Making marketing decisions: using the marketing mix
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48 Terms
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define product
Product is the goods and services that the firm provides
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what makes up a product
Product will be made up of core features and functions as well as additional aspects that can sway consumer behaviour e.g. brand or guarantees
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what does the product porfolio analysis look at
* **Product portfolio analysis** looks at the range of products and brands that a firm has under its control
* A businesses product range is called its product portfolio
* This type of analysis can help a firm identify where every single one of its products is positioned in the market
* A businesses product range is called its product portfolio
* This type of analysis can help a firm identify where every single one of its products is positioned in the market
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what does the boston matrix consider
This considers each product within the portfolio in relation to its market share and the rate of market growth
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where is a cash cow positioned in The Boston Matrix
low market growth and high market share
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where is a rising star positioned in The Boston Matrix
high market growth and high market share
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where is a problem child positioned in The Boston Matrix
high market growth and low market share
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where is a dog positioned in The Boston Matrix
low market growth and low market share
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explain cash cows
* These are established products
* The profits made through these products can be used to finance other products such as rising stars
* Firms will want to establish as many cash cows as possible.
* With low market growth there is likely to be less competition from new firms entering the market, therefore firms can spend less on advertising
* A product is called a cash cow because a firm can ‘milk’ the product to finance other areas of the business
* The profits made through these products can be used to finance other products such as rising stars
* Firms will want to establish as many cash cows as possible.
* With low market growth there is likely to be less competition from new firms entering the market, therefore firms can spend less on advertising
* A product is called a cash cow because a firm can ‘milk’ the product to finance other areas of the business
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explain rising stars
* These products enjoy increasing sales revenue
* However, because the market is growing other firms are entering the market with similar products, therefore there will be fierce competition between these firms
* There is usually heavy promotional spending and increased capital investment in order to increase capacity
* Cash flow can often be negative at first
* Rising stars are often funded from cash cows
* It is hoped that a star can go on to become a cash cow but many stars eventually become dogs
* However, because the market is growing other firms are entering the market with similar products, therefore there will be fierce competition between these firms
* There is usually heavy promotional spending and increased capital investment in order to increase capacity
* Cash flow can often be negative at first
* Rising stars are often funded from cash cows
* It is hoped that a star can go on to become a cash cow but many stars eventually become dogs
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explain problem child
* With growth in the market a product can be very successful if there is enough demand
* However, some products are unsuccessful and the firm will have to decide whether to persevere with the product or discontinue it
* A problem child, or question mark, will require a lot of attention, particularly in the form of marketing
* Nurturing the problem child to help it achieve its potential will cost the firm time and money
* If sales of the product can be increased there is the opportunity for increased profits in the future and the product can be turned into a cash cow
* However, some products are unsuccessful and the firm will have to decide whether to persevere with the product or discontinue it
* A problem child, or question mark, will require a lot of attention, particularly in the form of marketing
* Nurturing the problem child to help it achieve its potential will cost the firm time and money
* If sales of the product can be increased there is the opportunity for increased profits in the future and the product can be turned into a cash cow
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explain dogs
* Dogs are unlikely to be kept on by a company
* With little growth in the market and little market share the company might see little scope for future profits
* This does not always mean that the company will discontinue the product, if there is a market, then some products can still be profitable
* However, when a firm looks at its range of products it is more likely to concentrate on cash cows and rising stars rather than dogs
* With little growth in the market and little market share the company might see little scope for future profits
* This does not always mean that the company will discontinue the product, if there is a market, then some products can still be profitable
* However, when a firm looks at its range of products it is more likely to concentrate on cash cows and rising stars rather than dogs
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what are the 6 stages of a product life cycle
R and D
Introduction
Growth
Maturity
Decline
Extension strategies
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explain research and development in the product life cycle
negative cash flow due to market research and Research and Development (R&D). No sales revenue before launch
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explain introduction in the product life cycle
production and promotion costs can be high
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explain growth in the product life cycle
sales revenue increases but as more units are sold production costs also increase. However, there will be economies of scale
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explain maturity in the product life cycle
sales stabilise and the product acts as a cash cow
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explain decline in the product life cycle
at some point the product will start to lose sales.
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explain extension strategies in the product life cycle
many products are adapted and given a new lease of life
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influences on new product development
technology
competitors actions
entrepreneurial skills of managers and owners
competitors actions
entrepreneurial skills of managers and owners
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explain how technology influences a new product
Advances in technology have seen incredible changes in a range of industries in the past 30 years. The internet and mobile phones have made communications and the exchange of information quick, easy and cheap. Robotics, new stock control systems and the micro-chip have revolutionised manufacturing.
