A Level Business Studies 1.3 UNFINISHED

What are the 3 parts of the Design Mix?

Function

Aesthetics

Cost

What is Function in the Design Mix?

The way a product works:

• Does it work?

• Is it reliable?

What is Aesthetics in the Design Mix?

The way a product looks:

• Does it look good?

• Is it different from rival products

What is Cost in the Design Mix?

How much it costs to make the product:

• Can the product be sold for a profit?

• How much value has been added?

What does the Marketing Mix consist of? (The 4Ps)

Price, product, place and promotion

What is the role of Product Design?

• Good design goes to product usefulness (Design mix)

• The style goes to the heart of the product

What are the common features of Products that successfully emphasised Function in the Design Mix?

• More predictable and stable demand

• Longer Product Life Cycles

• Lower Promotional Costs

• Build reputation for quality based con reliability

• Economies of Scale

Examples of Products with this:

• Smart phones

• Handbags

What are Common features of products that successfully

emphasise aesthetics in the Design Mix?

• High Added Value

• Demanded fuelled by customer aspiration

• Potentially shorter product life cycle

• Attracts imitation = need for design protection

• Need for greater promotional support

How does the Design Mix change to reflect Social Trends?

The Design Mix is made to be:

• Sustainable

• Wasted Minimised

• Ethically sourced

What is Sustainability?

• Ensuring that the long-term supplies of the inputs aren’t affected when making a product

  • Such as using carbon neutral methods to not damage the environment raw materials come from

  • Or making it recyclable or biodegradable

What is an Example of Sustainability in the Design Mix? (M&S)

M&S’ use of Palm Oil:

• M&S launched Plan A in 2007 to make their Palm oil supplies sustainable

• By 2015 100% of palm oil in M&S products were covered by the RSPO (Rountable for Sustainable Palm Oil) certification

What does Product Design have to consider when addressing environmental issues?

• Their use of raw materials and inputs

• Energy use and its impact on climate change

• Waste and pollution by the business

• Impact it has on staff and local, wider and global community

What are 3 Examples of Ethical Sourcing?

1. Fair Trade

2. Ethical Supply Chain

3. Organic Products

How do Ethical Supply Chains affect Businesses?

• Consumers increasingly interested in buying from ethical sources

• “How” products are made is a key issue for many consumers

• Potential or significant damage to a business reputation if ethical issues are found in the supply chain (e.g. child labour)

How did Primark’s supply chain go wrong and what did they do afterwards?

• In 2013, the Rana Plaza Building (Primark’s supplier) in Bangladesh collapsed due to poor unsafe conditions

• Because of this Primark and many other businesses were sued and received backlash around the globe

• To fix this, they offered immediate help and aid to those affected and implemented better and safer conditions, as well as regular quality checks in their buildings

  • This later expanded to other countries such as Pakistan and India

What is a Brand?

A product thats easily distinguished from other goods so that it’s easily communicated and marketed

A brand name is the name of the distinctive product

What are the 5 Pros of Effective Branding?

1. Add significant value (from customer POV)

2. Can charge higher prices

3. Demand is more price Inelastic

4. Build customer loyalty and aspiration

5. Lower promotional costs, due to a strong brand image

What are the 5 types of Branding?

1. Product Brand

2. Service Brand

3. Umbrella (family) Brand

4. Corporate/Own-Label Brand

5. Global Brand

What is a Product Brand?

Brands associated w/specific products

E.g. marmite and Pot Noodle

What are Service Brands?

Brands that add perceived value to services, delivered physically or online

E.g. Vue, Uber, Drop Box

What are Umbrella (Family) Brands?

Brands associated to more than one product

Makes different product lines easily identifiable by grouping the products under one name

E.g. Cadbury, Dove

What are Corporate Brands?

Brands that practice the promoting the brand on a corporate entity than on specific products or services

E.g. IBM, Nestle

What are Own-Label Brands?

A form of Corporate Branding, where retail outlets assign their corporate brand to a range of goods and services

E.g. Sainsbury’s, ASDA

What are Global Brands?

The Ultimate Brands - easily recognised and operate globally.

They epitomise household names and based on familiarity and stability, even if they’re amended to meet local customer needs

E.g. McDonald’s, Coca Cola

What is a Brand Extension?

When a business uses its name on a new product with some of the brand’s characteristics

E.g. Mars Bar and Mars Ice Cream; Lucozade and Lucozade Sport

What is Brand Stretching?

Where a brand is used for a diverse range of product, not necessarily connected

E.g. Virgin: Virgin Media, Virgin Experiences, Virgin Holidays etc.

