2.2 Making Marketing Decisions Flashcards
All 36 cards in this deck
What are the three elements of the design mix?
Function, aesthetics and cost.
True or false? Improving a product's aesthetics has no effect on its cost.
False. Better materials and styling usually raise costs, so a business must balance function, aesthetics and cost for its target market.
Name the phases of the product life cycle in order.
Research and development, introduction, growth, maturity, decline.
In the introduction phase of the product life cycle, what happens to sales, costs and cash?
Sales are low and grow slowly, costs are high because of development and promotion, so cash flow is usually negative.
What is an extension strategy?
A method used to lengthen the life of a product and delay decline, e.g. new packaging, advertising, a price reduction, a new version or selling in a new market.
Give two reasons why differentiating a product or service is important to a business.
It allows the product to stand out in a crowded market, and more customers may choose the business over rivals, increasing market share and revenue.
What is price skimming?
Setting a high price when a product is new or unique, then lowering it later as competition increases.
What is price penetration?
Setting a low price when entering a market to attract customers and gain market share, then raising it later.
What is competitive pricing?
Setting prices in line with, or just below, those charged by competitors for a similar product.
What is a loss leader?
A product sold below cost to attract customers, in the hope they buy other, profitable products as well.
How can technology influence the pricing strategy a business chooses?
Price comparison sites and online shopping let customers compare prices instantly, pushing businesses towards lower, more competitive prices.
How does competition influence a business's pricing strategy?
In a competitive market a business must price close to what rivals charge, or customers will switch; with little competition it can charge more.
How do market segments influence a business's pricing strategy?
Different segments are willing to pay different amounts, so a business can charge higher prices to one segment and discounted prices to another.
How does the product life cycle influence pricing?
Skimming or penetration is used at introduction, while prices are usually cut in maturity and decline as competition grows.
True or false? Lowering the price will always increase a business's revenue.
False. If the extra customers gained do not offset the lower price, revenue falls and losses can increase.
What is advertising as a method of promotion?
Paid-for communication, e.g. TV, radio, newspapers or online, used to inform and persuade customers to buy.
Give one reason why a business may use sponsorship to promote a product.
The product becomes associated with a particular event or personality, which enhances the brand so the business may charge a higher price.
What are product trials as a method of promotion?
Letting customers sample or test a product free or cheaply so they try it and then buy it, often used when launching a new product.
What are special offers as a method of promotion?
Short-term incentives such as discounts, BOGOF or money-off coupons used to boost sales quickly.
Give two ways branding adds value for a business.
Customers identify with the brand and become loyal, repeat purchasing, and they are more willing to pay a higher price.
What is targeted advertising online?
Using data on customers' searches and browsing to show adverts only to the people most likely to buy the product.
What is viral advertising via social media?
Content that users share rapidly with each other, spreading awareness of the product widely at little or no extra cost to the business.
What is an e-newsletter and why do businesses use one?
A regular email sent to customers with news and offers; it is low cost and encourages repeat purchases.
True or false? Branding is only worthwhile for large businesses.
False. A small business can also use branding to add value, creating loyalty and allowing higher prices.
Which element of the marketing mix relates to the distribution of a product to the consumer?
Place.
What is a retailer?
A business that sells goods to the final consumer, usually from a physical shop.
What is an e-tailer?
A business that sells its products to consumers online (e-commerce) and delivers them to the customer.
Give two advantages to a business of selling through e-commerce rather than a physical shop.
Lower costs because no shop premises are needed, and a national or global market that can be reached 24 hours a day.
Give two drawbacks to a business of selling only as an e-tailer.
Customers cannot see or touch the goods first, and unreliable deliveries or limited warehouse capacity can damage the brand.
True or false? Place means only the physical shop in which a product is sold.
False. Place is how the product is distributed to the consumer, including online selling and delivery.
What are the four elements of the marketing mix?
Product, price, place and promotion.
What is an integrated marketing mix?
One where all four elements work together and send a consistent message to the target market.
How can a change to the product affect the other elements of the marketing mix?
e.g. a business upgrades its product to a premium version
A better product allows a higher price, promotion that stresses quality, and sale in more exclusive places.
What is competitive advantage?
A feature or benefit that makes a business's product better than rivals' in the eyes of customers.
True or false? Price is always the most important element of the marketing mix.
False. Product, place and promotion may matter more, as the product itself ultimately generates customer demand.
True or false? A small business can always win customers from a large national chain by cutting its prices.
False. A large chain may have a lower cost per customer, so the small business should consider competing in other ways, such as on quality.