Booklet 3: Marketing Mix & Product Life Cycle Flashcards
(41 cards)
What is the Product element? (4)
A product refers to the commodity that a business is offering for sale.
What is the Price element? (4)
Price refers to the amount of money a firm requires in return for providing its goods or services.
What is the Skimming Pricing Strategy? (4)
The price of the product is set high initially to target those who are willing to pay the higher price.
3 advantages and 3 disadvantages of Skimming? (8/10)
Advantages
1.Help establish the product as a must have
2.Early adopters of a product are usually willing to pay high prices
3.It makes sense to charge higher prices to recover the investment cost
Disadvantages
1.Some customers may be put off by the ‘rip-off pricing’
2.When the price gets cut, the firms image may suffer
3.Buyers who bought early may be annoyed with the price change
What is the Penetration Pricing Strategy? (4)
When a firm sets a low initial entry price to attract customers
3 advantages and 3 disadvantages of Penetration Pricing? (8/10)
Advantages
1.Low-priced new products may attract high sales volume
2.High sales volumes help to cut production costs per unit
3.Creates customer base quickly
Disadvantages
1.Pricing low may affect the brand image, making it look cheap
2.Pricing on the basis of value can cause customers to be very price sensitive
3.Businesses sacrifice higher profit in the initial phase
What is the Value-Based Pricing Strategy? (4)
The practice of setting the price of a product or service at its perceived value to the customer.
2 advantages and 3 disadvantages of Value-Based Pricing? (8/10)
Advantages
1.Increase profits
2.Customer loyalty
Disadvantages
1.Niche market
2.Not scalable
3.Competition
What is the Cost-Plus Pricing Strategy? (4)
When a firm calculates the average cost of producing a good or service and then adds a percentage profit or mark-up to calculate the selling price.
2 advantages and 3 disadvantages of Cost-Plus Pricing? (8/10)
Advantages
1.Company knows the amount of expenditure and can add profit margin accordingly
2.Simple method
Disadvantages
1.Doesn’t take into account the future demand for a product
2.Doesn’t take into account the competitor actions
3.Overestimating the price and personal bias when deciding the profit margin
What is the Promotion element? (4)
The process by which businesses inform customers about their products and in an attempt to persuade customers to purchase them.
What is the Advertising method of promotion? (4)
Companies invest large sums of money to promote products to the public.
What is the Sales Promotion method of promotion? (4)
Refers to any short-term incentive used to encourage consumers to purchase a good or service.
3 advantages and 3 disadvantages of Sales Promotion? (8/10)
Advantages
1.Generate sales and increase profits
2.Add to the brand awareness
3.Effective for first time entry on to the market
Disadvantages
1.Difficult to sell a product at full price
2.The firm has to reduce their profit margin
3.Short-term boost to sales and profits
What is the Joint Venture method of promotion? (4)
An agreement between 2 companies in which both organisations combine marketing strategies in order to increase their share of the marketplace and increase their revenues.
3 advantages and 3 disadvantages of Joint Ventures? (8/10)
Advantages
1.Can increase their advertising audience
2.Companies might combine assets and resources leading to an increase in likelihood of success of the campaign
3.Doesn’t carry a large risk
Disadvantages
1.Neither party has full control
2.Potential conflict can occur between businesses
3.Some confidentiality from each business is lost.
What is the Place element? (4)
Place refers to getting the goods to the correct place where they are going to sell most.
What is Retail? (4)
The retailer buys products direct from the manufacturer and distributes them to customers through the use of premises.
2 advantages and 2 disadvantages of retail? (8/10)
Advantages
1.Customers are able to see/try on products before they buy them
2.Personal service can be provided to the customer
Disadvantages
1.Expensive to operate a retail outlet
2.Shops aren’t open 24/7
What is Wholesale? (4)
The wholesaler buys goods direct from the manufacturer, stores them and redistributes them to individual retailers in small batches.
2 advantages and 2 disadvantages of Wholesale? (8/10)
Advantages
1.Provides the retailer with storage, bulk breaking, credit and delivery facilities, which reduce costs
2.Retailers can order exactly what is needed
Disadvantages
1.Efficient supply chain is required
2.More expensive for the retailer
What is the People element? (4)
People refer to the staff or representatives of a company who will directly or indirectly come into contact with customers.
What is the importance of the role of People? (8/10)
1.Staff should appreciate the positive impact of their actions on the brand image and business’s reputation.
2.Customer experience is paramount if the business is to achieve it’s goal of increased market share.
3.Excellent customer service could lead to repeat custom.
What is the Process element? (4)
Refers to the systems employed by the firm to ensure that their services are successfully delivered to their customers.
