unit 3 ch18 market research
Product life cycle growth stage explained? (points to note about it)
If the product is effectively promoted and well received by the market, then sales should grow significantly. This stage cannot last for ever, although all firms wish that it would. Eventually, and this may take days, weeks or even years, sales growth will begin to slow and might stop altogether, which leads the product into the next stage. The reasons for growth dying down include increasing competition, technological changes making the product less appealing, changes in consumer tastes and saturation of the market.
oligopoly competition is?
In between these two (monopoly and perfect competition) extremes, many industries are dominated by just a few large firms - such as oil and petrol retailing, tyre production, detergents - and this type of competition is known as oligopoly
Firm become what in a perfect competition
In this type of market, all firms become price takers, where the market price is the one that all firms must charge. If they try to set a price higher than this, then they will sell nothing - this is true competition-based pricing
New product development (NPD) importnace to businesses
New product development (NPD) is crucial to the success of some businesses, such as the rapidly changing world of computer games. In other markets, it is possible to sell the same product for many years or to adjust and adapt it slightly to meet changing tastes and to enter new segments,
Pricing strategies for new products are?(name 1-2)
Penetration pricing Market skimming
Competitors' prices (how do managers determine the appropriate price)
Related to the previous point, it may be difficult to set a price very different from that of the market leader, unless true product differentiation (see above) can be established.
The key aim of CRM?
Th e key aim of CRM is not necessarily to win new customers but to keep existing ones. Studies have shown that it can cost between four and ten times as much to gain new customers (with expensive promotions) as it does to keep existing ones.
why is PED normally negative?
Th e value of PED is normally negative because a fall in price (-ve) usually results in a rise in demand (+ve). This is called an inverse relationship. It is quite common to ignore the negative sign of the PED result, as it is the extent of the change that is important.
Psychological pricing is?
Th is has two aspects. Firstly, it is very common for manufacturers and retailers to set prices just below key price levels in order to make the price appear much lower than it is. e.g 1.99 instead of 2.01 and psychological pricing also refers to the use of market research to avoid setting prices that consumers consider to be inappropriate for the style and quality of the product. e.g if perfume is cheap they might think its not good or special but if its expensive it has a specialness to it
aims of this pricing strategy are?
The aims of this pricing strategy are to maximise short-run profits before competitors enter the market with a similar product and to project an exclusive image for the product.
Cost-based pricing
The basic idea is that firms will assess their costs of producing or supplying each unit, and then add an amount on top of the calculated cost.
effects of Level of competition in pricing
The easier it is for new firms to join an industry, the more competitive market conditions are likely to be. It is not technically difficult to become a clothing retailer or a window cleaner - so there are many competing firms in these markets. The firms in these sectors of industry are more likely to have to adopt competition-based pricing than firms in an industry such as electricity generation or aircraft manufacturing.
Dynamic pricing: explained?
The increasing use of constantly changing prices when selling goods to different customers - especially online through e-commerce. E-commerce has become a 'hot spot' for dynamic pricing models due to the way consumers can be 'separated by and communicated with' over the internet. Consumers cannot tell what other buyers are paying and businesses can vary the price according to demand patterns or knowledge that they have about a particular consumer and their ability to pay.
Unique selling point importance
The most successful new products are those that are differentiated from competitors' products and offer something 'special'. Product differentiation can be an effective way of distancing a business from its rivals - the best form of product differentiation is one that creates a unique selling point (USP).
What is the difference of Products and brands?
The product is the general term used to describe the nature of what is being sold. Th e brand is the distinguishing name or symbol that is used to differentiate one manufacturer's products from another
Price elasticity of demand (how do managers determine the appropriate price)
The significance of this has already been discussed above.
product means?
The term 'product' includes consumer and industrial goods and services.
Price wars to gain market share is?(oligopolistic industries)
These can be very damaging to profits and can, in extreme cases, lead to some weaker firms being forced out of the industry. This might reduce long-run competition in the industry. This reduced competition might lead to higher prices eventually and could reduce the pressure on firms to innovate with new products.
firms become what in a monopoly
They are said to be price-makers
Product life cycle pros? (points for it)
This is an important tool for assessing the performance of the firm's current product range It is an important part of a marketing audit - a regular check on the performance of a firm's marketing strategy.
Product life cycle inroduction stage explained? (points to note about it)
This is when the product has just been launched after development and testing. Sales are often quite low to begin with and may increase only quite slowly - but there are exceptions, such as a newly launched DVD by a major global rock star.
Inelastic demand is/value?
