4.5 - The 7 Ps + BCG Matrix Flashcards
1
Q
Marketing Mix
A
The key decisions that a firm takes in order to persuade consumers to buy their good or service
2
Q
What are the 7 Ps?
A
- Product
- Price
- Promotion
- Place
- People
- Processes
- Physical Evidence
3
Q
Product (Definition)
A
- Goods and services that businesses sell
Products can be:
- Tangible (goods) vs intangible (services)
Goods = pencils; services = haircut, education - Consumer goods (bought by consumers) vs producer goods (bought by businesses)
4
Q
Product Life Cycle
A
- The stages that a product goes through
- In terms of sales revenue
5
Q
Stages of a Product Life Cycle
A
- Introduction/Launch
- Growth
- Maturity
- Decline
Possible Additional Step
0. Research and Development
6
Q
Introduction/Launch (PLC)
A
- When the good/service first hit the market
- When the business sells the product for the first time
- High costs - lots of promotion needed
- No Economies of scale in production
- Low sales - cash flow problems
7
Q
Growth (PLC)
A
- Increasing revenue as shops willing to stock the product
- Customers are starting to buy the product more and more
- Profits can start to be made
- Still spend money on promotion
8
Q
Maturity (PLC)
A
- High, but flat, sales and market share
- More Economies of Scale so profits are made
- No longer grow or grow slower
- Most consumers already own the product
- Saturation - competition enters the market
9
Q
Decline (PLC)
A
- Sales and profits fall
- Business can try to extend the maturity stage
10
Q
What is a brand?
A
- Logo, Name, Image that differentiates one producer from another
- Creates a perception in the minds of consumers
11
Q
Brand Awareness
A
Extent to which a product is recognized and remembered by customers
12
Q
Brand Development
A
The process of building a brand identity in order to maximize sales and profits
12
Q
Brand Loyalty
A
Faithfulness of customers to a brand as shown by repeat purchases
13
Q
Brand value/equity
A
When customers are willing to pay a premium for a brand above a non-branded product
- E.g. non-branded trainers = $30
- Branded trainers = $90
- Brand value = $60
14
Q
Advantages of Branding
A
- Instant recognition and product differentiation (USP)
- Brand loyalty and brand value
- Emotional attachment
- Employee motivation
- Easier to enter international markets
15
Q
Disadvantages of Branding
A
- Bad news may affect the whole brand even if the products are the same
- If one of the products goes bad, it can affect other products
- Marketing cost to build and maintain the brand
- Cultural and language differences - increase in costs for market development
16
Q
Extension strategies
A
Marketing strategies that lengthen the maturity stage of the PLC and prevent a decline in sales
17
Q
Pros of using extension strategies
A
- Should be guaranteed increased revenue in the future - e.g. new Star Wars movies
- No need to create a whole new product - lower costs
- Relatively simple - change packaging, new name, etc…
18
Q
Cons of using extension strategies
A
- Costs involved - e.g. designing new product design
- Consumers may see through the strategy - may be seen as brand without new ideas
- Taking money away from developing new product
19
Q
List all 9 Pricing Methods
A
- Cost-plus pricing
- Penetration pricing
- Loss leader
- Prederatory pricing
- Premium pricing
- Dynamic pricing
- Competitive pricing
- Contribution pricing
- Price elasticity of demand
20
Q
Cost plus pricing
A
Adding a fixed mark-up profit to the unit cost of the product
21
Q
Penetration pricing
A
When entering a new market, setting a relatively low price for the product in order to gain market share
22
Q
Loss Leader
A
Product sold at a very low price, often below cost price, with the intention of making profits on other products
23
Q
Predatory pricing
A
Setting prices lower than the competition with the intention of driving them out of the market
24
Premium pricing
Setting a **high price** in order to show that the product is high quality or luxury
25
Dynamic pricing
* When a business **changes prices** according to **time** and the **level of demand**
* Prices go up and down depending to time of the year or week
26
Competitive Pricing
Setting the price at a **similar level** to other products in the market
27
Contribution pricing
* Ensuring that the price charged > variable cost of production
* Contribution per unit = Price - Variable cost
28
Price Elasticity of Demand
**PED shows how sales will change with a change in price**
Elastic PED (PED > 1)
* A change in price will lead to a proportionally larger change in sales
Inelastic PED (PED < 1)
* A change in price will lead to a proportionally smaller change in sales
29
Promotion
Communicating with current and potential customers about their product in order to raise sales
30
Objectives of Promotion
To **inform** - Tell customers about the product
To **persuade** - Get them to buy it
To **remind customers** - Get them to continue buying it
31
Above the line
Promotion directly paid for by the company to communicate with consumers through mass media. These promotion activities are **targeted to everyone.**
* TV/Radio adverts
* Newspapers/Magazine adverts
* Billboards
* Online ads
32
Below the line
Promotion activities that are generally **targeted towards a specific market** share or group of people. These are not directly paid for by the business, and no money is paid to advertising agencies.
