2.4 The Marketing Mix Flashcards
All 91 cards in this deck
Why must a business consider the needs of the target market when designing a new product?
So the design and features match what those customers want, which makes them more likely to buy it.
Give one risk of developing a new product.
Any one of: high research, design and launch costs; the product may fail to sell; it may damage the existing brand image.
Give one benefit to a business of innovation (bringing out new or improved products).
Any one of: it attracts new customers and increases sales; it spreads risk across more products; it can replace products that are in decline.
Why does a product usually make a loss in the introduction stage?
The costs of developing and launching it are high while few units have yet been sold, so revenue does not cover costs.
What is price skimming?
Setting a high price when a product is first launched, then lowering it once early demand has been met.
Why might a business use price skimming when it launches a product?
Any one of: early buyers who want something new will pay more; it brings in revenue quickly to cover development costs; a high price gives the product a premium image.
What is price penetration?
Setting a low price when a product enters the market to attract customers, then raising it once the product is established.
Why might a business use price penetration when it launches a product?
To encourage customers to try the product, so it builds sales and customers may keep buying it later.
What is cost-plus pricing?
Working out the cost of making each item and adding a percentage mark-up on top to set the price.
What is a loss leader?
Selling a product below cost to attract customers, who then buy other products the business does make a profit on.
What are free samples, as a point-of-sale promotion?
Giving customers a product free, often in a small amount, so they try it and go on to buy it.
Give one drawback of giving free samples as a point-of-sale promotion.
Any one of: giving products away costs money; some customers who try it will not go on to buy.
What is social media as a method of promotion?
Using sites and apps where users share content to promote a product, e.g. posts that followers share, reaching many people quickly at low cost.
Give one drawback of social media as a method of promotion.
Any one of: bad reviews or errors can reach a large audience very fast; someone must keep checking and answering posts, which takes staff time and money.
Give one benefit of advertising in a specialist magazine rather than a newspaper.
Any one of: it reaches readers who share a particular interest, so it targets the right market; readers keep magazines, so the advert may be seen more than once.
Give one advantage to a business of distributing through retail stores rather than only online.
Any one of: customers can see, test and take away the product straight away; staff can give advice and service.
What is e-commerce?
The buying and selling of products and services using devices connected to an electronic network such as the internet.
How does e-commerce help a business access wider markets?
Customers anywhere in the country or the world can buy online at any time, not just those near a shop, so the business can reach many more customers.
Give one drawback to a small business of using e-commerce.
Any one of: customers cannot see or try the product before buying; the costs of a website, payment handling, delivery and returns; more global competition.
Give one way promotion can influence the price in the marketing mix.
Promotion that builds a strong brand image makes customers willing to pay more, so the business can charge a higher price.
Give one way place can influence the other elements of the marketing mix.
Any one of: selling online cuts costs such as rent, so lower prices can be charged; a luxury product may need exclusive stores and a high price.
What is the formula for market share?
Market share (%) = (sales of the business ÷ total market sales) × 100
In pricing, what is demand?
How much of a product customers want to buy, and can afford to buy, at a particular price.
What is the basic relationship between price and demand?
As prices rise, demand is likely to fall (and as prices fall, demand is likely to rise).
What are the four elements of the marketing mix?
Price, product, promotion and place.
In the marketing mix, what does 'product' mean?
The good or service itself, with the features and qualities that customers need and want.
In the marketing mix, what does 'price' mean?
The amount customers are charged, which should match the value they believe the product gives them.
In the marketing mix, what does 'place' mean?
How and where the product or service is distributed to customers, e.g. in a shop, online or at the customer's home.
In the marketing mix, what does 'promotion' mean?
The methods used to make customers aware of the product and persuade them to buy, e.g. advertising or social media.
Name the four phases of the product life cycle in order.
Introduction, growth, maturity, decline.
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.
What is competitor pricing?
Setting a price in line with, or just below, the prices charged by competitors.
What is a price reduction as a point-of-sale promotion? Give an example.
Cutting the price for a short time to boost sales, e.g. buy-one-get-one-free, money-off vouchers or seasonal discounts.
Why can't a business rely on price reductions in the long term?
Selling at a discount cuts the profit on each item, and customers may wait for the next price reduction instead of paying full price.
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.
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.
What is targeted advertising online?
Using customers' online data and profiles to show adverts only to chosen market 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.
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-designed product can be sold at a higher price.
True or false? A business can decide its price without considering the other elements of the marketing mix.
False. The elements must work together — a low price can conflict with a high-quality product or brand image.
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.
How might consumers having less money to spend affect the marketing mix?
The business may change its prices (e.g. lower them) so customers still feel they are getting value for money.
What is market share?
The proportion of sales in a market made by one business.
What is the marketing mix?
The combination of product, price, place and promotion a business uses to market a product.
