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Marketing Mix 1.3
|What is a Channel of Distribution?
|Firms involved in passing a product to the customer
|Describe Direct Distribution
|Channel goes straight from producer to customer. Products that are difficult to transport due to their bulk will use this method. Firms selling direct avoid hefty overheads resulting from operating retail outlets
|Provide an example of Non-physical or intangible product or service
|What are Aesthetics?
|The look and the feel of the product, how our senses respond to the product
|Define Intangible benefits
|Pleasure, satisfaction, peace of mind
|Define Ethical Sourcing
|Buying materials from suppliers that are behaving in a morally correct manner. Fair trade, Responsible and organic farming e.g. free range chickens and using Sustainable sources.
|The ‘process of getting the firm’s product to the market’
|Describe Traditional Distribution
|Producer/Wholesaler/Retailer/Consumer. It is the most expensive and has the most intermediaries. The extra intermediary mean that costs are higher as wholesaler’s services do not come free
|Explain Modern Distribution
|Producer/Retailer/Consumer. Companies such as M&S would use this method of distribution.
|State three factors affecting distribution
|(1) Technically complex products - better distributed when the customer and producer can easily contact each other to solve any problems that arise. (2)Control - The more intermediaries a firm uses , the less control it has over the way it is sold
|Describe Online Distribution
|The distribution of media content digitally as opposed to physically e.g. music/films/news
|What is a Manufacturer
|Take raw materials or components and turn them into finished goods. Operate in the secondary sector e.g. car production
|Explain the role of Wholesalers
|Buy large quantities of supplies from producers and then sell them on in smaller quantities. Act as an intermediary between manufacturers and retailers and consumers.
|What is Retailer?
|An organisation that sells good or services to the public or end user. They are at the end of the channel of distribution.
|Define a Product
|Goods and services that the firm provides
|Describe the Design Mix
|The three fundamental elements of product or service design that must be taken into account during the research and development stage i.e. prior to launching onto the market
|Give three examples of Social Trends
|(1) Concern over resources depletion e.g. renewable and non-renewable resources (2) Ethical Sourcing (3) Designing for waste minimisation, re-use and recycling e.g. Refill packs, Recycled materials as a raw material and Recyclable packaging
|Define the Promotional Mix
|The combination of promotional activities that a business uses in order to create consumer awareness and generate sales
|Explain what is meant by promotion Promotion
|The activities designed to communicate with the market thereby increasing visibility and sales of a product
|Define Sales promotions
|Short term offers used by firms in order to increase sales for their products
|What is Public Relations (PR)?
|Involves communicating with the media such as newspapers, television and radio in order to get favourable publicity for the organisation
|What is Branding?
|A promotional method that involves the creation of an identity for the business that distinguishes that firm and its products from other firms
|Describe the forms of Brand recognition
|Brand recognition comes in many forms including colour, logo, strap line and shape
|What is a Geographical brand?
|When a region, city, county or country creates a brand that epitomises the people and the lifestyle of that country, often used in tourism
|What is a Personal brand?
|When a person brands themselves e.g. a sports personality or pop star
|Occurs when firms pay for the promotion of their product through the main media such as television, radio and the press. This is known as ‘above the line’ promotion
|Explain what a Unique Selling Point is using an example
|Feature or characteristic within a brand that makes it stand out e.g. SuperJam is sweetened by natural grape juice not sugar
|What is Viral Marketing?
|Use of social media to encourage the spread of promotional activities and increase brand awareness e.g. blogs and online forums
|Define Social Media
|The use of virtual communities to communicate with actual and potential customers
|Describe Emotional Branding
|Building a brand that will directly tap in to the consumers feelings, personal psychological needs and aspirations e.g. presents a feeling of belonging or success
|What is meant by Personal Selling?
|Occurs when a company’s sales team promote a product through personal contact. Financial services such as pensions, insurance and mortgages are often sold in this way
|Explain Direct Mailing
|Involves sending information about a product through the post. Consumer can usually buy the product by placing an order by post or telephone
|What is Price Discrimination and give an example?
|Markets can be broken down into different segments.. It may then be possible to price discriminate. Charge different price to different people e.g. rail card and bus travel
|The amount paid by the customer for a good or service
|Explain Cost Plus Pricing
|A percentage mark up is added to the cost of producing a good or service to calculate the selling price
|Describe Penetration Pricing
|The price is deliberately set low to gain a foothold in the market and a steady gain in market share.
|What is Price Skimming and when is it used?
