1.3 business revision cards

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What are the 3 sections to the design mix?
Function,cost and aesthetics
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What is cost plus pricing?
Adding a percentage (the mark-up) to the costs of producing a product to get the price
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What is mark-up?
The percentage added to unit cost that makes a profit for a business when setting a price
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What is penetration pricing?
Setting a low price when launching a new product in order to get established in the market
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What is predatory/destroyer pricing?
Setting a low price forcing rivals out of business
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What is psychological pricing?
Setting the price slightly below a round figure
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What is price skimming/creaming?
Setting a high price initially and then lowering it later
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What is a disadvantage of cost plus pricing?
This method ignores market conditions. For example, the mark-up used by a business may be far too high in relation to the prices of rival products. This might result in low sales. It may also be difficult to identify all the costs of production
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What is e-commerce?
The use of electronic systems to sell goods and services
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What is breaking-bulk?
Dividing a large quantity of goods received from a supplier before selling them on in smaller quantities to customers
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What is a retailer?
A business that buys goods from manufacturers and wholesalers, and sells them in small quantities to consumers.
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What is a wholesaler?
A business that buys goods from manufacturers and sells them in smaller quantities to retailers
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Name factors that determine the most appropriate pricing strategy for a particular situation?
differentiation and USP/price elasticity of demand/amount of competition/strength of the brand/stage in the product life cycle/costs and the need to make a profit
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Give examples of direct selling?
The internet/direct mail/door to door selling/mail order catalogues/direct response adverts/shopping parties/telephone selling
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What is the main advantage of direct selling?
Intermediaries are not involved so producers are able to make more profit. Producers can also reach customers who do not like going to shops
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What is the main drawback of direct selling?
With some methods people cannot physically see the products until they have been purchased. Also, some people object to direct mail, door to door selling and unwanted telephone calls
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What are intermediaries?
Links between the producer and the consumer e.g. retailers and wholesalers
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What is a distribution channel?
It is the route taken by a product from the producer to the customer
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What factors need to be considered when choosing the appropriate distribution channel?
The nature of the product/cost/The market/Control
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What is an agent (broker)?
An intermediary that brings together buyers and sellers
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Give 4 benefits to consumers of online distribution?
It is cheaper because online retailers often have lower costs/consumers can shop 24/7/There is generally a huge amount of choice/People can shop from anywhere if they have access to the internet
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What are the benefits to businesses of online distribution?
Lower start up costs/lower costs when processing transactions/less paper is needed for documents e.g. invoices/B2C businesses can offer goods to a global market/Businesses can serve their customers 24/7
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What are the drawbacks to businesses of online distribution?
They face increasing competition as selling online is cheap/Lack of human contact which might not suit some customers/There may be technical problems online/ There is also a security risk from computer hackers
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What are the drawbacks to consumers of online distribution?
Not being able to physically inspect goods before purchase/The risk of a poor after sales service/the exclusion of customers without internet access or credit cards
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What services do retailers provide?
1. They buy large quantities from manufacturers and wholesalers and sell small quantities to customers-breaking-bulk. 2. They sell in locations that are convenient to consumers. 3. They may add value to products by helping with packaging or delivery
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What is a marketing strategy?
A set of plans that aim to achieve a specific marketing objective. For example, a local car rental company might improve the quality of customer service by delivering cars to peoples homes in order to aim to become the market leader in the region
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What is a product line?
A group of products that are very similar
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What is a product portfolio?
The collection of products a business is currently marketing. The product portfolio will be made up of product lines.
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Describe the development stage in the product life cycle?
This is where the product is being researched and designed. A decision will be made about whether to launch the product. The business will spend to develop the product and costs will be high.
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Describe the introduction stage in the product life cycle?
The product will be launched. Sales are initially often slow. Costs are incurred when the product is launched. Business will spend on promotion. Prices may be set high to cover promotion costs or could be set low to in order to break into market
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Describe the growth stage in the product life cycle?
Once the product is established and consumers are aware of it, sales may begin to grow rapidly. The product then becomes profitable. Competition could increase which could slow down the rise in sales. Businesses may need to consider prices/promotion
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Describe the maturity stage in the product life cycle?
The growth in sales will level off. The product has become established with a stable market share. Lots of competition. Many businesses use extension strategies to extend the life of their products
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Describe the decline stage in the product life cycle?
Sales will decline. This is usually due to changing consumer tastes. The product will lose its appeal to customers
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Give 2 extension strategies used by businesses to prolong the life of their products?
Product adjustments-e.g. updating the product,/Promotion- Give a boost to flagging sales by investing in promotion campaigns
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How can businesses develop customer loyalty?
Communication-Keeping customers updated and informed/Customer service-High quality/Customer incentives-rewarding returning customers/Personalisation-Addressing individuals by their name/Preferential treatment-e.g. VIP areas
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What are outbound marketing strategies?
This involves directing marketing material at potential customers whether they are expecting it or not. e.g. sending direct mail, email, sponsorship
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What are inbound marketing strategies?
This involves attracting potential customers to websites when they are looking for suppliers or solutions to problems. e.g. blogging, social media marketing, video marketing
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What are the benefits of adapting product designs to changes in social trends?
If businesses can reduce waste they will use fewer resources. This will result in lower costs and higher profits. Products are likely to be more popular and sell in large quantities. Some businesses use their design features as a USP.
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What is ergonomics?
The study of how people interact with their environment and the equipment they use- often in the workplace. If something is ergonomically designed it means that they were designed so that people can interact with them safely without using effort.
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What are the aims of promotion?
To tell consumers about a new product/Remind customers about an existing product/Reach a widely dispersed target audience/Reassure customers about products/Show consumers that rival products are not as good/Improve/ develop the image of the businesss
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What is above the line promotion and what is below the line promotion?
Above the line promotion-Placing adverts using the media. Below the line promotion- Any promotion that does not involve using the media
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What is viral marketing?
Any strategy that encourages people to pass on messages to others about a product or a business electronically.
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What affects the choice of promotion?
Cost/market type/product type/stage in the product life cycle/competitors promotions/Legal factors
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Give 3 forms of branding?
Manufacturer brands- brands created by the producers of goods and services e.g. kelloggs corn flakes. own label brands- products which are manufactured for wholesalers or retailers by other businesses. Generic brands-e.g. carrots only product name
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What are the benefits of strong branding?
Added value/ ability to charge premium prices/reduced price elasticity of demand-price increase will have less impact on demand.
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Give ways a brand can be built?
Exploiting a unique selling point by differentiating their product/Advertising/sponsorship/using social media
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What are the benefits of sponsorship?
To help raise brand awareness and develop brand loyalty/support other promotional campaigns/create emotional commitment to the brand/Promote good relations with customers.
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What is merchandising?
A promotion specifically at the point of sale of a product. e.g. product layout, display material and keeping shelves well stocked, empty shelves create a bad impression.
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Other cards in this set

Card 2

Front

What is cost plus pricing?

Back

Adding a percentage (the mark-up) to the costs of producing a product to get the price

Card 3

Front

What is mark-up?

Back

Preview of the front of card 3

Card 4

Front

What is penetration pricing?

Back

Preview of the front of card 4

Card 5

Front

What is predatory/destroyer pricing?

Back

Preview of the front of card 5
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