Value of PED (ignoring minus sign) Between 0 and 1 ■ The percentage change in demand is less than the percentage change in price. If a firm faces this elasticity of demand, it can raise the price, not lose much demand and increase sales revenue. However, this cannot keep happening. As the price continues to rise, demand will become more elastic
Elastic demand is/value?
Value of PED (ignoring minus sign) Between 1 and infinity (∞) ■ The percentage change in demand is greater than the percentage change in price. If a firm faces this elasticity of demand, then it can lower the price, pick up a lot more demand and increase sales revenue.
Perfectly elastic demand is/value?
Value of PED (ignoring minus sign) Infinity (∞) ■ An infinitely large amount is demanded at one price and then demand falls to zero if the price is raised, even by the smallest amount. In reality, there is no product that would have this PED.
Unit elasticity is/value?
Value of PED (ignoring minus sign) Unitary ■ The percentage change in demand is equal and opposite to the percentage change in price, so any price change will lead to an equal change in demand and the total sales revenue will remain constant. When PED = 1, sales revenue will be maximised.
Perfectly inelastic demand is/value?
Value of PED (ignoring minus sign) Zero ■ The same amount is demanded, no matter what the price. In reality, there is no product that would have this PED
Competition-based pricing: def?
a firm will base its price upon the price set by its competitors.
Non-price competition is?(oligopolistic industries)
due to the potentially unprofitable effect of price wars, oligopolists often engage in fierce and competitive promotional campaigns that are designed to establish brand identity and dominance.
Full-cost (or absorption-cost) pricing :def
setting a price by calculating a unit cost for the product (allocated fixed and variable costs) and then adding a fixed profit margin. Example 3: A business makes industrial training DVDs and the annual overheads or fixed costs are $10,000. The variable cost of producing each DVD is $5. The business is currently producing 5,000 units per year. The total costs of this product each year are: $10,000 + [5,000 × $5] = $35,000 The average or unit cost of making each DVD: $35,000/5,000 = $7 The business will have to charge at least $7 each in ordervto break even on each unit. If the firm now adds a 300% profit margin then the total selling price becomes $28.
Target pricing :def/example?
setting a price that will give a required rate of return at a certain level of output/sales. example. If a company has costs of $400,000 when making 10,000 units of output and has an expected rate of return of 20%, then it will set its price by working out its total cost and expected return and then dividing the amount by the output. Example 2: Total output costs for 10,000 units = $400,000 Required return of 20% on sales = $80,000 Total revenue needed = $480,000 Price per unit 480,000/10,000 = $48
Penetration pricing:def?
setting a relatively low price often supported by strong promotion in order to achieve a high volume of sales.
Customer relationship management (CRM):def
using marketing activities to establish successful customer relationships so that existing customer loyalty can be maintained.
the 4Cs?
■ (Customer solution) - what the firm needs to provide to meet the customer's needs and wants. ■ (Cost to customer) - the total cost of the product including extended guarantees, delivery charges and financing costs. ■ (Communication with customer) - providing up-to-date and easily accessible two-way communication links with customers to both promote the product and gain back important consumer market research information. ■ (Convenience to customer) - providing easily accessible pre-sales information and demonstrations and convenient locations for buying the product.
Consumer durable:def
manufactured product that can be reused and is expected to have a reasonably long life, such as a car or washing machine.
marketing managers should try to understand what? (product based)
marketing managers should try to understand what 'intangible features or attributes' customers are looking for when making their purchasing decisions, as well as, for example, 'what colour of car and which size of engine' they are likely to prefer. Meeting customers 'intangible expectations' for a product is most commonly achieved by effective branding
Tangible attributes of a product:def
measurable features of a product that can be easily compared with other products.
(PED)Price elasticity of demand: def/formula
measures the responsiveness of demand following a change in price. percentage change in quantity demanded -------------------------------------------------- percentage change in price the more elestic the more more demand changes as price changes
Dynamic pricing:def?
offering goods at a price that changes according to the level of demand and the customer's ability to pay.
New product development is usually based on?
on attempting to satisfy consumer needs that have been identified through research. It is expensive and not always successful
The most extreme form of competition is called?
perfect competition.
Managing product portfolios unneeded moments (points against it)
product is just one part of the overall strategy needed to win and keep customers. Price, promotion and place are also key factors in making products successful - and a balanced and integrated marketing mix is essential
Market skimming:def?
setting a high price for a new product when a firm has a unique or highly diff erentiated product with low price elasticity of demand.
Uses of the product life cycle(3 main uses)
■ Assisting with planning marketing-mix decisions, such as new product launches and price or promotion changes. ■ Identifying how cash flow might depend on the cycle. ■ Recognising the need for a balanced product portfolio.