What is product design?
Planning the appearance, features and function of a product before it is made.
What is invention in business?
The creation of a completely new product or idea that did not exist before.
What is innovation in business?
Improving or developing an existing product or idea and bringing it to the market.
What is promotional pricing?
Temporarily lowering the price of a product to boost sales.
What is a competition as a point-of-sale promotion?
Offering customers the chance to win a prize, usually by buying the product.
Give one advantage to a business of running a prize competition.
It encourages repeat or multiple purchases to gain extra entries.
Give one advantage to a business of advertising on television.
Moving images can be used to demonstrate the product.
Give one advantage to a business of advertising on radio.
Stations can be chosen to target a specific audience or geographical area.
Give one advantage to a business of advertising on its own website.
The advert is easy and cheap to update.
Give one advantage to a business of advertising in print media such as a national newspaper.
It has a large readership, so many people across the country see it.
Give two examples of physical distribution channels.
Selling through shops/retailers and mail order or catalogues.
Give two examples of digital distribution channels.
Any two of: downloads (e.g. music, e-books, apps or games); streaming (e.g. films and TV); online services such as banking or insurance. No physical product is moved.
Give one advantage to a producer of including a wholesaler in its distribution channel.
The producer's storage costs are likely to be lower.
How might falling consumer incomes affect a business's product decisions?
It may design a cheaper, more affordable range.
How might environmental considerations affect the place element of a business's marketing mix?
It may change how products are transported or distributed, or where they are sold.
True or false? A business whose sales are rising must be gaining market share.
False. The whole market may be growing faster, so its share can still fall.
Give one benefit to a business of using market data.
Any one of: it shows trends in the market; it can reveal gaps or unfulfilled demand.
How can market data show the effect of a promotion?
By comparing sales or demand before and after the promotion ran.
What is a trend in market data?
The general direction in which the figures move over a period of time.
Give one advantage to a business of using price reductions as a point-of-sale promotion.
It encourages customers to buy, helping to sell off old or excess stock quickly.
What is digital distribution?
Delivering a product or service electronically, by download, streaming or an online service such as banking, so no physical item is moved.
How is digital distribution different from selling online with home delivery?
Selling online (e-commerce) can still mean physically delivering the goods; in digital distribution the product or service itself is delivered electronically, e.g. downloaded or streamed.
What does 'breaking bulk' mean?
A wholesaler buying large quantities from producers and selling them on in smaller amounts to retailers.
Give the three main routes a product can take through a physical distribution channel.
Producer to customer (direct); producer to retailer to customer; producer to wholesaler to retailer to customer.
When is a producer most likely to sell directly to its customers?
When it has few customers it can deal with itself, e.g. a small craft business or a firm selling to other businesses.
What is physical distribution?
Moving physical goods from the producer to the customer, e.g. through shops or by delivery to the customer's home.
Give one advantage to a business of digital distribution.
Any one of: there is no physical product to deliver, so costs are lower; customers receive the product straight away; customers can buy at any time of day.
Give one disadvantage to a business of digital distribution.
Any one of: not every product can be delivered digitally; some customers have no internet access; content can be copied and shared illegally, so sales are lost.
Give two factors that affect the price a business charges.
Any two of: competitors' prices; its costs and the profit it wants; whether customers know the business or brand; what customers are willing to pay.
Give one advantage of cost-plus pricing.
Each item sold covers its cost and earns a profit, as long as enough items are sold.
What are the two main methods of promotion?
Point of sale promotion and advertising.
Give two factors a business considers when choosing advertising media.
Any two of: the cost and its budget; where its target market will see the adverts; whether it is a single advert or part of a campaign.
Give one drawback of television advertising.
It is very expensive to make and show, so usually only large businesses can afford it.
Give one drawback of radio advertising.
Listeners cannot see the product, which matters if its look is a selling point.
Give one advantage of advertising with leaflets.
They are cheap to produce and can be delivered or left where the target market will see them.
Why might social media be a poor choice for advertising to elderly customers?
Older people are less likely to use social media, so many of the target market would not see the adverts.
Why should a business develop a new product before an existing one reaches decline?
So the new product is ready to replace the falling sales of the old one.
Why does a new business usually need more promotion than an established one?
Customers do not yet know its product or where to buy it, while an established business's customers already do.
How does market research help a business set its marketing mix?
It shows what product customers want, the price they will pay, where they buy and which promotions appeal to them.
What is market data?
Information that helps a business make marketing decisions, e.g. on changes in demand, market share or the effect of promotions.
Give two possible reasons for a fall in demand for a product.
Any two of: its price is higher than rivals'; it is out of date and customers have switched; customers now buy a different way, e.g. online.
Why must a business keep checking its target market?
Target markets change over time, e.g. more older people now use smartphones, so marketing aimed at the old group may miss customers.