section 5 topic 4 , 5 ,6

What is cost-plus pricing?

Adding up all production costs then adding a percentage mark-up for profit.

What is the mark-up formula?

Mark-up % = (Profit per item ÷ Cost per item) × 100.

Example: Chocolate bar costs £1.50 to make, 10% mark-up. What is the price?

£1.65 (£1.50 + 15p).

What is competition-based pricing (parallel pricing)?

Setting prices based on what competitors charge, either matching or slightly undercutting them.

What is a loss leader?

A product sold at or below cost price to attract customers who will then buy other, more profitable items.

Give 3 examples of loss leader strategies.

Cheap satellite TV dishes to sell premium channels; free mobile phones to profit from network usage; cheap printers to sell expensive ink cartridges.

What is predator pricing?

Deliberately undercutting a competitor's price (even at a loss) to force them out of business.

What is penetration pricing?

Setting a low price when entering a market to quickly gain market share and deter competitors.

What is skimming (creaming)?

Charging a high initial price for a new/innovative product to "skim" maximum revenue from early adopters, then lowering the price later.

When is skimming most appropriate?

For technologically advanced or highly desirable new products where early adopters are willing to pay premium prices (e.g. new iPhones, 4K TVs).

What is promotional pricing?

Short-term special prices or offers to boost sales (e.g. BOGOF, money off, sale prices, coupons).

What is psychological pricing?

Pricing just below a key price point to make it seem cheaper, e.g. £4.99 instead of £5.00, or "under £100."

What is a price war?

When competing businesses repeatedly undercut each other's prices to gain market share, often harming all competitors' profits.

Are price wars good or bad for consumers?

Good short-term (lower prices), but bad long-term (businesses fail, less choice, prices rise again).

What pricing strategy should The Curious Courgette use?

Competition-based pricing (match local coffee shop prices £2.50–£2.85), penetration pricing (introductory discounts), promotional pricing (meal deals, loyalty cards), and psychological pricing (£2.95 not £3.00).

What pricing strategy should ETG use?

Premium/prestige pricing because their product is unique with clear benefits and costs no more to produce than conventional glass.

What is premium pricing?

Setting a high price to emphasise quality, exclusivity and prestige (associated with skimming).

What is a distribution channel?

The route a product takes from producer to final consumer, also called the chain of distribution.

What is the traditional (long) distribution channel?

Producer → Wholesaler → Retailer → Consumer.

What is short-channel distribution?

Cutting out one or more intermediaries, e.g. Producer → Retailer → Consumer, or direct Producer → Consumer.

What is direct sales?

Selling straight to the consumer without intermediaries, e.g. farm shops, internet sales, phone sales.

What is an intermediary?

A link between stages in the distribution channel, e.g. wholesaler, retailer, agent.

What is the role of a wholesaler?

Buys in bulk from producers, provides storage and transport, and sells on to retailers (breaking bulk).

What is breaking bulk?

Buying large quantities and dividing them into smaller amounts for resale (done by wholesalers and retailers).

What is bulk buying?

Buying in large amounts to get lower prices and economies of scale.

What is a retailer?

A shop or chain selling goods to consumers, usually from a physical location (high street, shopping centre).

What is an e-tailer?

An electronic retailer selling goods online (e.g. Amazon, ASOS).

What is e-commerce?

Trading/buying and selling via the internet.

What is m-commerce?

Trading via a mobile phone app.

What is a push strategy?

The producer pushes products to wholesalers/retailers (e.g. with incentives), who then sell to consumers.

What is a pull strategy?

The producer advertises directly to consumers, who then demand the product from retailers, "pulling" it through the channel.

What is an agent?

An intermediary who never owns the products; sells on commission (e.g. estate agents).

What is a merchant?

An intermediary who buys products to resell at a higher price.

State 3 factors enabling small retailers to survive against big chains.

Personal service, convenient location, specialist products, community services, informal credit, longer opening hours.

What transport method for bananas from Africa to England?

Ship/boat — they are heavy, bulky, and allowed to ripen during the voyage.

What transport method for diamonds from South Africa to England?

Air — small, lightweight, high value, needs security.

What transport method for a human heart transplant 50km away?