Perceived-value pricing is used where?
(customer-value pricing) is used in markets where demand is known to be inelastic and a price is placed upon the product that reflects its value, as perceived by the consumers in the market. The more prestigious the brand name, for example Rolex watches, the higher the perceived value, and so the higher the price that can be set.
examples of extension strategies
-selling in new markets (export markets for example) -repackaging and relaunching the product and finding new uses for the product(rebranding) -Reducing the price of the product -repromoting/advertising
Economists suggest that there are what four conditions for perfect competition to exist?
1 Perfect consumer knowledge about prices and products. 2 Firms' products are of equal quality or homogeneous. 3 There is freedom of entry into and exit from the industry. 4 There are many consumers and producers, and none of the latter is big enough to influence prices on its own
Link between the 4Ps and the 4Cs
4Ps 4Cs Product Customer solution Price Cost to customer Promotion Communication with customer Place Convenience to customer
Collusion is?(oligopolistic industries)
As both of the forms of competition referred to above are expensive and may reduce profits (other forms), the few firms in an oligopolistic industry would find it relatively easy to collude, as in the formation of a cartel. These practices, when discovered, are nearly always declared illegal and are then subject to court action and heavy fines.
whats At the root of CRM?
At the root of CRM is customer information. Gain as much information as possible about each existing customer - income, product preferences, buying habits and so on - and adapt the 4Ps to meet these needs as closely as possible. This is virtually segmenting each customer and is, of course, the opposite of mass marketing. However, now that technology has made customer data collection so much easier and cheaper, it is becoming a widely adopted marketing strategy.
Product life cycle Maturity or saturation: stage explained? (points to note about it)
At this stage, sales fail to grow, but they do not decline significantly either. This stage can last for years, e.g phones only replaced when broken etc
Whether it is a new or an existing product (how do managers determine the appropriate price)
If new, a decision will have to be made as to whether a 'skimming' or a 'penetration' strategy is to be adopted.
Business and marketing objectives (how do managers determine the appropriate price)
If the aim is to become market leader through mass marketing (see Chapter 16), then this will require a different price level to that set by a business aiming at select niche marketing. If the marketing objective is to establish a premium branded product, then this will not be achieved with rock-bottom prices. The key point is that the price must reflect the other components of the marketing mix that must all be based upon the marketing objectives of the business.
Costs of production (how do managers determine the appropriate price)
If the business is to make a profit on the sale of a product, then, at least in the long term, the price must cover all of the costs of producing it and of bringing it to the market. These costs include the variable costs and the fixed costs. Variable costs vary with the number of units produced, such as material costs. Fixed costs can be very substantial, such as rents and advertising and promotion costs. These do not vary directly with the number of units produced and sold.
Competitive conditions in the market (how do managers determine the appropriate price)
If the firm is a monopolist, it is likely to have more freedom in price setting than if it is one of many firms making the same type of product. A firm with a high market share may be referred to as a dominant firm and it is likely to be a price-setter - setting prices for other smaller firms in the market to follow. The more competition there is, the more likely it is that prices will be fixed similar to those fixed by other rival businesses.
Why is product a key part of the marketing mix?
If the product does not meet customer expectations, as discovered by market research, regarding: ■ quality, ■ durability, ■ performance and ■ appearance, then no matter how low the price or how expensive the adverts for it, it will not sell successfully in the long term.
Factors that determine price elasticity?
1) How necessary the product is: __________________________________________________________________ The more necessary consumers consider a product to be, the less they will react to price changes. This will tend to make the demand inelastic, for example salt and oil. 2) How many similar competing products or brands there are: ___________________________________________________________________ If there are many competitors, then there are a large number of substitutes, and consumers will quickly switch to another brand if the price of one manufacturer's product increases − for example fruit being sold by one seller in a large street market. Any move by a business to reduce the number of competing products, such as a merger or takeover, will probably make demand for its own products less elastic 3) The level of consumer loyalty: ____________________________________________________________________________ If a firm has successfully branded its product to create a high degree of loyalty among consumers, like Coca-Cola, then the consumers will be likely to continue to purchase the product following a price rise. Another example of this is designer clothes that have a strong following, despite price increases, among well-off consumers. All businesses attempt to increase brand loyalty with influential advertising and promotional campaigns and by making their products more distinct - this is called product differentiation. 4) The price of the product as a proportion of consumers' incomes: __________________________________________________________________________ A cheap product that takes up a small proportion of consumers' incomes, such as matches or batteries, is likely to have inelastic demand, as consumers will not care too much about a 10% or 15% price increase.
uses of price elasticity of demand?