|Sets a high price for the product because people will be desperate to try out the product no matter what price is being charged for it. Used when a new and innovative product is released onto the market
|Define Competition Pricing
|Setting the price at the same level as the competition
|Describe and give an example of Predator Pricing
|This occurs when a firm sets out to destroy/weaken competition through low prices e.g. Virgin Airlines
|What is a Price Leader?
|Firms that dominate a market with an existing product set the price and other firms in the market follow suit
|What is a Price Taker?
|Smaller firms in the market who set their prices based on the market price. This might be the price set by the market leader or it might be where firms sell similar products and customers find it hard to differentiate the product.
|Describe using an example Dynamic Pricing
|Prices change frequently and quickly in response to changes in demand. Often used by businesses with set capacity e.g. an airline so as the plane reaches full capacity prices will start to rise
|Describe what the Product Life Cycle is and state the stages
|Shows the different stages that a product passes through and sales that can be expected at each stage e.g. Development, introduction, growth, maturity and decline
|Describe the Decline stage of the Product Life Cycle
|Sales start to decline due to changing customers tastes or advances in technology e.g. CD's
|What happens during the Development stage of the Product Life Cycle?
|During this stage product is designed. Suitable ideas tested. If an idea is considered suitable then a prototype is produced. Decision will then be made whether to launch.
|Explain the Introduction stage of the Product Life Cycle
|Product is new on the market. Sales are often low. Costs are incurred e.g. building new production lines, promotion and distribution costs. Likely the product will still not be profitable.
|State two things about the Growth stage of the Product Life Cycle
|Once the product is established and consumers are aware of it, sales begin to grow. If it is a new product and there is a rapid growth in sales, competitors may launch their own version
|What happens during the Maturity stage of the Product Life Cycle?
|This is when the growth in sales levels off. The product has become established with a stable market share. Sales will have peaked.
|Give three Extension Strategies
|Cut price/ Modify the product/Change the packaging/Special offers
|Define Stars in the Boston Matric
|Have a dominate share of the market/Market leaders/Fast growing /Make Substantial profit
|Describe Dogs in the Boston Matrix
|Products in decline as they have a low share of the market and no prospects for growth/Operate at a cost disadvantage/ Often in markets that are barely developing
|Explain Problem Child/Question Marks in the Boston Matrix
|Products that have a small share of a growing market/ Require a lot of funds to fulfil their potential/ Rapid growth/ Likely to turn into stars
|What are Cash Cows?
|Products with a dominant share of the market but low prospects for growth/Likely to remain solid earners without the need for much investment/Today’s stars become the cash cows of tomorrow
|Define the Boston Matrix
|Illustrates the position of a firm’s products in terms of their market share and the market growth rates
|What is Product portfolio analysis?
|Looks at the range of products and brands that a firm has under its control. A businesses product range is called its product portfolio
|Define Niche marketing
|When a firm targets a small subsection or previously unexploited gap in a larger market. Gives a business first mover advantage and allow them to charge a premium price
|Describe Mass marketing
|When a firm targets the whole of a market rather than a particular segment. Gives a business a high volume of sales but often at a low price
|What are Industrial markets?
|Where businesses are selling to other businesses; business to business (B2B)
|What are Consumer markets?
|Where businesses are selling to the public, business to consumer (B2C)
|Where do Dogs fall on the Boston Matrix?
|Low market growth/Low market share
|Where do Stars fall on the Boston Matrix?
|High market growth/High market share
|Where do Question marks fall on the Boston Matrix?
|High market growth/Low market share
|Where do Cash cows fall on the Boston Matrix?
|High market share/Low market growth
|State two advantages of the Boston Matrix
|Easy to understand (anyone can deduce easily that cash cow and stars are the two parts of the matrix which are ideal for the company)/Helpful in removing the weak areas of the business
|State two problems of the Boston Matrix
|Ignores other factors of the business (takes into account market share and cash flows only)/It is only a snapshot of the current position/Does not take into account environmental factors/Has no predictive value
|State two benefits of operating in a Niche market
|Less competition/Builds up specialist skill and knowledge/Can often charge a higher price /Profit margins often higher
|Describe three problems of operating in a Niche market
|Lack of economies of scale/Risk of over dependence on a single product or market/Likely to attract competition if successful Vulnerable to market changes (all "eggs in one basket")
|Give two benefits of Mass marketing
|Wider customer base/Can benefit from economies of scale
|State three criticisms of the Product Life Cycle
|Strategic decisions can change the life cycle e.g. extension strategies/ Length of each stage cannot be predicted e.g. maturity phase can last a long time/ Decline is not inevitable/Hard to know exactly where a product is in the life cycle.