Business 3.3 - 3.4 Review (3.3 (Pricing methods (Cost Plus ( The average…
Business 3.3 - 3.4 Review
-The actual product/service sold
-How much the customer pays for the product/service
-How the customer is made aware of the product and persuaded to buy it
-How the product is distributed to the customer
Creating a product that customers want to buy (demand) includes the following.
New Product Development
Also called Research and Development (R&D). Firms use this create new innovations and technologies that they can sell on their own or incorporate into existing products
Allows firms to benefit from first mover advantage
Creates competitive advantage and product differentiation so firms can set themselves apart from the competition.
Creates unique selling points (USPs)
Brand Image (Branding)
The name symbol or design that is used to identify the business or product. Branding tries to give a product or business a “personality”.
Create and maintain loyalty through familiarity
Expand the product ranges as customers are more likely to try a new product from a brand they trust
Help customers recognize the product and therefore ignore or avoid the competition
The way in which the product is wrapped for sale and display and should protect the product from damage.
Promote the product
Tell customer information
Could make the product easier to use than other products
Could make the products easy to store or display
Colors and designs can attract customers
Product Life Cycle
Features of the Stages in the Product Life Cycle
Little / Few
Medium - Low
Extension of the Product Life Cycle
Sometimes the product's sales start to fall and businesses need to either make changes or pull the product from the market. Changes to the product are aimed at extending the product’s life cycle.
Encouraging people to use the product more frequently
Identifying and selling to new users
Identifying new uses for the product
Adapt the product to meet changing needs and wants of customers
Increase the level of promotion for the product
Unique Selling Point
The average cost of one item is found and then a mark-up (profit margin) is added to find the final selling price
Price is set at the same level as competitors in the market.
Low price is set on a new item to attract customers
High price is charged when a product is first introduced into the market to get back money that was invested in the research and development of the product.
Reducing the price of a product to attract customers.
Changing prices, hour by hour, minute by minute depending on the level sales
The stages a product passes through in order to reach the customer. In some of the channels of distribution there are intermediaries (agent, wholesaler, retailer) which increases the stages between the producer and the consumer.
Distribution Key Terms
Producer - Manufactures products that can be sold to consumers
Agent - Doesn’t own or touch the products, buy connects buyers and sellers and manage the transfer of goods
Wholesaler - Buys in large quantities for cheap. They sell to retailers in small quantities
Retailer - Some retailers might have a strong brand image themselves. The can buy directly, or from wholesalers. Larger variety of products
Consumer - Buys the product
Ways Of Distribution
Producer sells directly to the customer
Internet sales can connect customers to producers ex. Etsy
•Sell at a low price making the good more competitive.
•Direct customer feedback
•Cost are not shared with retailer
•Deal with every customer
Producer sells to a retail store that sells to the customer
Nike apparel is sold at many retail stores including Sports Direct
•Wide distribution is possible
•Selling through specialist retailers can ensure that customers receive product advice
•Often sell more than one brand, so there is more competition
•Loss of control of the product
Large quantities are purchased from producer and then sold in smaller parts to customers
Costco and Sam’s Club
•Ensure products are available to both large and small retailers
•Holds stock, so it reduces stock holding costs for the seller
•Loss of control of the product
•Additional stage in distribution increases time a product reaches the customer
•Chance of product damage
Agent connects the buyer to the seller.
Usually occurs when goods are imported or exported. The agent ensures that laws and paperwork are processed
•Understands the best methods of distribution/transport within their own country
•Understands language, and tastes of the local market
•Understands the laws of distribution in their country
•Produces loses a degree of control over how and where the product is sold, so there is a risk of damage to brand image
•Can add markups so price charged to customers may be high and uncompetitive
Methods or promotion
Billboards and posters
Direct mailing - this can be leaflets but more commonly done by email now
Merchandising - point of sale displays
Sales promotions - sales/discounts, buy-one-get-one-free (BOGOF) etc.
Definition: Buying and Selling product on the internet
How and why has e-commerce grown recently?
Trust in the internet pages increased, which meant that more people use it and more often / Increase in security online.
Technology has also improved, which allowed more people access to the internet.
How a business decides which elements of the marketing mix it will put first to influence consumer behaviour.
The ultimate goal of marketing is to meet the needs of customers so that they will purchase the products that the business makes. Which part of the marketing mix should be the focus of the business when trying to meet this goal? It depends on the business. Below are examples.
All the products are the same price, so it reduces the need to check and many things are cheaper.
They are in every shopping mall and are very common around the world.
Focuses on products and is known to be high quality and new.
Sends products to footballers, basketballers, and many others to show how they are very popular among celebrities.
Mass Or Niche Strategy
Wide distribution (place)
Mass media promotion
Undifferentiated product (same or nearly the same as competitors
Narrow distribution (place)
Specialized promotion that aims to reach the market segment
Highly differentiated products
What to consider
The marketing strategy a business uses must link with the objectives the business has set for itself. For example, a business that is trying to expand into international markets will adopt a marketing strategy to help achieve this objective.
Stage in the Product Life Cycle
Different types of marketing are more appropriate for different stages of the product life cycle. For instance, a new product in the market is best suited for penetration pricing or price skimming, while a product at the end of its life cycle is best suited for promotional pricing.
Businesses often make marketing decisions based on competitors.
Type of Product
Companies that sell industrial goods will need a different marketing strategy than a company selling consumer goods. Industrial goods generally have a small number of buyers and sellers and therefore developing new products for similar markets may be a strategy for a business to make.
Markets that change a lot in a short period of time need flexible marketing strategies. For example, clothing stores need to change constantly due to a. Changing styles and b. Changing weather.
The amount of money the business can afford to spend will impact the type of marketing the business does. For example, a new business with a small budget may choose to use social media and flyers for promotion.
Each country has a set of laws in place to protect consumers from misleading marketing or products that are dangerous. Businesses should make sure that their marketing strategy does not contain misleading information and that the products they produce are safe for consumers.
It is illegal to mislead consumers and to produce products that are known to be faulty and/or dangerous when consumed. Businesses that engage in this type of activity can face fines and the reputation of the firm will be damaged
Moving to markets abroad
There might not be as many businesses like yours, which means there are more sales
Increased Customer Base
Moving into a new market might allow for more people in the market to know about your brand
Adapting products to international or local cultures might increase the sales
Different products, some products might be more useful. New kinds of products might cause unique variations
They might not get as much profit, or they might get sued of bankrupt in that one place
The new market might have a religious way. (McDonalds in India where they can’t have cows due to them being sacred)
Different languages from what the company is used too
Might have to change the product (recyclable) if it is to be sold in the market
Lack of Knowledge
Does not know the companies in the area which are good and does not know information about the market and the trends
The market might decline which cause losses