1.3 - Marketing mix and strategy

Define the design mix

Range of features that are important when designing a product

What are the 3 features of the design mix?

Aesthetics, function and cost

What is the difference between goods and services?

Goods are physical/tangible and services are non-physical/intangible

Describe function

The primary purpose for which the consumer purchased

Describe aesthetics

Look and feel of the product

Describe costs

If the design allows the product to be made and sold profitably

Which changes are made to the design mix to reflect social trends?

Concern over resource depletion Waste minimisation, re-use and recycling Ethical sourcing

Define resource depletion

Use of natural resources quicker than their rate of replenishment

Describe the difference between renewable and non-renewable resources

Renewable can be replenished Non-renewable are in finite supply and will run out

Give an example of a renewable resource

Wood

Give examples of non-renewable resources

Oil and natural gas

Define ethical sourcing

Buying materials from suppliers that are behaving in a morally correct manner

Give examples of ethical sourcing

Fair trade, sustainable sources and organic farming

What is a brand?

A product that is easily distinguished from other products and can be easily communicated and effectively marketed

What is branding?

Promotional method that involves the creation of an identity of a business that distinguishes that firm and its products from other firms

What are the key benefits of strong branding?

Adds value - higher prices Builds customer loyalty - repeat purchases Inelastic price elasticity of demand

What are the 7 types of branding?

Product Multiple Umbrella Corporate Own label Personal Global

Give examples and describe product branding

Single product that is recognised by that name (Jacuzzi, Marmite, Pot Noodle)

Give examples and describe multiple branding

Business uses a range of different brand names for its products (VW owns Audi, SEAT, Bentley and Skodia)

Give examples and describe umbrella branding

Business that uses the same brand name for a range of different but related products (Hoover, Dyson, Cadbury)

Give examples and describe corporate branding

Name of the business is the brand (Microsoft, Facebook)

Give examples and describe own label branding

Common amongst supermarkets to compete with 'name' brands (Tesco Finest, Waitrose Essentials)

Give examples and describe personal branding

Individuals who have become their own brand (Stella McCartney, Victoria Beckham, Bobbi Brown)

Give examples and describe global branding

Easily recognisable and operating worldwide (Ikea, McDonalds, Coca-Cola)

How can a brand be built?

Create a USP Promotional mix

What is promotion designed to do?

Inform customers and potential customers about the product or service and convince them to buy it

What is the promotional mix?

Combination of promotional activities that a firm uses in order to create customer awareness and generate sales

What factors affect the choice of promotional mix?

Type and size of business and market Promotional budget Mass or niche market Profile of target customers

What are the 6 types of promotion?

Advertising Sales offers Digital Sponsorship Direct sales Public relations

Give examples and describe advertising

Informs and persuades, designed to increase sales (TV, radio, billboards)

Give examples and describe sales offers

Short term sales techniques designed to lower the price to encourage consumers to buy (BOGOF, free samples, discounts)

Give examples and describe digital advertising

Aimed at users of the internet (social media, online advertising, viral marketing)

Give examples and describe sponsorships

Financially supporting an event, activity or person (sport events)

Give examples and describe direct sales

Direct contact between a sales person and consumers (door to door, telephone, leaflets)

Describe public relations

Providing press and media with information about the company

Advantage of advertising

Likely to be seen by a large number of people

Disadvantages of advertising

Difficult to know if it's effective Expensive to produce Can be skipped

Advantage of sales offers

Reduced prices are a powerful incentive to purchase

Disadvantage of sales offers

Consumers may take advantage of cheaper prices and wait for next sales offer

Advantages of digital advertising

Cheap Reach large numbers of people Quickly go viral

Disadvantages of digital advertising

Lots of competition Using social media to advertise products can be viewed as unethical

Advantages of sponsorship

Can reach a wide range of people Raises image and reputation of business

Disadvantage of sponsorship

Can be very expensive

Advantage of direct sales

Message can be adapted to suit different types of consumers

Disadvantage of direct sales

Viewed as junk mail or nuisance phone calls

Advantage of public relations

Cheaper than adverts

Disadvantage of public relations

Difficult to control what is said

What are examples of designing for waste minimisation, re-use and recycling?

Refillable packs Recyclable packaging

What are the 6 types of pricing strategies?

Cost plus Price skimming Penetration Predatory Competitive Psychological

What is cost plus?

When a percentage mark-up is added to the cost of producing a good or service to calculate the selling price

What is the formula for cost plus?