New technology has:
* Brought economies of scale to businesses
* Made the world a global market through communication systems
* Seen the rapid development of both new and innovative products
New technology has:
* Brought economies of scale to businesses
* Made the world a global market through communication systems
* Seen the rapid development of both new and innovative products
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explain how competitors actions influences a new product
Firms are now faced with increasingly competitive markets. Not only are UK firms competing against each other but they are now also competing against firms from all over the globe.
Firms keep a close eye on competitors’ actions and either respond to moves by their competitors **or** they try to be proactive and bring out new products before their competitors do.
Firms keep a close eye on competitors’ actions and either respond to moves by their competitors **or** they try to be proactive and bring out new products before their competitors do.
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explain how the entrepreneurial skills of managers and owners influences a new product
The managers and owners of businesses are vitally important if the firm is to develop a range of new ideas and products. It is the owners and managers that will:
* Be able to see the opportunities for new products that might arise within their markets
* Provide the funding that will be required for firms if they are to have the resources that are required in order to develop the new products
* Provide the inspiration and motivation for other members of the organisation so that all staff are engaged in the process of identifying new ideas that might lead to new products
* Be able to see the opportunities for new products that might arise within their markets
* Provide the funding that will be required for firms if they are to have the resources that are required in order to develop the new products
* Provide the inspiration and motivation for other members of the organisation so that all staff are engaged in the process of identifying new ideas that might lead to new products
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what are the 3 pricing options
* Penetration pricing
* Price skimming
* Dynamic pricing
* Price skimming
* Dynamic pricing
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explain penetration pricing
* Price penetration involves setting a low initial price for a new product in order to get a foothold in the market and gain market share
* May be a suitable pricing strategy for a product in a mass market
* A firm will release a new product at a low price with the aim of enticing people to buy
* The aim is to gain an early customer base
* Once the product has been launched and built up a customer base the firm may raise the price
* Likely to be used with a price elastic product
* May be a suitable pricing strategy for a product in a mass market
* A firm will release a new product at a low price with the aim of enticing people to buy
* The aim is to gain an early customer base
* Once the product has been launched and built up a customer base the firm may raise the price
* Likely to be used with a price elastic product
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explain price skimming
Price skimming involves setting a high initial price for a new product in order to recoup costs
When a firm releases a new product it often charges a high price targeting a segment of the market known as ‘early adopters’
These are customers who must have the product as soon as it is launched and are prepared to pay high prices to get it
Firms often base their initial promotional campaign around this idea, trying to create a ‘must have’ mentality amongst their target market
Once this market has been ‘skimmed off’ the company will lower price
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explain dynamic pricing
* Prices change frequently and quickly in response to changes in demand
* At times of peak demand prices will go up and vice versa
* Often used by businesses with set capacity e.g. an airline so as the plane reaches full capacity prices will start to rise
* Dynamic pricing is made possible by technology that tracks demand and levels of interest
* At times of peak demand prices will go up and vice versa
* Often used by businesses with set capacity e.g. an airline so as the plane reaches full capacity prices will start to rise
* Dynamic pricing is made possible by technology that tracks demand and levels of interest
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Promotional decisions influenced by a what factors
The segmentation, targeting and positioning process
* Will the message appeal to the target market?
* Does the promotion support the rest of the marketing mix and correctly position the product relative to competitors?
Internal constraints e.g. the size of the promotional budget or the firm’s ethical objectives
External influences
* Technology
* Competitors’ actions
* Environmental issues
* Will the message appeal to the target market?
* Does the promotion support the rest of the marketing mix and correctly position the product relative to competitors?