Helicopter — speed is essential, organ must be kept cool.

Why are returned goods less of a problem for e-tailers?

They don't bear the cost of high-street stores; free returns policies encourage more online purchases overall.

What distribution channel would ETG use?

Direct sales to car manufacturers; transported carefully by road due to size and fragility of glass.

What is promotion?

How a business tells customers what products it has, where to buy them, and why to choose them over competitors.

What are above-the-line promotion techniques?

Advertising through paid media (TV, radio, newspapers, internet, cinema).

What are below-the-line promotion techniques?

Promotion other than advertising, e.g. point-of-sale displays, special offers, product trials, branding, PR.

What does AIDA stand for?

Attention, Interest, Desire, Action — the qualities good advertising should create.

What is informative advertising?

Advertising that gives factual information about a product (e.g. petrol consumption, carrying capacity, specifications).

What is persuasive advertising?

Advertising that tries to convince consumers to buy a particular brand, often using lifestyle/emotional appeals.

What is generic advertising?

Advertising by a whole industry rather than one firm (e.g. "Buy British meat").

What is corporate advertising?

Advertising about the business itself rather than specific products (e.g. Sky's "Believe in better").

What is sponsorship?

Attaching a brand/company name to a sport, event or individual to increase visibility and brand association.

What is branding as a promotional strategy?

Creating a distinctive identity that consumers recognise and trust; long-lasting effect unlike short-term special offers.

What is product placement?

Placing a product where it will be seen by many people, e.g. in films or TV shows (e.g. Aston Martin in James Bond, Pepsi in Back to the Future 2).

What is public relations (PR)?

Managing the image of a business and its products in the public eye; includes press releases, sponsorship, customer relations, endorsements.

State 5 PR activities.

Customer relations, sponsorship, endorsements, competitions, gifts/samples, awards, product placement.

What is a product trial?

Giving potential customers a free sample or taste of a product, e.g. handing out samples in supermarkets or at food fairs.

What is BOGOF?

"Buy One, Get One Free" — a value-added special offer.

What is a loyalty card?

A card where customers collect points electronically with each purchase, rewarded with vouchers or tailored offers.

What is point-of-sale (POS) material?

Display stands, posters, leaflets and other materials used to attract customers to a product in a retail outlet.

What is viral advertising?

Online content that spreads rapidly from person to person via social media, generating massive free publicity.

What is targeted advertising online?

Using cookies/data to show ads to specific individuals based on their browsing history and preferences.

What are e-newsletters?

Regular emails to customers about new products, offers and events; cheap and targets people already interested.

State 2 advantages of digital advertising over TV/print.

1) Reaches children and young adults who are online more than watching TV, 2) Can be precisely targeted at particular individuals.

State 1 downside of internet advertising.

If ads interrupt what the user is doing, the product may be viewed negatively.

What happened in the Hoover free flights promotion disaster (1992)?

Hoover offered free airline tickets for purchases over £100; sales boomed but they couldn't meet demand. Cost £50m in tickets, revenue only £30m. Senior staff lost jobs and the company was taken over.

What happened to British Airways' image in 2017?

An IT failure stranded thousands of passengers; poor communication damaged their quality image. Cost parent company ~£80m.

How should The Curious Courgette use social media for promotion?

Create a website/Facebook page defining brand identity; offer promotional vouchers; run photography competitions; use Instagram for food photos; build viral content carefully to avoid controversy.

What is the difference between promotion in marketing and promotion in HRM?

Marketing promotion = advertising and selling products; HRM promotion = advancing an employee to a higher job position.

What is Fordism?

Production-led manufacturing where the business dictates what is made (Henry Ford: "any colour as long as it's black").

What is post-Fordism?

Market-led manufacturing where consumer choice and demand drive production decisions.

Why did Ryanair's competitors change their marketing when Ryanair entered the market?

They couldn't compete on price, so marketed features like generous baggage allowances instead.

How did Premier Inn differentiate itself from other budget hotels?

Offered money back if customers didn't get a good night's sleep.

What is the "price plateau" theory?

Consumers have a maximum price in mind for any product; prices above this are rejected as "too expensive."

