2.2 - Making Marketing Decisions Flashcards
What is the marketing mix important for?
+They’re important for established businesses as well as small businesses.
What do the different parts of the marketing mix affect?
The different parts of the marketing mix affect each other.
What different elements make up the marketing mix?
- Product [a good or service],
- Price
- Promotion
- Place
What can a business use the different elements of the marketing mix for?
+A business can use the different elements of the marketing mix to make decisions about the business.
+By having the right combination of the four elemens, a business can have an advantage over competitord [called competitive advantage], by attracting and selling to more customers.
What are the downsides of the marketing mix?
+However, the different elements of the marketing mix can affect each other - this may mean that a business will have to make a compromise between the different elements.
+For example, a business may have to charge a high price for high quality products.
What will the method of distribution also affect?
+The method of distribution of a product will also affect its pricing and promotion.
+Products sold online are likely to be cheaper than those sold in stores since the business may have lower fixed costs [eg. rent].
+Hight-street retailers are likely to use displays in their store fronts to attract customers, whereas businesses that sell products online may use more online advertising.
What will the quality and price of a product also affect?
+The quality and price of a product will also affect how it is promoted.
+If a product is of low quality but is quite cheap, then price may be emphasised in promotional material.
+However, if the product is of higher quality or is more expensive, then the promotional material may emphasise its quality.
What can differentiation attract?
Differentiatiation can attract customers
What is differentiation?
+Differentiation is about making your products or services distinctive in the market [eg. by changing elements of the marketing mix].
+These differences should make customers want to buy your product instead of competing products.
Why might a company not be able to differentiate itself for long?
+A compay may not be able to differentiate itself for long - competitors may copy the idea which removes their competitive advantage.
What happens without differentiation?
+Without differentiation, customers will think your product is identical to others.
What is one way to differentiate your product?
+One way to differentiate a product is to give it a unique selling point [USP].
+This could be a special feature or a service provided by the company, such as fast delivery.
How can you differentiate a product by promotion?
+You can promote your product in a way that makes it seem different, even if it’s not.
How can you differentiate a product by price?
+You can also change the price of the product.
+Cheaper usually means more appealing to a mass market, but it also means less profit per unit sold.
+Having a really expensive product can actually make it appear much more luxurious than competitors’ products and more appealing to a niche [small and specialised] market.
What is hugely important for product differentiation?
+Product design is hugely important for product differentiation.
+The design mix has three main ingredients.
What does the design mix consist of?
- Function
- Cost
- Aesthetics
What is the ‘function’ aspect of the design mix?
+The design must be fit for purpose.
+A car without an engine would be a non-starter.
+Unique features can also help - a razor with seven blades shaves better than a razor with one. Probably.
What is the cost aspect of the design mix?
+A good design will lead to low manufacturing costs.
+This means higher profits.
What is the aesthetics aspect of the design mix?
+Aesthetics [appearance] - a good product should look attractive and distinctive.
+Packaging can also help a product to stand out [and protect it till it reaches the customer].
What will firms with even the greatest products find?
+Even firms with the greatest products will find that they don’t sell well forever - all products have a life cycle.
How does demand for a product change?
Demand for a product changes over time
What do all products go through?
+All products go through the same life cycle - but the sales life of some products is longer than others.
+For example, the sales life of most cars is about ten years, but the sales life of many computer games is only a few months.
+Whatever the product, its marketing mix will need to change during its life cycle.
What is Research and Development?
+Research and Development [R&D] is the first stage of a product’s life cycle.
+It is used to develop an idea and turn it into a marketable product.
Why is Research and Development so important?
- Scientific research is often vital for product development - A lot of scientific research is done in universities [It’s often pure science - without any kind of commercial aim].
- Large businesses often then have teams of “applied” scientists, who try to use recent scientific discoveries to develop new or improved products to sell.
- One aim during product development is to find the most cost-effective materials and methods to use.
What comes after research and development?
+Introduction comes next - the product is launched and put on sale for the first time.
+This is usually backed up with lots of advertising and sales promotions.
+Place is also an important P here - there’s no point in launching a product in places where nobody will be interested in buying it.
What comes after introduction?
+Growth - During this phase, demand increases, until the product becomes established.
What comes after growth?
+Maturity - Demand reaches its peak during this stage.
+Promotion becomes less important - businesses will continue to advertise the product, but less than at its launch.
+As the product’s popularity grows, businesses will try to make the product more widely availible.
+Towards the end of this phase, the market becomes saturated and there’s no room to expand.
What happens as demand for products increases?
+As demand for a product increases, sales for a product increases, sales of the product will also increase, and vice versa.
What happens after maturity?
+Decline - Eventually demand starts to fall as rival products take over.
+The life cycle is linked to the cash flow of the business during the life of the product.
What happens to cash flow in development and introduction?
+The firm spends money on research and promotion, but sales of the product are usually low.
+The business will expect to make a loss during these stages.
What happens to cash flow in growth and maturity?
+The business will hope to earn enough money to pay back their initial investments and make a profit.
What happens to cash flow in decline?
+The firm will probably spend less money supporting the product - and as sales fall, it will begin to make a loss, unless it stops making the product.
What happens to sales of products over time?
+Over time the sales of products may eventually decline.
+But there are lots of things that businesses can do to keep their products selling.
+These are called extention strategies - they drag out the life of a product to the bitter end…
What may firms try to extend?
+Firms may try to extend the life of products in decline
+Although the sales of products will eventually decline, firms can take action to extend their life.
Which phase of the life cycle may firms decide to use an extension strategy?
+They might decide to use an extension strategy during the decline phrase of the life cycle.
What happens if the extension strategy works?
+If the extension strategy works, the product will make profit for longer.
+However, it means spending more money on the product - this takes away cash from other parts of the business.
What do firms have to strike a balance between in extension strategies?
+Firms have to strike a balance between investing money in supporting old products and in designing new ones.
What are there several types of?
There are several types of extension strategy
What are the ways that firms can extend the life of their products?
+There are lots of ways that firms can extend the life of their products, for example:
- Adding more or different features
- Using new packaging
- Targeting new markets
- Changing advertisements
- Lowering price
How can adding more of different features extend the life of a product?
+Adding new features may increase demand for the product by making it more useful or more appealing to customers.
How can using new packaging extend the life of a product?
+Creating a new packaging design for the product may make it more eye-catching, so that customers are more likely to see it and choose it over competitors’ products.
+A new image for the product may also attract a new target market.
How can targeting new markets extend the life of a product?
+Businesses can find new markets for their products, eg. a different age group of country.
+They can target their promotional material at the new markets to extend the life of the product.
How can changing advertisements extend the life of a product?
+By running a new advertising campaign, businesses may be able to make more people aware of the product, or promote it in a way that makes it more appealing to the original market or to a new market.
How can lowering price extend the life of a product?
+Businesses can reduce the life of the product, or use special offers or competitions.
