2.2 Making Marketing Decisions Flashcards
All 62 cards in this deck
What are the three elements of the design mix?
Function, aesthetics and cost.
In the design mix, what does 'function' mean?
How well the product works and does the job it was designed to do.
In the design mix, what does 'aesthetics' mean?
How the product appeals to the senses — how it looks, feels, sounds or smells.
Name the four phases of the product life cycle in order.
Introduction, growth, maturity, decline.
What is an extension strategy?
An action taken to lengthen the life of a product and stop it going into decline.
Give two extension strategies a business could use.
Any two of: reduce the price, target a new market segment, add extra features to the product, sell it in new places/on new platforms, advertise more.
What is product differentiation?
Making a product or service stand out as different from those of rivals. It allows the product to stand out in a crowded market.
Give one drawback to a business of differentiating its product.
Variable costs may rise, so profit per product sold falls; or differentiation is expensive, so cash outflows rise and cash flow worsens.
What is a volume pricing strategy?
Setting a low price with a low profit margin on each item, so the business relies on selling a high volume to make a profit.
What is a margin pricing strategy?
Setting a high price with a high profit margin on each item, accepting that the business will sell a low volume.
What is competitive pricing?
Setting a price in line with, or just below, the prices charged by competitors.
What is premium pricing?
Setting a price higher than competitors' to show that the product is high quality or exclusive.
Why might a business set a low price when it launches a product?
To encourage customers to try the product, so it builds sales and customers may keep buying it later.
Give two influences on a business's pricing strategy.
Any two of: technology, competition, market segments, the product life cycle.
How can competition influence a business's choice of pricing strategy?
In a market with lots of competition the business may need to use competitive pricing, so its products appear good value against rivals.
How can the product life cycle influence the price charged?
Prices are often cut in the maturity or decline phase, as an extension strategy to keep sales up.
How can technology influence a business's pricing?
Price comparison sites and online shopping let customers compare prices instantly, so businesses must keep prices competitive.
True or false? Lowering the price always increases a business's profits.
False. The profit margin on each item falls, so profit only rises if enough extra units are sold.
What is advertising as a method of promotion?
Paid-for communication, such as TV, print or online adverts, used to inform and persuade customers to buy.
What is sponsorship?
Paying to have a business's name or brand associated with an event, team or personality.
Give one reason a business may use sponsorship to promote a product.
The product becomes associated with an event or personality, enhancing the brand so a higher price can be charged (it also raises awareness, so more customers try it).
What is a product trial as a method of promotion?
Letting customers try a product free or at low cost (e.g. free samples or a free trial period) so they buy it afterwards.
What is a special offer in promotion? Give an example.
A short-term deal to boost sales, e.g. buy-one-get-one-free, money-off vouchers or seasonal discounts.
What is branding?
Using a name, logo, design or image to identify a business's products and distinguish them from rivals'.
Give one benefit to a business of having a strong brand.
It builds brand loyalty, so customers make repeat purchases and are less likely to switch to rivals.
What is targeted advertising online?
Using customers' online data and profiles to show adverts only to chosen market segments.
What is viral advertising via social media?
Promotional content designed to be shared and reposted by social media users, spreading the message quickly at low cost.
What is an e-newsletter?
An email sent regularly to existing or past customers with news, products and offers.
What is a retailer?
A business that sells goods directly to consumers, usually through shops or stores.
What is an e-tailer (e-commerce)?
A business that sells goods and services to customers online rather than through physical stores.
Give one advantage to a business of distributing through retail stores rather than only online.
Customers can see, test and take away the product straight away, and staff can give advice and service.
What is competitive advantage?
A feature of a business that allows it to perform better than its rivals and gives customers a reason to choose it.
What is an integrated marketing mix?
A mix in which product, price, promotion and place all work together to support the same message and target market.
Give one way the product can influence the price in the marketing mix.
A high-quality or well-differentiated product can be sold at a premium price.
Give one way promotion can influence the price in the marketing mix.
Promotion that builds a strong brand adds value, so the business can charge a higher price.
