Unit 3 topic 4

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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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