Notesale: Turn your study into money

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Topic 1
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It is about making products desirable
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It includes how well a product meets a need or
solves the problem for which it was intended
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Specifically, the cost per unit
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 ABOVE-THE-LINE – involves any form of advertising through
the media, such as TV, radio, internet, posters/billboards,
cinema, and direct marketing
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g
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 Influences on promotion:
 Promotion budget – the promotion budget will determine
which methods are available and the geographical reach of
the campaign
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g
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 Technology – it can help a firm narrow down its promotion
so that it only reaches the right people
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Price
Price is a key factor in any product decision
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 Influences on price:
 Costs – what profit margin is the firm hoping to achieve?
 The PED – the potential for a firm to change the price,
 Competition – the level of competition and the price set by the market
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 Branding – the perceptions customers have of the brand and how
much value they place on it
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Pricing Strategies
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Branding
 A clear and obvious logo, name, or statement that
customers can recognise as being related to a certain
product or firm
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 The importance of branding:
 It adds value to the product
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 It builds trust
 Product might become the natural choice for the novice
customer
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 It makes a product recognisable
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The initial price is high so the
profit in the marker can be ‘skimmed’
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Particularly effective in
technology markets
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PENETRATION PRICING – applied to a new product attempting to enter
the market
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Over time price may increase as demand grows
and reputation/popularity builds
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The firm may make a loss for a
period of time until the competitor fails
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This is used in very competitive markets and helps avoid price
wars
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E
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£9
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COST-PLUS PRICING – a firm bases a price on the unit cost and then
adds a percentage as a mark-up
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 MARK-UP = UNIT COST X PERCENTAGE MARK-UP

Key Words
Design Mix
Customer Loyalty
E-Commerce
Marketing
B2C

Promotion
Pricing Strategy
Distribution
Product Life Cycle
B2B

Branding
Digital Marketing
Distribution Channels
Boston Matrix

Distribution refers to how the product gets to the customer
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Parties in the distribution network:
 AGENTS/BROKERS – agents link buyers and sellers together and
operate in industries
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They are common when firms export
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 WHOLESALERS – they take bulk quantities from manufacturers and
distribute them across a network of retailers
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 DIRECT SELLING – the main route to direct sell today is through
online sales and e-commerce website
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Influences on Distribution
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Control over promotion and pricing – a firm may opt to use its own
website or retail chain if controlling these factors are important
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E
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it can be difficult and costly to ship plants, flowers, and other
delicate objects
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By contrast, a local firm may simply require one retail outlet
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 Builds relationships through a more personal service by tracking
buying habits
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 Opportunities for personalisation and involving customers in the
design of products
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BENEFITS FOR FIRMS
BENEFITS FOR CUSTOMERS
E-tailers do not have to meet the Customers gain from lower prices
costs of retail stores
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Lower start-up costs make it Customers can shop 24/7
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Transactions can take place in a Comparison between brands is
secure online environment
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Firms can take sales 24/7
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Firms can offer goods to a much Customers can see reviews of
wider market
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Product Portfolio Analysis

The Product Life Cycle
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The Boston Matrix
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The Boston Matrix compares a firm’s products based on
their market growth and market share
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 Refers to the new products that are not profitable yet
and could succeed or fail
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 A firm can do various things with them – brand
building, harvesting (maximising sales or profit in the
short term) or divestment (selling off the product)
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 They are in their maturity phase
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 They bring in plenty of money
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 They are in their profitable growth phase and have the
most potential
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 Also, money might need to be spent to increase
capacity to keep up with demand
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 They are usually pretty much a lost cause
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 If the product is no longer making a profit, it can be
sold off
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Development
 The research and development (R&D) department develop the product
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 The costs are high, and there are not any sales yet to cover the costs
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This is because there is often not enough demand, or because the firm cannot make the product cheaply enough
to make a profit
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 The firm often promotes the product heavily to build the sales – firms need to make sure they have got enough resources and capacity to meet the
demand that promotions create
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This is price skimming
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This is penetration pricing
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The firm usually ditches
products with disappointing sales after this stage
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 Competition may be limited (if it is an innovative product)
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There are new customers and repeat customers
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Promotion shows differences from competitors’ products
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 Rising sales encourage more outlets to stock the product
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 At saturation (when the market is full and has maximum growth) sales may begin to drop, depending on the product
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The price is often reduced to stimulate demand, which reduces profits
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Competition within the industry becomes fierce so sales might fall
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Sales fall rapidly and profits decrease
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 If sales carry on falling, the product is withdrawn or sold to another firm (divestment)
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 Decline is not inevitable
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Quality products with
great design can sell for decades, e
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Cadbury Dairy Milk
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Typical marketing objectives might include: becoming market leader, building customer
loyalty, improving brand recognition, or increasing market share
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Marketing may differ between B2B (business to business) and B2C (business to customer)
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OUTBOUND MARKETING – includes any strategy that pushes a message out to customers
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INBOUND MARKETING – includes any technique that attracts potential customers to a website when they are looking for a particular service or product
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HYBRID STRATEGIES – involve a combination of both
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Customer loyalty:
 Excellent customer service
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 Customer incentives – e
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reward schemes and money-off vouchers
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