Y12 BUSINESS IB MARKETING

consumer product

purchased by private individuals for their personal use

producer products

industrial goods purchased by businesses to use in production process

PLC (product lifecycle)

shows the different stages a product is likely to go through from its initial design to its decline

PLC stages

R&D, launch, growth, maturity, decline

product portfolio

the collection of all the products owned by a business at a point in time

features of R&D stage

companies invest a lot of money —> high costs, no sales revenue

features of launch stage

sales start slowly, products are not profitable, buyers in this stage known as innovators

features of growth stage

greater consumer awareness —> increase in sales, more channels of distribution, more competitors, buyers in this stage known as early adopters

features of maturity stage

sales at slower rate, economies of scale, heavy promotion to differentiate brands, product lines extended, buyers in this stage known as majority

features of decline stage

sales & profits fall, low demand, promotion stops/falls, buyers in this stage known as laggards

extension strategies

price reduction, redesigning, repackaging, new markets, new promotions

brand

name or trademark that is identifiable with a business or product

brand awareness

measures the extent to which potential customers, the public, recognises a particular brand

brand development

refers to the marketing process of improving and enlarging the brand name, helps extend PLC

brand loyalty

when customers buy from the same brand over and over again

2 benefits of brand loyalty

maintains/improve market share, ability to set premium pricing

brand value

the premium that customers are willing to pay for a brand name over and above the value of a product itself

2 benefits of brand value

higher market share, higher barriers to entry

2 benefits of branding

image enhancement, recognition/loyalty

competitive advantage

any positive attribute that sets a business apart from competitors, enables firms to outperform rivals

cost leadership

a business becoming lowest cost organisation in the industry

2 cost leadership strategies

cost parity, cost proximity

cost parity

charging same price as competitors for a product but lowering costs —> increase in profit margins

cost proximity

charging a lower price than the average competitor while reducing costs —> price advantage but smaller profit margin

advantages of cost leadership strategies

allows firms to charge low prices but still be profitable

disadvantages of cost leadership strategies

can be risky if more than one firm uses this strategy as it leads to price war

differentiation

when firm makes goods and services distinct from competitors in some way, makes USP

2 benefits of differentiation

premium pricing can be charged, customer loyalty

2 disadvantages of differentiation

expensive because of increased costs of production, requires continuous innovation & creativity

cost focus

a business focusing on being a low-cost producer in niche markets

differentiation focus

a business focusing on a particular market segment with well-specified, high-end products

2 benefits of focus strategies

can be highly profitable due to lack of competition, brand loyalty

1 disadvantage of focus strategies

small market size limits opportunity for growth

2 benefits of porter’s generic strategies

straightforward framework for strategic options, provides choice & flexibility

2 disadvantages of porter’s generic strategies

may not be practical due to risks, no guarantee of success if firms don’t adapt to changing external environment

cost plus pricing

involves working out average cost per unit and adding a % markup

penetration pricing

products initially sold at low price to quickly break into market and gain market share

2 benefits of penetration pricing

suitable for mass market products sold in large volumes, new firms trying to enter market

2 disadvantages of penetration pricing

if prices too low, causes customers to perceive product as inferior/low quality

loss leader pricing

selling product at or below its cost value

1 benefit of loss leader pricing

suitable for low cost ranges

1 disadvantage of loss leader pricing

prices too low may damage prestige and image of brand

predatory pricing

temporarily reducing prices with the intention of forcing a competitor out of market

premium pricing

when the price of a good or service is set significantly higher than similar competing products

2 benefits of premium pricing

higher profit margins, higher barriers to entry for competitors

2 disadvantages of premium pricing

limits number of customers because of high price, requires strong brand loyalty

dynamic marketing

varying the price of a good or service to reflect changing market demand

competitive pricing

firm sets price of its goods and services at the same/similar to its competitors

1 advantage of competitive pricing

simplistic & easy to calculate

1 disadvantages of competitive pricing

need to find differentiate methods which can add to costs

contribution pricing

setting a price based on the direct costs of producing a product

PED

measures the responsiveness of demand to a change in price for a product

product with many substitutes is more likely to be..

price elastic

product with less substitutes is more likely to be..

price inelastic

above the line promotion

This is any form of paid-for promotional method through independent mass media sources (television, radio, print)

below the line promotion

This is the use of non-mass media promotional activities, allowing the business to have direct control (direct mail, sponsorships, in store promotions)

through the line promotion

This is the use of strategies that involve both ATL and BTL methods in an integrated marketing approaching (social media influencers)

advantages of international operating

increased customer base, economies of scale, increased brand recognition

disadvantages of international operating

more competitive, legal issues, higher costs

sales forecasting

quantitative management technique used to predict a firm’s level of sales over a given time period

extrapolation

identifies the trend by using past data and extending this trend to predict future sales

market research

identifying and forecasting the buying habits of consumers can be vital to a firm’s prosperity and survival

times series analysis

attempts to predict sales levels by identifying the underlying trend from a sequence of actual sales figures

advantages of sales forecasting

improved working capital, improved stock control, improved productive efficiency

disadvantages of sales forecasting

limited information, inaccuracy of predictions, external influences