Why do we Promote?

• Attract new customers

• Increase sales

• Encourage customer loyalty

• Launch a new product

• Encourage brand switching

What is the Main Aim of Promotion?

To ensure that customers are aware of the existence and positioning of a product

To persuade customers that the product is better than the competition

What is the Promotional Mix?

The specific mix of promotional methods that a business uses to pursue its marketing objectives

What is Above-the-Line Promotion?

Promotion using Media:

• TV

• Radio

• Internet

• Direct marketing

• Print

What is Below-the-Line Promotion?

All forms of promotion that isn’t advertising:

• Sales Promotions

• Public relations (PR)

• Personal Selling

What are the 5 Main elements of the Promotional Mix?

1. Advertising (offline and online)

2. Sales promotion and merchandising

3. Personal Selling

4. Public relations/publicity/ Sponsorship

5. Direct Marketing

• These elements must be integrated in a cohesive, consistent and logical manner

What are the 5 Key Factors that influence promotional decisions and strategy?

1. Stage in the Product Life cycle

• Position in the product life cycle dictates the type of promotional method used

2. Nature of the product

• What info do customers want before they buy?

3. Competition

• What are rivals doing; What promotional methods are traditionally effective in a market?

4. Marketing objectives and budget

• what does promotion need to achieve; how much can the firm afford?

5. Target Market

• Appropriate ways too reach the target market segments

What is Advertising?

Paid-for communication

• Many different advertising media like TV, radio, newspapers, social media etc.

What are the problems with advertising?

• Consumers are subject to lots of advert messages daily

  • So its hard to get your message through

• Mass marketing is very expensive

What are the Pros of Advertising?

• Wide coverage

• Control of message

• Repetition, so message is communicated effectively

• Effective for building brand loyalty and awareness

What are the Cons of Advertising?

• Often costly

• Impersonal

• One-way communication

• Lacks flexibility

• Limited ability to close a sale

What is Personal Selling?

Promotion on a person to person basis:

• 2-way communication

• Meeting w/potential customers to close a sale

• Usually by phone, in meetings, retail outlets or door-to-door

• High priced, low volume and highly technical products rely heavily on this method

What are the Pros of Personal Selling?

• High customer attention

• Message is tailored/adapted to customer

  • Can develop relationship

• Persuasive and interactive

• Chance to close a sale

What are the Cons of Personal Selling?

• High cost

• Labour intensive

  • So costly for wages

  • Can only reach a limited No. of customers

What is Sales Promotion?

A tactical incentive to stimulate purchases:

• Usually short term

• Some promotions are aimed at consumers, others are at intermediaries or sales force

What are some examples of Sales Promotion?

• Coupons

• Free samples

• Trade in offers

• BOGOF (Buy one get one free)

• Free gifts

What are the Pros of Sales Promotion?

• Effective at achieving a quick boost of sales

• Encourages customers to trial a product or switch brands

What are the Cons of Sales Promotion?

• Sales effect may only be for a short time

• Customers may come to expect further promotions e.g. more free samples

• May damage brand image

What are Public Relations (PR)?

Activities that create goodwill towards an entity (person, firm, product etc.)

What are the Main aims of Public Relations (PR)?

• To achieve favourable publicity about the business

• To build the image and reputation of the business and its products, particularly among customers

• To communicate effectively w/customers and other stakeholders

What are some typical PR activities?

• Promoting new products/business image/social responsibility

• Enhancing public awareness

• Obtain favourable product reviews/recommendations

What is a Sponsorship?

A payment for an event, person, organisation is given in return for the sponsors to be promoted:

• It’s a specialised form of PR

• Common in art and sport

• It should benefit both sides

What is Direct Marketing?

Promotional material directed through mail, email, social media or phone to peoples or businesses

Why do we use Direct Marketing?

• Allows a business to generate a specific response from target customers

• Allows a business to focus on several marketing objectives:

  • Increasing sales to existing customers

  • Building customer loyalty

  • Re-establishing lapsed customer relationships

  • Generating new business

What are the Pros of Direct Marketing?

• Focus limited resources on targeted promotion

• Can personalise the message

• Relatively easy to measure response and success

• Easy to test different marketing messages

• Cost-effective if customer database is well managed

What are the Cons of Direct Marketing?

• Response rates vary enormously

• Negative image of junk mail and email spam

• Databases costly to maintain and keep accurate

What is Viral Marketing?

Using social media/online to produce brand awareness or to achieve other marking objectives

How did Dove Real Beauty Sketches enact Successful Viral Marketing?