Internal constraints e.g. the size of the promotional budget or the firm’s ethical objectives
External influences
* Technology
* Competitors’ actions
* Environmental issues
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what is branding
A promotional method that involves the creation of an identity for the business that distinguishes that firm and its products from other firms
Branding can add value to a product allowing firms to charge higher prices
Ultimately leads to brand loyalty whereby customers will continue to buy products from that firm
Organisations spend enormous amounts of time and money branding their company and products
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define place
* Place defines both the physical location where a product is available as well as the distribution channel it has travelled through to get from the manufacturer to the customer
* Place can be a physical market where buyers and sellers meet face to face or a virtual location i.e. over the internet
* Place can be a physical market where buyers and sellers meet face to face or a virtual location i.e. over the internet
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define distribution
* Distribution is the process of getting the firm’s product to the market
* Distribution channels are the routes to market that a product takes from producers to the final customer
* Distribution channels are the routes to market that a product takes from producers to the final customer
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what are the the 2 distribution channels
* **Short distribution channels** are where the producer sells either directly to the customer or through a retailer
* **Long distribution channels** are where there are more than one **intermediary** (middle person) between the producer and the customer
* **Long distribution channels** are where there are more than one **intermediary** (middle person) between the producer and the customer
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define manufacturer/producer
* organisations that take raw materials or components and process them into finished or semi-processed goods
* operate in secondary sector of the economy such as housing or car production
* operate in secondary sector of the economy such as housing or car production
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define wholesalers
* buy large quantities of supplies from producers and sell them on in smaller quantities
* they act as an intermediary between manufacturers and retailers and consumers
* they act as an intermediary between manufacturers and retailers and consumers
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explain retailers
an organisation that sells goods or services to the general public or end user
retailers are at the end of the channel of distribution
they can act as an intermediary between producers, wholesalers and the consumers
retailers are at the end of the channel of distribution
they can act as an intermediary between producers, wholesalers and the consumers
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factors affecting distribution decisions
* type of product
* market
* quantity and frequency
* geographical location
* cost
* degree of control
* market
* quantity and frequency
* geographical location
* cost
* degree of control
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explain why type of product effect distribution decisions
The characteristics of the product need to be taken into account. For example Coca Cola do not ship their product to the UK from the USA. Instead, they ship over the syrup and the actual product is then made in the UK using British water
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explain why market effect distribution decisions
It is important that the customers being targeted can access the product. High streets are accessible by public transport so that all customers can shop, not just those with cars
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explain why quantity and frequency effect distribution decisions
If only a few low cost items are being delivered it would not be cost effective to send them hundreds of miles. If a product is regularly being delivered then a firm might invest in a delivery system
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explain why geographical location effect distribution decisions
How far is the target market from the firm? The firm will have to take into account the nearness of the market. Regional markets are far more accessible than international markets
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explain why cost effect distribution decisions
This is very important for a firm. An expensive distribution method will reduce the contribution being made to a firm’s profit. Therefore, the firm must ensure that the method is cost effective
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explain why degree of control effect distribution decisions
Businesses may want to protect their brand by limiting the spread of the product and keeping tight control of where it is available and a what price
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what is the role of ‘people’ in the marketing mix
* Providing information
* Supporting the customer in decision making
* Resolving problems
* Completing the transaction
* Supporting the customer in decision making
* Resolving problems
* Completing the transaction
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who are the ‘people’ in the marketing mix
* People are the employees involved in dealing with customers before, during and after a sale
* Customer service is extremely important in today’s service sector in the UK
* Staff must be appropriately trained, motivated and show good communication skills when dealing with customers
* People are an important aspect of all business, they are the ones interacting with the customer
* Customer service is extremely important in today’s service sector in the UK
* Staff must be appropriately trained, motivated and show good communication skills when dealing with customers
* People are an important aspect of all business, they are the ones interacting with the customer
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define process’ in the marketing mix
* Process is the steps a customer goes through to actually complete a transaction
* The ease with which a transaction takes place will directly impact on customer’s perceptions of the business
* The ease with which a transaction takes place will directly impact on customer’s perceptions of the business
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Aspects of the ‘process’ that could be included in the marketing mix
* The ease with which a product can be paid for e.g. credit card transactions
* The effort involved e.g. how many clicks when buying online
* The length of queues or number of people you have to transact with
* The effort involved e.g. how many clicks when buying online
* The length of queues or number of people you have to transact with
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explain the ‘physical environment’ in the marketing mix
* Physical environment is the design and features of the actual place where a transaction takes place
* This can directly influence the customers’ shopping experience and therefore their level of satisfaction as well as willingness to return
* This can directly influence the customers’ shopping experience and therefore their level of satisfaction as well as willingness to return
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Aspects of the ‘physical environment’ that could be included in the marketing mix
* Cleanliness
* Design e.g. ease of movement around the premises or ability to find what you are looking for
* Facilities
* Ambience
* Design e.g. ease of movement around the premises or ability to find what you are looking for
* Facilities
* Ambience