1) Making more accurate sales forecasts: ______________________________________________________________ If a business is considering a price increase, perhaps to cover rises in production costs, then an awareness of PED should allow forecast demand to be calculated. For instance, if PED is believed to be -0.8 and the price is increased by 10%, what will be the new weekly sales level if it is currently 10,000 per week? Demand will fall by 8% (check this out using the PED formula) and this will give a forecast sales level of 9,200 per week. 2) Assisting in pricing decisions: ________________________________________________________________ If an operator of bus services is considering changing its pricing structure, then, if it is aware of the PED of different routes, it could raise prices on routes with low PED (inelastic) and lower them on routes with high PED. This kind of analysis also underpins the strategy known as price discrimination - this is covered later in this chapter.
limitation of PED(1-3)
1)PED assumes that nothing else has changed.)) If Firm A reduces the price for a product by 10%, it will expect sales to rise because of this - but if, at about the same time, a competitor leaves the industry and consumer incomes rise, the resulting increase in sales of Firm A's product may be very substantial, but not solely caused by the fall in price. Calculating PED accurately in these and similar situations will be almost impossible. 2) A PED calculation, even when calculated when nothing but price changes, will become outdated quickly ))and may need to be often recalculated because over time consumer tastes change and new competitors may bring in new products - so last year's PED calculation may be very different to one calculated today if market conditions have changed. 3) It is not always easy, or indeed possible, to calculate PED.)) The data needed for working it out might come from past sales results following previous price changes. These data could be quite old and market conditions might have changed. In the case of new products, market research will have to be relied upon to estimate PED - by trying to identify the quantities that a sample of potential customers would purchase at different prices. This will be subject to the same kind of inaccuracy as other forms of market research.
Product positioning is?
Before deciding on which product to develop and launch, it is common for firms to analyse how the new brand will relate to the other brands in the market, in the minds of consumers This is called positioning the product by using techniques such as market mapping.
branding importance
Branding can have real influence on marketing. It can create a powerful image or perception in the minds of consumers - either negative or positive - and it can give one firm's products a unique identity.
Product life cycle Decline stage explained? (points to note about it)
During this phase, sales will decline steadily. Either no extension strategy has been tried or it has not worked, or the product is so obsolete that the only option is replacement. Newer competitors' products are the most likely cause of declining sales and profits - and when the product becomes unprofitable or when its replacement is ready for the market, it will be withdrawn.
how to interpret ped formula(example)
Example: the price increased from $4 to $5 and demand fell from 300 units per week to 270 units. What is the PED? Step 1: Calculate the percentage change in price. Step 2: Calculate the percentage change in demand. Step 3: Use the PED formula: % change in demand = 10 % change in price = 25 PED = 10 ____ 25 = 0 4 It is now important to explain this result. A PED of 0.4 (do not forget that we are overlooking the minus sign) means that demand changes by 0.4% for every 1.0% change in price. As this is less than one, it is described as being inelastic. Consumers do not respond greatly to a change in the price in this product: an increase in price will raise a firm's revenue, while a price reduction, because demand will change little, will reduce revenue.
The marketing mix and phases of the product life cycle
Introduction: price: ■ may be high compared to competitors (skimming) or low (penetration) Promotion: ■ high levels of informative advertising to make consumers aware of the product's arrival on the market Place (distribution outlets): ■ restricted outlets - possibly high-class outlets if a skimming strategy is adopted Product: ■ basic model __________________________________________________________________________ Growth: Price: ■ if successful, an initial penetration pricing strategy could now lead to rising prices Promotion: ■ consumers need to be convinced to make repeat purchases - brand identification will help to establish consumer loyalty Place (distribution outlets): ■ growing numbers of outlets in areas indicated by strength of consumer demand Product: ■ planning of product improvements and developments to maintain consumer appeal _________________________________________________________________________ Maturity: Price: ■ competitors likely to be entering market - there will be a need to keep prices at competitive levels Promotion: ■ brand imaging continues - growing need to stress the positive diff erences with competitors' products Place (distribution outlets): ■ highest geographical range of outlets possible - developing new types of outlets where possible Product: ■ new models, colours, accessories, etc. as part of extension strategies _______________________________________________________________________________ Decline: Price: ■ lower prices to sell off stock - or if the product has a small 'cult' following, prices could even rise Promotion: ■ advertising likely to be very limited - may just be used to inform of lower prices Place (distribution outlets): ■ eliminate unprofitable outlets for the product Product: ■ prepare to replace with other products - slowly withdraw from certain markets ________________________________________________________________
New product development involves?
