Chapter 12: Marketing mix: Product and Price

Question 1

What is marketing mix?

Answer 1

Four marketing decisions needed for the effective marketing of a product -> Four Ps

Question 2

What are the Four Ps?

Answer 2

Product, Price, Promotion, Place

Question 3

What is Product?

Answer 3

the goods and services produced to satisfy a customer need or want

Question 4

What is Brand?

Answer 4

a name, image or symbol that distinguishes a product from competitors

Question 5

Costs of new product development (4)

Answer 5

1. Market research -> expensive
2. Large capital expenditure
3. No guarantee of success
4. If the investment in the product is financed by borrowing, and the product fails -> survival of the business is at risk

Question 6

Benefits of new product development

Answer 6

1.

Question 7

What is Brand image?

Answer 7

The general impression of a product held by consumers

Question 8

Why does Brand image increase sales?

Answer 8

1. Consumers recognize the product easier
2. Product can be priced higher from less known brands
3. Easier to launch new products -> consumers trust the brand

Question 9

What are the roles of packaging?

Answer 9

1. To protect the product
2. To provide information about the product
3. To help consumers recognize the product

Question 10

What is The product life cycle?

Answer 10

the pattern of sales of a product from the introduction to its withdrawal from the market

Question 11

What is the Introduction stage?

Answer 11

When the product is introduced in the market. Sales are low. Losses because of advertising costs.

Question 12

What is the Growth stage?

Answer 12

The product is becoming better known to consumers. Sales are increasing, start to earn profit.

Question 13

What is the Maturity stage?

Answer 13

Sales are steady: not growing not failing. Most profitable stage.

Question 14

What is the Decline stage?

Answer 14

Sales are falling. Product becomes unprofitable and is withdrawn.

Question 15

What are Extension strategies?

Answer 15

Marketing activities to extend the maturity stage of a product.

Question 16

What are some Extension strategies?

Answer 16

1. Finding new markets for the product
2. Finding new uses for the product
3. Adapting the product or packaging to improve appeal
4. Increased advertising and other promotional activities

Question 17

What is Price?

Answer 17

The amount paid by the customer to the supplier when buying a good or service.

Question 18

What is Product quality?

Answer 18

The product meets the needs and expectations of customers.

Question 19

What are the main Pricing methods?

Answer 19

1. Market skimming
2. Penetration pricing
3. Cost-plus pricing
4. Competitive pricing
5. Promotional pricing

Question 20

What is Market skimming?

Answer 20

Setting a high price for a new product that is unique or very different from any other product on the market.

Question 21

What are the Benefits of Market skimming?

Answer 21

1. High price enables firm to recover research and developmental costs
2. High price creates a quality image for the product

Question 22

What are the Costs of Market skimming?

Answer 22

1. High profits will eventually attract cheaper competitor product
2. Some customers are not able to buy it -> loss of sales

Question 23

What is Penetration pricing?

Answer 23

Setting a low price to attract customers to buy a new product, just to raise it when it’s popular.

Question 24

Benefits of Penetration pricing?

Answer 24

1. Attracts customers quicker
2. Helps the product become established in the market.
3. Can increase market share quickly

Question 25

Costs of Penetration pricing?

Answer 25

1. Possible loss of revenue due to lower prices. 2. Can't recover developmental costs quickly.

Question 26

What is Competitive pricing?

Answer 26

Setting a price similar to that of competitors' products which are already established in the market.

Question 27

Benefits of Competitive pricing?

Answer 27

Prices are similar to those of competitors -> the business can compete on other things (example: quality)

Question 28

Costs of Competitive pricing?

Answer 28

1. Still need to find ways of competing to attract sales 2. If the market has a price leader, the price set needs to be followed.

Question 29

What is Promotional pricing?

Answer 29

Pricing the product as low as possible for a limited period of time to get consumers to buy it.

Question 30

What are the main methods of Promotional pricing?

Answer 30

1. Loss-leader pricing 2. Buy-one-get-one-free 3. Discount

Question 31

What is Loss-leader pricing?

Answer 31

When a business sells a product at a loss (lower than its cost) to attract customers into the store or onto the website. Once customers are there, they buy other products that are profitable, so the business makes money overall.

Question 32

Benefits of Promotional pricing?

Answer 32

1. Good way to sell off unwanted inventory before it becomes out of date 2. Good way of increasing short term sales and market share.

Question 33

Costs of Promotional pricing?

Answer 33

Low profits.

Question 34

What is Cost-plus pricing?

Answer 34

Setting the price by adding a fixed amount to the cost of making/buying the product.

Question 35

Benefits of Cost-plus pricing?

Answer 35

1. Quick and easy to work out. 2. Makes sure that the price covers all of the costs.

Question 36

Costs of Cost-plus pricing?

Answer 36

1. The price may be set higher than competitors or higher than customers are willing to pay.

Question 37

How do you choose a pricing method?

Answer 37

1. Is it a new or existing product? 2. Is the product unique? 3. Is there a lot of competition in the market? 4. Does the business have a well-known brand image? 5. What are the costs of making and supplying the product? 6. What are the marketing objectives of the business?

Question 38

What is Demand?

Answer 38

The quantity of goods and services consumers are willing and able to buy.

Question 39

What is Price elasticity of demand?

Answer 39

Measures by how demand for a product shifts when its price is changed.

Question 40

What is the general relationship between Price and Demand?

Answer 40

When Price increases, Demand decreases (inelastic). When Price decreases, Demand increases (elastic).

Question 41

What is Price inelastic demand?

Answer 41

The percentage change in Demand is less than the percentage change in Price. (Price increases, Demand decreases.)

Question 42

What is Price elastic demand?

Answer 42

The percentage change in Demand is greater than in Price. (Price decreases, Demand increases.)

Question 43

What is Revenue?

Answer 43

The amount earned by a business from the sale of its products.

Question 44

Increase price -> Price inelastic demand -> .... Revenue

Answer 44

Increase

Question 45

Decrease price -> Price inelastic demand -> .... Revenue

Answer 45

Decrease

Question 46

Increase price -> Price elastic demand -> .... Revenue

Answer 46

Decrease

Question 47

Decrease price -> Price elastic demand -> .... Revenue

Answer 47

Increase

Question 48

What should a business do if it wants to increase revenue?

Answer 48

1. Increase the price if the product has price inelastic demand. 2. Decrease the price if the product has price elastic demand.