Give one way place can influence the other elements of the marketing mix.
Selling online cuts costs such as rent, so lower prices can be charged; a luxury product may instead need exclusive stores and premium pricing.
True or false? Price is always the most important element of the marketing mix.
False. Other elements, such as product, promotion or place, may matter more depending on the product and market.
Give one way a business can use the marketing mix to build competitive advantage.
Any one of: differentiate the product so it stands out, price below rivals, target promotion at its market segment, or distribute more conveniently than rivals.
Why does a business need to change its marketing mix over time?
Because customer needs, competitors and technology change, so the mix must be reviewed to stay competitive.
Why does an integrated marketing mix strengthen competitive advantage?
The four elements reinforce each other and give customers a consistent message, making the business harder for rivals to copy.
True or false? In the design mix, 'cost' means the price the customer pays for the product.
False. Cost is what it costs the business to design and make the product; the price charged is part of the marketing mix, not the design mix.
True or false? Extension strategies are normally introduced when a product is in the introduction phase.
False. They are used when sales start to fall at maturity or decline, to extend the product's life cycle.
True or false? Once a viral advert is shared on social media, the business cannot control how it is passed on or altered.
True. Users may change the message or not share it at all, which can damage the brand.
What does the product life cycle show?
How a product's sales change over time as it moves through the stages of its life, from launch to withdrawal.
What happens in the introduction phase of the product life cycle?
The product is first put on sale. Sales are low, so the business uses promotion to make customers aware of it and get them to try it.
What happens in the growth phase of the product life cycle?
Sales rise quickly as more customers buy the product, and it may start to make a profit.
What happens in the maturity phase of the product life cycle?
Sales growth slows and sales level off at their peak. Most potential customers already have the product and rivals compete hard, so the business relies on repeat purchases and customer loyalty.
What happens in the decline phase of the product life cycle?
Sales fall, often because the product has become out of date or rivals offer something better, until the business withdraws it.
Why can improving a product's function or aesthetics be a problem for the design mix?
Better features or a more attractive design usually raise the cost of making the product, so the business has to balance them against cost to keep it profitable.
Give one benefit to a business of differentiating its product.
Any one of: it gives the product a USP so it stands out from rivals; it can be aimed at a particular market segment; customers may be willing to pay a higher price.
What kind of business is suited to a volume pricing strategy?
One that can keep its cost per unit very low and has the capacity to produce and deliver on a large scale, so a thin margin on each item still adds up to a profit.
How can market segments influence a business's pricing?
Different groups of customers may be charged different prices, e.g. a discount for students or a higher price for a premium version.
How can new technology in production influence the price a business charges?
Technology such as automation can lower the cost of making each item, so the business can charge less than rivals and still keep its profit margin.
Why should a business choose promotion methods to suit its target market segment?
Different segments use different media and respond to different messages, so a method that reaches one group may miss another.
Give one drawback of advertising as a method of promotion.
Any one of: it can be expensive; it is hard to measure how many extra sales it brings.
Give one drawback of sponsorship as a method of promotion.
Any one of: it tells customers little about the product's features or benefits; it can be expensive; if the team, event or person sponsored gets bad publicity, the brand suffers too.
Give one drawback of product trials as a method of promotion.
Giving products away costs money, and some customers who try it will not go on to buy.
Why can't a business rely on special offers in the long term?
Selling at a discount cuts the profit on each item, and customers may wait for the next offer instead of paying full price.
Give one drawback of branding as a method of promotion.
A strong brand takes a long time and a lot of spending to build, and bad publicity can damage it quickly.
Give one advantage of using technology to promote products.
Any one of: it can reach many customers at a lower cost than traditional media; messages can be personalised for individual customers; adverts can be aimed at chosen segments.
What is a channel of distribution?
The route a product takes from the producer to the customer, e.g. through a retailer, or sold directly to customers online.
How can a volume pricing strategy influence promotion?
The low profit margin on each item leaves little money for promotion, so the business may need cheaper methods.