Unit cost x percentage mark-up = price

Benefits of cost plus pricing

Price increases can be justified when costs rise Each product will be sold at a profit

Problems of cost plus pricing

Ignores market conditions, competitor's pricing and elasticity of demand Less incentive to control costs

What is price skimming?

Setting a high initial price when a product is launched to attract early adopters then lower the price

What is penetration pricing?

Setting a low initial price when a product is launched to get a foothold in the market then raise the price

What is predatory pricing?

Prices are set very low for a short period of time to force competitors out of market then raise prices

What is competitive pricing?

Prices are similar to competitors prices

What is psychological pricing?

A tactic designed to make the consumer think a product is cheaper than it actually is

Which factors determine the choice of pricing strategy?

Number of USPs/amount of differentiation Price elasticity of demand Level of competition Strength of brand Stage in product life cycle Costs and need to make a profit

What are pricing methods?

Methods used to calculate the actual price set

What are pricing tactics?

Adopted in the short run to suit particular situations

What are pricing strategies?

Adopted over the long term to achieve marketing objectives

What type of pricing have online sales led to and what does it mean?

Dynamic pricing - prices change frequently and quickly in response to changes in demand

What do price comparison websites force businesses to do?

Be more competitive

What pricing strategy would a highly differentiated product use?

Price skimming

What pricing strategy would an elastic product use?

Competitive pricing

What pricing strategies would businesses in lowly/highly competitive markets use?

Low = competitive pricing High = predatory pricing

What is distribution?

The process of getting the firm's product to the end user

What are distribution channels?

Routes to market that a product takes from producers the final customer

What are the 2 distribution channels available to firms?

Direct/short Traditional/long

What are direct/short distribution channels?

Producer sells to the customer or through a retailer

What are traditional/long distribution channels?

When there is more than one intermediary between the producer and customer

What is an intermediary?

Middle person between producer and customer

Which factors affect the choice of distribution channel?

Nature of the product The market The cost Amount of control Speed of distribution Distance

What is the most important new trend in distribution?

Online distribution

What is online distribution often known as?

E-commerce

What is e-commerce?

Buying and selling of goods and services through the use of electronic systems

What can e-commerce take place between?

Businesses to consumers (B2C) Businesses to businesses (B2B)

Benefits to consumers of online distribution

Prices are lower - lower fixed costs Can shop 24/7 from any location Wider choice of products available Easier to make price comparisons Can use click and collect or deliveries

Drawbacks to consumers of online distribution

Not able to inspect goods before purchase Risk of internet fraud Problems of taking delivery Inconvenience and cost to return goods

Benefits to businesses of online distribution

Less fixed costs Lower start-up costs Payments received online - Paypal or credit cards Access to a global market 24/7

Drawbacks to businesses of online distribution

Increased global and national competition Delivery and technical costs and problems Traditional physical retailers have had to adapt to online services - travel agents, banks

What is the product life cycle?

The stages that a product will go through in its lifetime

Name the stages of the product life cycle

Development Introduction Growth Maturity Decline

Why is cash flow negative in the development stage?

Market research Research and development No sales revenue before launch

What are production and promotion costs like in the introduction stage?

High

When are there economies of scale in the product life cycle?

Growth stage

When do sales revenue increase but as more units are sold production costs also increase in the product life cycle?

Growth stage

When do sales stabilise and the product acts as a cash cow in the product life cycle?

Maturity stage

What happens in the decline stage?

Product loses sales

What are extension strategies?

Products are adapted and given a new lease a life

Give examples of extension strategies

Changing the product Increasing promotion/changing promotional methods

Advantages of using the product life cycle when making marketing decisions

Allows a business to identify the life cycle stages of the various products that it has in its portfolio Ensures they have a balanced product portfolio by allowing them to plan when to release new products Allows the business to know when to launch extension strategies to ensure sales are maximised Helps plan other elements of the marketing mix to ensure sales are maximised

Disadvantages of using the product life cycle when making marketing decisions

Difficult to estimate in advance the life cycle of each of its products if a business sells a wide range of products External influences can affect the life cycle of products High percentage of new products fail and don't go through all the stages of the product life cycle

What is the Boston Matrix?

Model that analyses each product within a product portfolio in relation to its market share and the rate of market growth

What is a product portfolio?

Collection of products a business is currently making

What are the 4 things in the Boston Matrix?

Cash cow Rising star Dog Problem children/question mark

What has a high market share in a low growth market?

Cash cow

What has a high market share in a high growth market?

Rising star

What has a low market share in a low growth market?

Dog