A

new version of the product
adding features
redesign
reduce price on older models
new packaging
entering a new market
more frequent use

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16
Q

pros of extension strategies

A

should be guaranteed increased revenue in the future
no need to create a whole new product - lower costs
relatively simple - change packaging new name etc

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17
Q

cons of extension strategies

A

costs involved - designing new product design
consumers may see through strategy - may be seen as a brand without new ideas
taking money away from developing new products

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18
Q

Cost-plus pricing

A

adding a fixed mark-up for profit to the unit cost of a product
add a fixed amount or %
calculate cost of producing one unit

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19
Q

Pros of Cost plus pricing

A

guaranteed profit - charging price higher than unit cost

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20
Q

Cons of cost plus pricing

A
  • price changes with cost - doesn’t control their price but its instead controlled by the cost, suppliers control the price - they lose control
  • ignores the market - consumers are less willing to pay the high prices but the price is determined by the cost
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21
Q

Penetration pricing

A
  • 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
  • can then increase pricing when gain market share
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22
Q

Cons of penetration pricing

A
  • low profit margins at the beginning - can be different for new company as they have cash flow problems
  • price rises are unpopular -some consumers may go elsewhere
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23
Q

Loss Leader

A

Product sold at a very low price below cost price, with the intention of making profits on other products

24
Q

Predatory

A
  • setting prices lower than the competition with the intention of driving them out of the market
  • usually by a firm with resources or a lower cost of production - could have lots of money and afford a loss in the short term and then raise the price higher than previously to make more money
  • then can raise the price when competition has left increasing monopoly power
  • illegal in many countries but difficult to prove
25
Q

premium

A
  • 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 etc.
  • high profit margins
  • fewer customers and requires an exclusive image
26
Q

Dynamic (HL)

A
  • When a business changes prices according to time and the level of demand
  • surge pricing
27
Q

Competitive (HL)

A
  • 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
28
Q

Contribution (HL)

A
  • Ensuring that the price charged is higher than the variable cost of production
  • Contribution per unit = Price - Variable Cost
  • Then this “profit” (CPU) can be used to pay towards the fixed costs
29
Q

PED

A
  • Revenue P x Q
  • PED shows how sales will change with a change in price
  • As price increases, sales (quantity demanded) will go down
30
Q

Elastic PED

A
  • PED>1
    *A change in price will lead to a proportionately larger change in sales
  • So a decrease in price will lead to higher revenue
31
Q

Inelastic PED

A
  • PED<1
  • A change in price will lead to a proportionately smaller change in sales
  • So an increase in price will lead to higher revenue
32
Q

Promotion

A
  • Communicating with current and potential customers about their product in order to raise sales
33
Q

Objectives of promotion

A
  • to inform - tell customers about the product
  • to persuade - get them to buy it
  • to remind customers - get them to continue to buy it
34
Q

Above the line promotion

A

Promotion directly paid for by the company to communicate with consumers through mass media
- TV/Radio adverts
- Newspapers/Magazines adverts
- Billboards
- Online Ads

35
Q

Below the line promotion

A

Promotion activities that are generally targeted towards a specific market share of group of people.
These are not directly paid for by the business, and no money is paid to advertising agencies
- Price promotion
- Loyalty cards
- Free samples
- Direct Selling
- Sponsoring events/teams

36
Q

Pros of TV/online ad

A
  • Can reach a wide and diverse audience
  • audio/visual stimulus
  • can tell a story
37
Q

Pros of loyalty

A
  • relatively cheaper
  • Targeted at specific customers
  • Can track behavior and target personalized ads
38
Q

Through the line promotion

A
  • a promotional strategy which combines above the line and below the line strategies
  • e.g. a TV ads alongside a customer loyalty program
39
Q

Social media marketing as a promotional strategy

A
  • the use of social media platforms to connect with the target audience
40
Q

pros of using social media marketing

A
  • reach large audiences, especially younger generation
  • can target your audience
  • can measure success - through click through rate
  • do this quickly
41
Q

cons of social media marketing

A
  • cost involved in hiring people to manage the line presence
  • no control over the online reaction
  • security issue
42
Q

Place

A
  • the process of how a product gets from the manufacturer to the final consumers
  • not literally a ‘place’ - it’s the distribution channel not a physical place
  • e.g. should a business sell only online or via a retailer
43
Q

Distribution channel + examples

A
  • chain of intermediaries a product passes through from producer to final customer
    Producer —-> Consumer
    Producer —> Retailer —> Consumer
    Producer —> Wholesaler —> retailer —> consumer
44
Q

Direct selling

A
  • selling directly to consumer without any intermediaries
45
Q

Pros of direct selling

A
  • Higher profit margins - no intermediaries to pay
  • direct contact with the customer
  • more control - over pricing, promotion etc
46
Q

Cons of direct selling

A
  • less exposure for the product to consumers
  • have to hand storage and distribution
  • not specialised in selling
47
Q

Slight intermediary channel

A

Selling to consumers via on intermediary (retailers, agent or distributor)

48
Q

Pros of using one intermediary

A
  • reach a wider range of customers
  • Consumer can see and feel the product
  • Retailer takes care of storage and distribution
49
Q

Cons of using one intermediary

A
  • Retailer will take some of the profit
  • Lose control of the marketing mix - e.g. price, promotion
  • Product will likely be displayed next to competitors
50
Q

Two intermediary channel

A

Manufacturer selling to consumers via two intermediaries
* Wholesales buy in bulk from manufacturers and then sell smaller amounts to retailers

51
Q

Pros of using two intermediaries

A
  • Wholesaler takes care of storage and distribution
  • Wider geographical reach
52
Q

Cons of using two intermediaries

A
  • Another intermediary to take profit
  • Even less control over marketing mix
53
Q

Importance of different types of distribution channels

A
  • the more intermediaries the lower the profit margins - direct selling has highest profit margins
  • retailers has product displays and allows communication with the customer
  • retailers reduce the control the manufacturer has on marketing decisions
  • Retailers and wholesalers will stock the product, reducing stock holding costs for manufacturers
  • the manufacturer may control the whole distribution channel
54
Q

Factors to consider in determining method of distribution channel

A
  • cost
  • is the profit margin high enough to allow intermediaries
  • Control over the brand
  • does the business need to control the price promotion methods etc
  • Where are the customers
  • if there are a large number of customers spread out over the country, a wholesales may be appropriate
  • mass market vs niche market
  • if the product is mass market, then direct selling is not likely to be possible
55
Q

People

A

how employees (staff and managers interact with consumers)
e.g. customer interactions
after sales service
use of social media

56
Q

Processes

A

the way in which the good or service is actually delivered to the consumer
e.g. payment methods
waiting times
website
online delivery

57
Q
A

business vicky (21 decks)

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