biz - 4.5 (7Ps : Product and Price)

term 4

Product

Physical good or intangible service provided by biz

Product life cycle

Research and development, launch, growth, maturity, decline

Extension strategies

Strategies to lengthen the product life cycle before decline stage, financially rewarding

Purpose of extension strategies

to develop brand loyalty, important for revenue streams to ensure biz longevity

Investment and capital expenditure

biz spending on fixed assets or capital equipment of a biz

Profit

financial return from the trading activities of the biz

cash flow

the actual movement of money in and out of a biz

liquidity

the ability of a company to pay its short-term debts

branding

a marketing technique used to dive a product/biz a unique name or identity

Purpose of branding

create original identity and image, differentiate a biz, build brand awareness, build trust, foster customer loyalty

Global brands use unified approach to their global brand strategy, leading to-

\-increased brand recognition

4 aspects of branding (ADLV)

brand awareness, development, loyalty, value

brand awareness

the extent to which existing and potential customers know, recognize, and remember an individual brand

\-enhance brand awareness

promotional strategies can-

brand development

building sales by making more people attracted to the brand

description of brand development

* can create perception of biz, leading to a competitive advantage
* highly expensive, no assurance that the strategy will succeed
* effective marketing, leading to longevity

brand loyalty

exists when customers repeatedly and habitually buy the same brand

loyalty programmes

create incentives for customers to make repeated purchases

benefits of brand loyalty

* trust
* ability to charge premium prices
* lower chance of brand switching

brand value

expected earning potential of a brand (its forecast future sales revenue)

Price

the value of a g/s that is paid by the customer

pricing strategies

mark-up, penetration, loss-leader, predatory, premium

mark-up pricing

adds a profit margin to the cost of production in order to determine the selling price of a g/s

advantages of mark-up pricing

* simple to calculate
* able to make sure that the selling is above COP and making profit
* important in markets when raw material cost rise

disadvantages of mark-up pricing

* ignores price being charged by competitors
* does not directly consider customer needs when price is set

penetration pricing

selling low price to enter an industry

* allows firm to compete against existing firms and to gain market share

advantages of penetration pricing

* allows biz to enter market and/or launch a new product
* discourage other firms from entering the industry
* higher sales and revenue

disadvantages of penetration pricing

* not a sustainable strategy long-term (low price = low profit)
* customers may associate low prices with low quality

loss-leader pricing

pricing a product below COP to attract customers to purchase other items (with higher profit margins)

advantages of loss-leader pricing

* can help biz attract customers
* higher sales revenue from customers who buy other goods
* to clear out older stock

disadvantages of loss-leader pricing

* expensive for biz to sustain
* biz makes loss yet no guarantee that customers will buy other products

predatory pricing

charging a low price to destroy the sales of rival

advantages of predatory pricing

* customers buy more
* non customers switch to your brand
* barrier to entry (prevent potential rivals from competing in an industry)

disadvantages of predatory pricing

* not sustainable
* anti competitive (illegal in many countries and violates competition laws)
* customers will doubt quality of product

premium pricing

biz permanently setting a high price for its products due to its associated image, reputation, or status associated with its high quality products

advantages of premium pricing

* higher profit margin
* image of high quality

disadvantages of premium pricing

* customers expect more when they pay more
* limits customer base and therefore reduce market share