Unit 3 topic 4

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Created on: 24-02-16 12:04

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Unit 2 Topic 4
- Marketing Mix
  - The elements of a business' approach to marketing that enable it to satisfy and delight its customers.
- 7 p's
  - Promotion
  - Physical environments
  - Place
  - Products
  - Processes
  - Price
  - People
- Business to business
  - When a firm sells its products to another business
- Business to consumer marketing
  - When a firm targets individual consumers with its products and services
- Boston Matrix
  - A tool of product portfolio analysis that classifies products according o market share of the product and the rate growth of the market in which the product is sold
  - Star
    - High market share, high market growth
    - Increasing sales revenue
    - Competitors encouraged to enter the market
    - Require a great deal of promotional spending
    - Cash outflow may exceed cash flow in short term
    - Their profits can be used to support other products.
  - Question Mark
    - Competitive Market
    - Low market share, high market growth
    - Require large amount of market research
    - Could become stars/cash cows
    - Could become dogs
  - Cash cow
    - Established products in mature markets
    - Low market growth may discourage competitors so less advertising required
    - Cash cows good for business focusing on high profits
    - Business will need to develop new products to enter high growth markets
  - Dog
    - Business need to think about retaining dogs.
    - Little scope for profit
    - Businesses need to decide whether to invest to improve their position or put them down and use funding elsewhere
  - Provides a simplistic view of the product portfolio in relation to market share and growth
    - BM helps a business to identify the position of its product in the market
      - High market share means strong competitive position, likely to lead to high levels of customer loyalty
- Product life cycle
  - The stages product through during its lifetime
    - 1)Development
      - Business invests a lot of money developing and producing a product that meets consumer needs
        Their cash flow would be negative because they've invested money but made no sales yet.
    - 2)Introduction
    - 3)Growth
    - 4)Maturity
    - 5)Decline
  - Benefits
    - Helps with strategic planning
    - Helps with financial planning for products
    - Important for a business to consider the position of its products to determine if new launch is foreseable.
  - Disadvantages
    - Difficult to know exact life span of the product
    - Difficult to know what stage the product is at.
  - Extension strategies
    - Methods used to lengthe the life cycle of a product by preventing or delay it from reaching the decline stage
    - Types of extension strategies
      - Attract new market segments
      - Increase wage by current customers
      - Modifying the product
      - Change the image
      - Target new geographic markets
      - Promotions, advertisement deals and offers
- Influences on new product development
  - Technology
    - Can allow products to get developed that are considered superior to existing ones
  - Competitors actions
    - Competitors releasing new product may take away some market share
  - Entrepreneural skills
    - If an entrepreneur can be first person to identify a gap in the market they can gain first mover advantage.
      - E.g.: Bill Gates
  - Market research
    - Enables an organisation to identify potential new products or services that could meet consumers.
  - Ideas from other countries
    - Many businesses can observe the success of products in other countries.
      - E.G. Karaoke from Japan
  - Personal Exerience
    - Some products arise from individual experiences
      - E.g: Levi Roots Reggae Reggae sauce
- Value of New product development
  - 1. Achieve a USP differentiation
  - 2.Increased sales from interest in new products
  - 3. Customer loyalty
  - 4. Competitive advantage.
  - Brand image.
- Pricing decisions
  - Penetration pricing
    - Low prices used to break into the market
    - Many businesses use this when they first release a product to the market.
    - It can be established products as an extension strategy
    - A significant cut can attract customers
    - Can be used to attract a new market segment.
  - Price Skimming
    - Often used during the introduction phase of product life cyce
    - Early adopters will pay higher price for the status of owning it first.
    - Once those customers have purchased
      - Price dropped --> Skim off next layer of customs
  - Price leadership and price taking
    - Large businesses sets the price - Leader
    - Smaller takers follow
    - If takers don't follow the leaders price there may be a price war and if they go higher they are likely to lose custom.
  - Predator pricing
    - A business sets very low prices to drive out competition
    - E.G. Ryanair
    - If someone wants to is this they need a lot of capital until competitors
  - Loss leaders
  - Psychological pricing
    - Gives the impression of better value --> £4.99 rather than £5
- Price Elasticity of Demand
  - The degree to which the quantity demanded of a good or service is affected by a change of price
  - PED = % change in quantity demanded / % change in price
  - Elastic Demand
    - A number higher than 1- Means demand will be affected significantly by a change in price.
  - Inelastic demand
    - Identified by a number less than 1 - means demand will be affected significantly by a change in price
  - Unitary Elasticity
    - CAn be identified by exact number 1- % change is = to %change in demand. They have cancelled each other out so revenue stays the same.
  - Factors influence whether PED of a product is elastic or inelastic
    - Habit
    - Necessity
    - Availability of substitutes
    - Brand loyalty
    - Proportion of income spent on a product.
    - Consumer Income
    - Time

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Unit 3 topic 4

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