TOPIC 7: MARKETING MIX 1

Question 1

Product differentiation is (3)

Answer 1

Is central to successful marketing
increases the value of the product / service on offer to the customer
Is concerned with providing solutions to customers problems or ways of satisfying need

Question 2

Levels of Product / Service Offering (4)

Answer 2

• Core offer
• Expected Offer
• Augmented Offer
• Potential Offer

Question 3

Core offer (levels of product/services)

Answer 3

• the basic offering e.g. easyjet

Easyjet stripped its airline offer down to the Core Offer, removing Expected Offer elements to reduce price

Question 4

Expected Offer (levels of product/services)

Answer 4

Additional benefits normally provided with core offer

Question 5

Augmented Offer (levels of product/services)

Answer 5

Additional benefits not normally provided but serving to differentiate from competitors offer e.g. Kia

Kia provide an Augmented Offer including 7 year warranties

Question 6

Potential Offer (levels of product/services)

Answer 6

Additional benefits not currently offered but that could be considered as a way of augmenting the offer e.g. google

Google are exploring / developing a Potential Offer for cars involving driverless technology

Question 7

4 Ways to achieve product differentiation

Answer 7

Quality- durability, responsiveness, realibilty
Packaging- storage and protection, Facilitates use
Branding- image, reputation
Service- ‘product wrapper’ Enhanced value for a product

Question 8

How do customers choose products?

Answer 8

Most purchases are a combination of rational and emotional

Balance will vary dramatically depending upon category

Question 9

Designing the features of the product / service

Answer 9

Features, attributes and benefits (FAB to sales professionals) are used to help sell a product or service.

Benefit- what you want it to do
Attribute- what you would want it to do as an extra
Feature- how you will do it

Question 10

The New Product Development Process

Answer 10

New Product Strategy
Idea Generation
Idea Screening
Business Analysis
Development
Test Marketing
Commercialisation
New product/ service

Question 11

Introduction (Product Life Cycle)(1)

Answer 11

Audience- early adopters
market- small
sales- low
competition- low
business focus- awareness
Design focus- tuning

Create product awareness and trial

Question 12

Growth (Product Life Cycle)(2)

Answer 12

Audience- mainstream
market-growing
sales-high
competition-moderate
business focus-market share
Design focus-scaling

Maximise market share

Question 13

Maturity (Product Life Cycle)(3)

Answer 13

Audience-late adopters
market-large
sales-steady/flattening
competition-high
business focus- customer retention
Design focus-support

Maximise profits while defending market share

Question 14

Decline(Product Life Cycle)(4)

Answer 14

Audience-Laggards
market-contracting/shrinking
sales-Moderate
competition-Moderate
business focus-Transition
Design focus-Transition

Reduce expenditure and milk brand

Question 15

However as a product reaches decline, sometimes it can have

Answer 15

product extension, which rejuvinate the brand

e.g. gillete razors

Question 16

Factors Impacting the Pricing Situation

Answer 16

Economic value to customer
Competitor price levels
Elasticity demand
Production costs
Corporate objectives
Desired Positioning

Question 17

Pricing signals

Answer 17

Signals product value
Competitive tool; high or low pricing to competition
Determines financial performance
Used as a substitute for selling effort
Reinforce other functional and marketing activities

Question 18

Harvest (Pricing Portfolio approach)

Answer 18

Keep high prices despite market share falls in order to fund other products

Question 19

Maintain position (Pricing Portfolio approach)

Answer 19

Reduce pricing to maintain market share

Question 20

Growth (Pricing Portfolio approach)

Answer 20

Aggressive pricing to grow market share

Question 21

Premium positioning (Pricing Portfolio approach)

Answer 21

Positioned within a niche sector and priced for a non-price sensitive audience

Question 22

Pricing Strategy – Little / No knowledge of customer value

Answer 22

Cost and pricing e.g.government pays you 10% extra of what it takes to build a road
Going rate- same as competitors
Auction and Participative e.g. Ebay

Question 23

Pricing Strategy –Good knowledge of customer value

Answer 23

Premium- product perceived as high value/unique e.g. Gucci
Skimmimg- maximise revenues on new products, then decrease over time e.g. Apple
Market Penetration- price lower level to attract new customers. Then as you get better known can charge more e.g. kia
Economy- aims to attract more price-conscious consumers

Question 24

Promotional Pricing

Answer 24

Loss leaders to attract customers into store / initial purchase (e.g. Printers)
Freemium: spotify
Cash rebates inc coupons
Low interest finance
Psychological pricing (£4.99)
Bundle Pricing

Question 25

Break Even Analysis

Answer 25

Fixed Costs- Business costs that remain constant regardless of the number of units produced e.g. price of standard haircut Variable Costs- Business costs that increase with the number of units produced e.g. more electricity being used for more customers, more staff needed for haircuts

Question 26

Break Even Analysis eq

Answer 26

(Total fixed cost / Production unit volume) + Variable cost per unit