* Price promotion - e.g. buy 2 get 1 free, prizes
* Loyalty cards
* Free samples
* Direct selling - e.g. door to door
33
Through the line
A promotional strategy that combines above the line and below the line strategies.
E.g. a TV ad alongside a customer loyalty program
E.g. Online ads alongside in store sales promotions
34
Social Media Marketing
The use of social media platforms to connect with the target audience.
E.g. Instagram, TikTok, LinkedIn
35
Pros of TV/online ad
* Can reach a wide and diverse audience
* Audio/visual stimulus
* Can tell a story
36
Pros of loyalty card
* Relatively cheaper
* Targeted at specific customers
* Can track behavior and target personalized ads
37
Pros of Social Media Marketing
* Reach large audiences, especially younger generations
* Can target your audience
* Can measure success - E.g. Click through rate (CTR)
38
Cons of Social Media Marketing
* Cost involved in hiring people to manage the online presence
* No control over the online reaction
* Security issue
39
Place
The **process** of how a product gets from the **manufacturer** to the final **consumers**
40
Distribution Channel
**Chain or intermediaries a product passes through from the producer to final customer**
* Direct selling
* Selling through retailers
* Selling through wholesalers
41
Direct selling
**Manufacturers selling to consumers without any intermediaries.**
E.g. Amazon, plane tickets
E.g. Door to door, telephone, mail order, farmers markets
42
Pros of Direct Selling
* Higher profit margins - no intermediaries to pay
* Direct contact with the customers
* More control - over pricing, promotion, etc…
43
Cons of Direct Selling
* Less exposure for the product to consumers
* Have to handle storage and distribution
* Not specialized in selling
44
Single Intermediary Channel (One-level)
(Selling through retailers)
Selling to consumers via one intermediary (retailer, agent or distributor)
E.g. supermarket, bookstore, real estate agent
45
Pros of Single Intermediary Channel
* Reach a wider range of customers
* Consumers can see and feel the product
* Retailer takes care of storage and distribution
46
Cons of Single Intermediary Channel
* Retailers will take some of the profit
* Lose control of Marketing Mix - e.g. price, promotion
* Product likely to be displayed next to competitors
47
Two Intermediary Channel (Two-level distribution channel)
* **Manufacturer selling to consumers via two intermediaries**
* Usually a wholesaler and a retailer
* Wholesalers buy in bulk from manufacturers and then sell smaller amounts to retailers
48
Pros of Two Intermediary Channel
* Wholesaler takes care of storage and distribution
* Wider geographical reach
49
Cons of Two Intermediary Channel
* Another intermediary to take profit
* Even less control over the marketing mix
50
Factors to consider in determining method distribution channel
**Cost**
* Is the product margin high enough to allow intermediaries?
**Control over the brand**
* Does the business need to control price, promotion methods, etc…
**Where are the customers**
* If there are a large nimber of consumers spread out over the country, a wholesaler may be appropriate
**Mass market vs niche market**
* If the product is mass market, then direct selling is not likely be possible
51
People
**How employees (staff and managers) interact with consumers**
E.g.
* Customer interactions
* After-sales service
* Use of social media
* If the product is a service
Cultural Variations:
* Packing bag in supermarkets
* Do staff approach customers
52
Processes
**The way in which the good or service is actually delivered to the consumers**
Examples:
**Payment methods**
* E.g. cashless, debit card
**Waiting times**
* E.g. McDonalds, Pizza delivery
**Website**
**Online delivery**
53
Physical Evidence
* **Tangible aspects of the business when a consumer buys the good or service**
* The senses - see, smell, hear, feel, taste
E.g.
* The smell of fresh bread in a bakery/supermarket
* Music they play
* Cleanliness of a hotel room
* IB school - classroom, projectors, sports fields, the smell of burgers on game day
54
What is BCG Matrix?
* **A tool that helps businesses analyze and make their product portfolio**
* Analyze product portfolio in terms of
- Market share (high/low)
- Market growth (high/low)
55
Question Marks (Problem Child)
* High market growth
* Low market share - E.g. Lamborghini Lanzador
* Product Life Cycle = Introduction
* High promotion costs to establish brand and not all will succeed
* Negative cash flow
56
Star (BCG Matrix)
* High market growth
* High market share - E.g. Teslas
* Product Life Cycle = Growth
* High promotion costs as the market is growing
* If you don’t promote other business will overtake you
* Maybe positive cash flow/profit
57
Cash Cow
* Low market growth
* High market share - E.g. BMW 3 Series
* Product Life Cycle = Maturity
* Some, but less, promotion costs
* Maintaining brand
* Positive cash profit
58
Dog (BCG Matrix)
* Low market growth
* Low market share
* Product Life Cycle = Decline
* Probably needs to be replaced
59
The relationship between PLC, investment, profit, and cashflow