Why are supermarkets arranged so milk is at the back?

Milk is a loss leader placed deep in the store so shoppers must pass many other tempting products to reach it.

What is a cookie in online advertising?

A small file downloaded to a user's computer that tracks browsing and allows websites to tailor ads to that individual.

What is m-commerce?

Trading or shopping via a mobile phone application.

What is the difference between an agent and a merchant?

An agent never owns the goods and earns commission; a merchant buys goods to resell at a profit.

What is after-sales service as a promotional tool?

Offering extended warranties or support to build customer confidence and loyalty.

What is an endorsement in PR?

Getting a famous person to recommend your product, e.g. a film star saying they use a particular shampoo.

What is corporate hospitality?

Entertaining important clients at sponsored events (e.g. giving them seats/privileges at a sports match).

Why is repetition important in advertising?

One showing is never enough; repeated exposure across multiple media reinforces brand recognition and message retention.

What is the difference between a department store and a chain store?

Department store = large store with separate departments selling wide ranges; Chain store = multiple outlets with centralised management and standard methods.

What is a cash-and-carry wholesaler?

A wholesaler that opens its warehouse to retailers and consumers to collect goods themselves, reducing delivery costs.

What is the role of process in the extended marketing mix?

The procedure of providing a service, including waiting time, information given, and customer experience.

What is physical evidence in the extended marketing mix?

Tangible cues that help customers "see" what they are buying, e.g. clean reception areas, testimonials, professional uniforms.

Why is the product life cycle important for marketing decisions?

It helps determine the type, amount and cost of marketing expenditure appropriate at each stage.

What is a "craze" product example of an explosive life cycle?

A must-have Christmas toy that sells out instantly then is forgotten by January.

How did Lakeland spot a gap in the market?

Focus groups of older people said food packaging writing was too small; Lakeland produced a fridge-door magnifier.

What is the importance of the 4 Ps being a "mix"?

They must be combined and balanced; changing one affects the others (e.g. a luxury product needs premium pricing, selective placement, and quality promotion).

What is non-price competition?

Competing through factors other than price, e.g. quality, service, branding, convenience, personal attention.

How can small shops compete with supermarkets?

Through non-price competition: personal service, convenient location, specialist knowledge, community ties, flexible hours.

What is the significance of the gluten-free market example?

Quantitative data (15% interested) seemed discouraging, but actual market growth was 12.6% vs 4% for packaged foods — showing market research must be interpreted carefully.

What is the Heinz "Beanz Meanz Heinz" example?

A 50-year-old successful branding slogan; Heinz celebrated with limited-edition tins showing 50 variations, reinforcing brand loyalty.

Why did Mercedes-Benz renew their product line-up?

To attract younger customers with more disposable income/credit, securing future brand loyalty as these customers age.

What is the role of comparison websites in modern markets?

They allow easy price/service comparison (e.g. Go Compare for insurance), increasing competition and forcing businesses to differentiate.

What is the "dine-in" deal trend in supermarkets?

Ready meal deals for home consumption, driven by Netflix/home entertainment making "nights in" more appealing.

How did Amazon's review system change market research?

Automated post-purchase reviews with star ratings; no human intervention needed, but risk of inappropriate/negative comments.

What is the importance of "impulse buying" in online vs physical shopping?

Online shopping reduces impulse buying because once the order is placed, that's it; physical shops tempt customers with displays.

What is the significance of the Ilkley Literature Festival sponsors?

Sponsors reflect the audience demographics (older, affluent): retirement homes, cruises, private schools, estate agents, solicitors.

What is the role of technology in modern promotion?

Cheaper than traditional media, more targeted, reaches future spenders, allows viral spread, but risks negative reactions if intrusive.

What is the difference between a trade publication and a customer magazine?

Trade publication = specialist magazine for an industry; Customer magazine = produced by a retailer for its shoppers (e.g. supermarket magazine with recipes).

What is the importance of brand loyalty?

It creates repeat purchases, reduces price sensitivity, and provides long-term competitive advantage.

What is the key lesson from the Hoover and BA PR disasters?

Promotions must be fully costed and deliverable; IT/customer service failures can destroy years of brand building very quickly.