Flashcards in Making Marketing Decisions Deck (57):
What is the design mix?
Function, cost and appearance
What is function?
How well a product does what it is meant to
What is cost?
The cost is closely linked to price. Businesses will try to keep costs low, but improved functionality and appearance will increase cost.
What is appearance?
Style and elegance are important for many products.
What is the product lifestyle?
A business model that represents the sales of a product through different stages of its life.
What are the four steps of the product lifecycle?
Introduction- The product is launched/released onto the market
Growth- If the launch is successful sales increase sharply and the product may make a profit for the first time.
Maturity- Sales Growth slows down, but repeat customers continue to buy and customers become loyal. The market becomes saturated as rivals bring out competing
Decline- Eventually the product is outdated and there is a big fall in sales, leading to withdrawal.
What are some examples of extension strategies?
A new marketing campaign, a modified product or a change of packaging- anything that will create new interest and boost sales
What do extension strategies do?
Businesses can increase the life of a product using extension strategies. This involves slightly changing the product so that it has a fresh appeal to the target market or appeals to a new market segment.
What is product differentiation?
Product differentiation is about making a product different from other products in some way.
Why is product differentiation important?
Because it help businesses:
To position their products and target different market segments
To gain an advantage over rivals when faced with competition
It allows consumers to see clearly that their needs are being met more effectively by one product than by another.
What are some examples of how a business can differentiate a product?
Unique and catchy product name
Design, formulation or function
Differentiation across the value chain
What is the importance of price in the marketing mix?
The price of a product gives customers an indication of quality
In competitive markets, changes in price can have a significant influence on demand
Branded products generally have a higher price than non-branded products because they are more expensive to produce and promote
What are the different types of price?
Luxury brands can charge a premium price for their products.
Many pricing decisions are based on comparing the average market price- what other businesses charge for their products and services. This is known as competitor pricing.
A low price might be used by generic/ non-branded products or to encourage product trial when a product is first launched.
How might a business improve its profits?
By increasing the price of its products and services. If this strategy is to succeed, customers must perceive the business’s products and services to be sufficiently high value in relation to competitors’ products. If they do not, the business may find that its sales volume falls.
What is a Margin strategy?
Involves setting a price that achieves a high profit margin.
What is a volume strategy?
Involves setting a price with a low profit margin, which requires high sales volumes in order to be profitable.
What must a business with a high volume low margin strategy must be able to keep low?
Must be able to keep costs low and have the facilities to produce and distribute large quantities.
What might a low volume high margin strategy be determined by?
Might be determined by the quality of the product and its brand image. Businesses using this strategy will target the premium end of the market.
How does competition influence on pricing strategy?
A business has to consider its competitors and the position of its brand in the market.
How does market segment influence on pricing strategy?
Different prices may be applied to customers with different characteristics
How does product life cycle influence on pricing strategy?
The product’s stage in the product life cycle will influence pricing decisions
How does costs influence on pricing strategy?
A business may set itself a profit margin target (e.g. 150%) that it adds to the cost of the product or service in order to set its price
How does branding influence on pricing strategy?
Products with a strong brand can demand a higher price due to the perceived value and desirability.
How does technology influence on pricing strategy?
New technology can lower the costs of production and allow a business to set a more competitive price
What is profit margin?
The proportion of revenue left over after costs have been deducted
What are some examples of advertising?
Tv, radio, magazines, posters, websites, point-of-sales displays, leaflets and brochures.
What are some examples of sponsorship?
Sponsoring sporting events, music festivals and good causes such as educational or environmental causes.
What are some examples of product trials?
Free miniatures, product testing and samples given away with other products
What are some examples of special offers?
Buy one get one free, free price draws and discount sales
What are some examples of public relations?
Using a recognisable logo on all promotional materials so that customers remember it and associate it with the product/business.
What are some different promotion methods?
Advertising, sponsorship, product trials, special offers and public relations
What are the benefits of advertising?
Can have a big impact and grab customer’s attention if the advert is in the right place and uses the right medium.
What are the drawbacks of advertising?
Can be expensive and it can also be difficult to work out the impact of advertising on sales.
What are the benefits of sponsorship?
Can provide a business with a lot of exposure and associate it with a good cause
What are the drawbacks of sponsorship?
Communicates very little information about the features and benefits of products and services
What are the benefits of product trials?
Can encourage customers to use a new product or service that they might not try otherwise
What are the disadvantages of product trials?
Can be expensive to give away free products
What are the benefits of special offers?
Can boost short-term sales and clear stock levels
What are the disadvantages of special offers?
Not suitable in the long term as selling at a discount will reduce profits
What are the benefits of public relations?
Can encourage customers to connect with the brand, trust it and become loyal to it
What are the disadvantages to public relations?
Takes a long time to develop a strong brand and brand image can be damaged quickly by bad publicity
How might a business benefit from a strong brand?
Customers may instantly recognise the brand and what it represents
Customers may associate positive characteristics with the brand
A well-known brand may become a first choice for customers, increasing brand loyalty
Customers may trust a strong brand
A strong brand may allow a business to charge a premium for their products and services
How can social media be used for promotion?
A cheap form of communication that provides opportunities for viral advertising
How can apps be used for promotion?
Businesses’ apps for consumers and the opportunity to advertise through third-party apps
How can targeted advertising be used for promotion?
How can email be used for promotion?
Communications such as e-newsletters that can be tailored to the needs and interests of customers
What does a brand represent?
The characteristics and personality of a business. For example, customers may associate a brand with characteristics such as ‘value for money’ ‘fun’ or ‘premium quality’. A strong brand can be created by investing in successful promotion
What is brand loyalty?
A customer’s willingness to buy a product from a particular business rather than from its competitors
What is retailing?
Selling products or services to customers in a physical shop
What is e-tailing?
Retailing to customers through the internet, such as through an e-commerce website
What are the benefits of retailing?
Customers have the opportunity to browse and try products
Retailing offers point-to-sale promotion (e.g. displays)
Retailers can provide customers with help and advice
Many customers enjoy the experience of shopping in a retail store
What are the benefits of e-tailing?
Businesses do not have to rent or own expensive retail space
Customers can buy at any time of the day
Businesses can assess customers around the world
Small businesses are able to compete with larger businesses without needing retail space
What must a business consider when choosing a site to locate a retail store?
Proximity to competitors
Proximity to the labour market
Proximity to resources and transport links
What is the marketing mix?
Product, place, price and promotion
How can a business make their marketing mix have a competitive advantage?
Product- a product with unique features and a strong brand can be highly desirable
Price- a business that finds a way to set its prices lower that its competitors’ will be more competitive
Promotion- a successful advertising campaign can attract consumers’ attention and build a unique brand
Place- a highly visible and convenient business location can help a business attract customers that other competitors cannot attract
What happens if one aspect of the marketing mix does not link up with the others?
It is likely that the business’s marketing strategy will fail