GCSE AQA Business Studies Unit 2: Product/Price/Promotion/Place

Product portfolio is range of different products a firm sells. Most large businesses have range of products giving a balanced portfolio. Products at peak are responsible for business' income. However these products will decline and need to be replaced.

Firms can extend the life of products by making changes to the design or offering discounts. If this works the product will profit for longer. However more money must be spent on the product. Firms must get balance between old/new products.

Businesses can broaden portfolios to compete with other companies. Adding products to an existing range by developing new products based on existing ones OR increasing range by developing products that are slightly different from current ones.

When a firm charges a very low price when the product is new to get lots of people interested in it. 

When a product is set below cost. Once the product is established the firm will increase the price. This happens with new consumer products where existing products have brand loyalty.

The opposite of penetration pricing. Firms charge a high price to begin with to apply to a higher market and to make the product a desirable one. Then, when the product is established the firm will lower the price to help it become a mass market product. This happens a lot with consumer goods based on new technology e.g. TVs.

Where the firm has to charge similar prices to other firms. This happens most when there's lots of competitor choice and not much product differentiation (e.g. petrol)

Work out how much product costs and increase by required profit margin. e.g. product costs £2 to make and you want a 20% profit margin, £2 is 80% the required selling price. 80%=200p->1%=200p÷80=2.5p->100%=2.5px100=250p You'd sell it for £2.50

Work out how much the product costs and then add a %age mark up. e.g. if a product costs £2 to make and you want a 25% mark up, you'd sell it for £2+25%=£2.50

Discounts - Products Trials - Free Gifts - Buy One Get One Free - Competitions - Point-of-sale advertising - Use of credit

Goes straight to the customer without going through other media. Usually some sort of voucher sent in the post. Requires customer to make a direct response. The business can measure its success with this. However this creates junk mail/spam email.

Businesses can help pay for events such as sports tournaments, TV shows and exhibitions. In return, their name is displayed at the event for publicity. Sponsorship can create a high profile for your business/brand name BUT if the thing you're sponsoring starts to get bad publicity, your business will suffer too. Sports/TV/The Arts are all a few places for sponsorship. 

There are 4 main distribution channels. 1, 2 and 3 are indirect and 4 is direct. 

Here, consumer buys the product from a cash and carry. Its good for the manufacturer because they get bulk orders and the wholesaler takes the cost of storing the products and the risk of not selling them. Consumer often pays lower prices than if they bought from a retailer - levels of customer service may be lower.  

The traditional route. Commonly used in the food and drink industry. Advantages to the manufacturer are the same as channel 1. Retailers also benefit from dealing with the Wholesaler - they reduce risk by allowing retailers to buy in smaller quantities and giving a wide choice of goods. However, goods can take a long time to get from manufacturer to consumer. 

This route is becomming more common. Often used in clothing industry. Faster than dealing with retailers through wholesalers and the manufacturer gets consumer feedback about the products. Harder for small retailers to to avoid having to hold lots of stock. 

Now very popular. Used in factory shops, mail order, tele sales and internet selling. The fastest and often, cheapest channel for consumer. Can be more difficult for consumers to shop around (manufacturers usually only sell their own products, but a retailer would probably stock goods from a range of manufacturers) and customer service may not be as good.