• Dove released a ‘Real Beauty Sketches” YouTube campaign

• This got 114 Million Views in the first month

• This was uploaded in 25 languages to 33 of its YT Channels

  • Reaching consumers in more than 110 countries

What is Price?

The money charged on a product of service

What are the 7 Stages of Price Setting?

1. Develop pricing objectives

2. Assess of target market’s ability to purchase

3. Determine demand for product

4. Analyse demand, cost and profit relationship

5. Evaluate competitors’ prices

6. Select pricing strategy & tactics

7. Decide on price

What are some Financial Objectives that will influence Pricing?

• Maximise profit

• Achieve target sales

• Achieve target rate of return

• Improve Cash flow

What are some Marketing Objectives that will influence Pricing?

• Maintain/improve market share

• Beat/prevent competition

• Increase sales

• Build a brand

What is the Pricing Method?

The method used to calculate the actual price set

What is a Pricing Strategy?

Adopted over the medium to long term to achieve marketing objectives has a significant impact on marketing strategy

What is a Pricing Tactic?

Something that’s adopted in the short term to suit particular situations

Limited impact beyond the product itself

What are the Main Factors that influence Pricing?

• Costs

• PED

• Stage in Product Life Cycle

• Market Share

• Marketing objectives

• Market Positioning

• Competitor pricing

What are Price Takers?

An entity that has no option but to charge the ruling market price

What are Price Makers?

An entity that’s able to fix their own price

What are Price Leaders?

The Market Leaders whose price changes are followed by rivals

What are Price Followers?

An entity that follows the price-changing lead of the market leader

What is Mark-Up pricing?

Pricing that involves adding more onto the price to make a profit from the unit cost

This is widely used in retailing

E.g.

If the cost per unit was £10, and a business added 100% mark-up of cost, the selling price would be £20

What are the Pros of using Cost to influence pricing?

• Easy to calculate

• Price increase can be justified when costs rise

• Managers can be confident each product is being sold for profit

What are the Cons of using Cost to influence Pricing?

• Doesn’t take PED into account

• May not take into account of the competition

• Profit is lost if price is set below the price that customers are willing to pay

• Sales are lost if price is set above the price customers are willing to pay

• Business has less incentive to control costs

What are the 9 types of Pricing Strategies?

1. Mark-up

2. Price Skimming

3. Penetration Pricing

4. Predatory Pricing

5. Price Wars

6. Psychological Pricing

7. Competitive pricing

8. Cost Plus

9. Dynamic Pricing

What is Price Skimming?

• Setting a high price to maximise profit

• Product sold to different market segments at different times

• Top segment (high income earners) skimmed off first w/the highest price

• Price is then lowered overtime as new adaptations come out

• Best used in Introduction or Growth stage of product life cycle

• Electronic goods use this

What is the Aim of Price Skimming?

To maximise profit per unit to achieve quick recovery of production costs

What is Penetration Pricing?

Basically the opposite of Price Skimming:

• Offer a low introduction price:

  • Allows to gain market share easily

  • Build customer usage and loyalty

  • Build sales w/higher priced options (Hook & Bait approach)

• Price can be increased once target market share is reached

• Products like printers do this

  • As you have to buy the ink cartridges over and over again

What is Predatory Pricing?

Setting a low price to remove rivals from the market or to deter competition (OFT - Office of Fair Trading)

• This allows a business to build a monopoly and manipulate the market

  • Monopoly - when a business dominates the market as there are few rivals in the industry

• The business will make a loss for a period of time until the competition fails

What are Price Wars?

Competitive pricing between firms in a competing industry:

• Both reducing prices to increase market share

  • This results in a destructive spiral of price reductions

• Process continues until the weaker firm goes out of business

• Seen as good for consumers in the short run, but harmful in long run if competition is reduces

What is Psychological Pricing?

Pricing that makes the product seem cheaper than it is:

• Paying £3.99 for a good is seen as better and cheaper than being charged £4 for it

What is Competitive Pricing

Pricing similar to the competition

What is Dynamic Pricing?

When a business sets flexible prices for products/services based on current market demands/trends

How does Amazon use Dynamic Pricing?

Amazon changes its prices every 10 minutes on average

What is a Loss Leader?

• A product prominently displayed and promoted and priced below normal prices and below cost to the seller

  • This encourages customers to buy other full price products in the business, along w/the loss leader product

• Loss leaders are widely used in supermarkets to draw customers in from rival firms

• The aim is to encourage people to buy complementary goods at full price

What is a Complementary Product?

A low price product that is bought alongside another main costly product:

• This helps to add value