Marketing - PPPP Flashcards
(60 cards)
What is the research and development process for creating a product?
- Conduct market research to find out what consumers need or want in a new product.
- Generate an idea based on the data collected from the market research.
- Create a prototype of the product. This is a basic model which shows what the product would look like and how it would function.
- Test the market by giving consumers a basic model of the product to try gather their feedback.
- Alter the product based on the tests and feedback gathered from consumers.
- Put the final product into production.
What are the advantages of branding?
-consumers tend to perceive branded goods as being of higher quality;
-customers will become brand loyal, meaning that they will only buy that brand;
-customers are often willing to pay a higher price for branded goods;
-costs and risks of launching a new product are reduced as consumers are already aware of the brand
what are the disadvantages of branding?
-establishing a brand can be a very expensive and time-consuming process;
-the entire brand could be damaged by one poor product in the range;
-branding goods makes them easy to copy for counterfeiters.
why is packaging needed?
-to protect products from being damaged during transportation;
-to help to keep products fresh;
-to provide legally required information, e.g. nutrition
-to reflect product branding, e.g. choice of colors and fonts;
-to appeal to the target market, e.g. choice of images and materials.
what are the factors to be considered when setting the price of a product?
-Cost of buying or producing the product,
-Amount of profit to be made,
-Price charged by competitors,
-Quality of the product,
-Price target markets will pay,
-Government restrictions on pricing,
describe the ‘Cost of buying or producing the product’ factor to consider when setting a price:
the business will have to ensure that the price is higher than the costs to buy or make the product to ensure that a profit is made on each product sold.
describe the ‘Amount of profit to be made’ factor to consider when setting a price:
the business will price the product higher or lower depending on the level of profit they wish to make on each product sold.
describe the ‘Price charged by competitors’ factor to consider when setting a price:
the business needs to consider whether to match the price charged by competitors or choose a different pricing strategy to stand out from the crowd.
describe the ‘Quality of the product’ factor to consider when setting a price:
the price set by the business must reflect the quality of the product. If the business charges a high price for a poor quality product, the customer will feel that they have been ripped off.
describe the ‘Price target markets will pay’ factor to consider when setting a price:
the business must choose a price that is acceptable to their target market otherwise they will struggle to persuade customers to buy it.
describe the ‘Government restrictions on pricing’ factor to consider when setting a price:
the government has legislation for specific products which restricts the minimum or maximum amount a business can charge for the product (such as the minimum unit pricing on alcohol set by the Scottish Government)
what are the long term pricing strategies?
-Premium (high) price,
-Low price,
-Competitive pricing
-Cost-plus pricing
describe the ‘Premium (high) price’ pricing strategy:
A business will set the price of their product higher than that of their competitors. Premium pricing is used to give consumers the perception of quality and luxury. To justify the high price, the business must ensure their product is of high quality. Examples of businesses which use this pricing method are Apple and Gucci,
describe the ‘Low price’ pricing strategy:
A business will set the price of their products lower than that of their competitors. Low price is effective in markets where there is little brand loyalty and customers place price above all other decision-making factors. However, some consumers will see low price as an indicator of poor quality and will be put off from buying the product. Examples of businesses that use a low-price strategy include Aldi and Ryanair.
describe the ‘Competitive pricing’ pricing strategy:
This strategy involves setting the price of the product at the same level as that of competitors. As there is no difference in competitive prices, businesses will then need to compete on other factors such as customer service and product quality to convince customers to buy from them.
describe the ‘Cost-plus pricing’ pricing strategy:
A business first calculates the cost of making or buying one unit of the product. They then add a percentage mark-up to the cost price to calculate the selling price. For example, a business which adds a 25% mark-up on a product which costs £1 to make will sell the product for £1.25. Cost-plus pricing ensures a profit is always made on any product sold as the selling price will always be higher than the cost price.
what are the short term pricing strategies?
-Price skimming,
-Penetration pricing,
-Promotional pricing,
-Psychological pricing,
describe the ‘Price skimming’ pricing strategy:
The price is set high when the product is first launched. Once there are no customers left willing to pay the initial high price, the price of the product is then gradually lowered over time. Price skimming is most effective in markets where there is little to no competition
describe the ‘Penetration pricing’ pricing strategy:
The price is set low when the product is first launched. The aim of the low price is to attract customers away from competitors to buy the product. Once a customer base has been established, the business will gradually increase the price over time. Penetration pricing is used when launching products into highly competitive markets such as those for soft drinks and cereal.
describe the ‘Promotional pricing’ pricing strategy:
A short-term reduction in the price of the product. It will be widely publicised and is used to generate increased sales or to sell off outdated products. Examples include Boxing Day sales and buy one get one free (BOGOF) offers.
describe the ‘Psychological pricing’ pricing strategy:
A price is selected which makes the customer feel they are getting a much better deal than they actually are. When using this strategy, businesses will usually avoid rounding prices up to whole numbers. For example, a business will charge 99p rather than £1. Customers are more likely to buy at the 99p as their mind is tricked into thinking this is a lot cheaper than if it was priced at £1.
what are the factors to consider when choosing a location?
-Type of business,
-location of competitors,
-Cost of premises,
-Availability of labour,
-Transport links,
-Government incentives,
describe the ‘type of business’ factor to consider when choosing a location:
Depending on what the activity of the business is, some businesses need to be located in particular areas. For example, a wind farm needs to be in a rural area which is windy otherwise it will not generate much electricity.
describe the ‘location of competitors’ factor to consider when choosing a location:
When researching locations, a business will find out which competitors already operate in each area. A business then must consider whether it makes greater business sense to locate next to competitors or far away from them. For example, a small independent coffee shop might try to avoid areas where well-known chains such as Starbucks and Costa are already located as they might find it difficult to compete with them.
