Please enable JavaScript.
Coggle requires JavaScript to display documents.
2.2 Making Marketing Decisions - Coggle Diagram
2.2 Making Marketing Decisions
2.2.1 Product
The Marketing Mix (4Ps)
Price – how much it costs.
Place – where it is sold.
Promotion – how customers are informed.
Product – what is sold.
Design Mix
The design mix consists of Function, Aesthetics and Cost (FAC).
Function
What the product is designed to do.
Must meet customer needs.
If it doesn’t work properly, customers will not buy it again.
Aesthetics
The product’s appearance.
Includes colour, shape, style and materials.
Attractive products can increase sales and brand loyalty.
Cost
Cost of producing the product.
Should be low enough to make a profit but still provide good value for customers.
Product Life Cycle (PLC)
Development
2. Introduction
High promotion and advertising costs.
Cash flow: Usually negative.
Slow sales.
Product is launched.
3. Growth
Sales rise rapidly.
Production increases.
Market share grows.
Cash flow: Positive.
4. Maturity
Sales reach their highest level.
Competition increases.
Business focuses on maintaining market share and reducing costs.
Cash flow: Positive.
5. Decline
Sales begin to fall.
Product becomes outdated or replaced.
Business may reduce prices or withdraw the product.
Cash flow: Can become negative.
Product is designed and tested.
No sales.
High research and development costs.
Cash flow: Negative.
Forms of extending a products life
Product-related
Improve the product.
Introduce new versions (line extensions).
Reposition the product for a different market.
Promotion-related
New advertising campaigns.
Price promotions.
Sales promotions (e.g. loyalty cards).
Product Differentiation
Definition: Making a product different from competitors.
Can be:
Tangible – Physical features (quality, design, warranty).
Intangible – Brand image or reputation.
Benefits
Increases demand.
Builds brand loyalty.
Creates a Unique Selling Point (USP).
Gives a competitive advantage.
Allows businesses to charge higher prices.
2.2.2 Price
Pricing Strategies
A pricing strategy is how a business decides what price to charge.
Penetration Pricing
Low price.
Low profit margin.
High sales volume.
Used to gain market share quickly.
Advantages
Attracts lots of customers.
Increases market share.
Discourages competitors.
Disadvantages
Lower profit per sale.
Hard to raise prices later.
Price Skimming
High price.
High profit margin.
Low sales volume.
Used for premium or unique products.
Advantages
High profit per item.
Creates a premium image.
Helps recover development costs.
Disadvantages
Fewer customers.
Competitors may offer cheaper alternatives.
Freemium Pricing
Basic product is free.
Customers pay for extra features.
Advantages
Attracts many users.
High profits from premium upgrades.
Disadvantages
Many users never pay.
Requires a large customer base.
Factors Affecting Pricing
1. USPs / Product Differentiation
More unique products can charge higher prices.
2. Technology
Customers can compare prices online.
Businesses may:
Price match competitors.
Use freemium pricing.
3. Level of Competition
High competition → Lower prices.
Low competition → Higher prices.
4. Brand Strength
Strong brands can charge premium prices.
Loyal customers are willing to pay more.
5. Product Life Cycle
6. Costs and Profit
Prices must:
2 more items...
Businesses consider:
4 more items...
Introduction
Often lower prices to attract customers.
Growth
Prices can increase as demand rises.
Maturity
Prices may fall because competition increases.
2.2.3 Promotion
Promotion Methods
Advertising
Paid promotion through media.
Advantages
Reaches many customers.
Increases awareness.
Builds brand image.
Disadvantages
Expensive.
Hard to measure.
Can be ignored.
Branding
Creating a unique identity for a business or product.
Advantages
Builds recognition.
Builds trust.
Differentiates from competitors.
Disadvantages
Expensive.
Takes time.
Special Offers
Temporary promotions to increase sales.
Advantages
Boosts sales.
Clears stock.
Encourages purchases.
Disadvantages
Reduces profit.
Attracts bargain hunters.
Can reduce full-price sales.
Sponsorship
Paying for publicity through an event or organisation.
Advantages
Increases awareness.
Improves image.
Reaches new customers.
Disadvantages
Expensive.
May not increase sales.
Risk of negative publicity.
Product Trials
Testing a product before a full launch.
Advantages
Gains customer feedback.
Reduces risk.
Allows improvements.
Disadvantages
Costs time and money.
Not suitable for all products.
2.2.4 Place
Distribution Channel
Three stage distribution channel
This channel is often used for products with high profit margins, where the manufacturer can afford to sell directly to the retailer and still make a profit
The three stage distribution channel moves the product directly from the producer to the retailer who then sells to to the final customer
Two stage distribution channel
The two stage distribution channel moves the product directly from the manufacturer to the end customer
This channel is commonly used for products that are sold online or through direct sales channels and is referred to as e-tailing
2.2.5 The Marketing mix to make business decisions
Ways to Gain Competitive Advantage
Innovation
Branding (reputation)
Strong stakeholder relationships
Adding value
Product differentiation
Market segmentation
Price leadership
Common Sources
Quality – Better quality products.
Delivery – Faster delivery.
Low Price – Cheaper than competitors.
Reliability – Products work well and last longer.
Ethical Stance – Environmentally or socially responsible.
Design – Attractive or unique product design.