It involves 'research and development' costs and many of the products initially developed will never reach the final market. It is important to realise that developing new products cannot just be left to the scientists or the engineers. Input from the marketing department is vital to ensure that the new idea is developed into a product that the market will accept and buy.
the need for a balanced product portfolio/what is it?
Look at graph. Th is shows an 'ideal' position for a business to be in. As one product declines, so other products are being developed and introduced to take its place Cash flow should be reasonably balanced, so there are products at every stage and the positive cash flows of the successful ones can be used to finance the cash deficits of others. Factory capacity should be kept at roughly constant levels as declining output of some goods is replaced by increasing demand for the recently introduced products. This is known as a balanced portfolio of products.
Loss leaders is?
Loss leaders Th is is a common tactic used by retailers. It involves the setting of very low prices for some products - possibly even below variable costs - in the expectation that consumers will buy other goods too. The firms hope that the profits earned by these other goods will exceed the loss made on the low-priced ones.
Managing product portfolios effectively can help a business achieve its marketing objectives use/importance? (points for it)
Managing product portfolios effectively can help a business achieve its marketing objectives Products cannot just be 'launched and forgotten' but must be developed, marketed and managed to help the business increase sales profitably The product is often considered to be the most important element of the marketing mix, if it fails to work, is poorly designed and looks ugly, will low prices and extensive advertising help sales much? without a well managed product portfolio that offers customer real and distinctive benefits, marketing objectives are unlikely ever to be achieved.
types of name Cost-based pricing them? 1-4
Mark-up pricing Target pricing Full-cost (or absorption-cost) pricing Contribution-cost (or marginal-cost) pricing Competition-based pricing
Mark-up pricing :def/example
adding a fixed mark-up for profit to the unit price of a product. Example 1: Total cost of brought-in materials = $40 50% mark-up on cost = $20 Selling price = $60
Brand:def
an identifying symbol, name, image or trademark that distinguishes a product from its competitors.
Product portfolio analysis:def?
analysing the range of existing products of a business to help allocate resources effectively between them.
Contribution-cost pricing:def?
setting prices based on the variable costs of making a product in order to make a contribution towards fixed costs and profit. Example 4: a firm produces a single product that has direct costs of $2 per unit and the total fixed costs of the firm are$40,000 per year. Th e firm sets a contribution of $1 per unit and so sells the product at $3. Every unit sold makes a contribution towards the fixed costs of $1. If the firm sells 40,000 units in the year, then the fixed costs will be covered. Every unit sold over 40,000 will return a profit. Thus, if the firm sells 60,000 units, then the fixed costs will be covered and there will be $20,000 profit made. Obviously, it would be good for a firm if it produced a range of products that all made a positive contribution to the fixed costs. Then each product is 'doing its bit'. As a general rule of thumb, a product that makes a positive contribution to fixed costs should continue to be produced so long as there is spare capacity in the firm, it does not take the place of a product with a higher contribution and there is not another option that has a higher contribution. There are many firms that have excess capacity and hence use contribution-cost pricing to attract extra business that will absorb the excess capacity. Examples are train companies, for which there is substantial excess capacity except in the morning and evening rush hours. Even then, trains tend to run almost empty in one of the two directions. Electricity and telephone companies face the same sort of situation. When this problem arises, some businesses are able to use price discrimination to increase demand during the low-use periods - see below. Example 5: A firm produces a single product that has a variable cost per unit of $4. Th e annual fixed costs or overheads are $80,000. Th e firm decides on a contribution of $2 per unit sold. Therefore, selling price is $6. If the business sells 50,000 units in one year, the total contribution to fixed costs becomes 50,000 × $2 = $100,000. This exceeds the fixed costs by $20,000 and so a profit of this amount has been made. Th is firm would have to sell at least 40,000 units per year in order to break even.
Intangible attributes of a product:def
subjective opinions of customers about a product that cannot be measured or compared easily.
Price discrimination is?
takes place in markets where it is possible to charge different groups of consumers different prices for the same product. An example of this would be airline operators who charge many diferent rates for the same journey. Firms can price discriminate if there are different groups of consumers with different elasticities of demand for the product, where the firm is able to avoid resale between the groups and when it does not cost too much to keep the groups of consumers separate..
Product positioning:def
the consumer perception of a product or service as compared to its competitors.
Product:def
the end result of the production process sold on the market to satisfy a customer need.
Contribution-cost pricing explained?
the firm calculates a unit variable cost for the product in question and then adds an extra amount that is known as a 'contribution' to fixed costs. If enough units are sold, the total contribution will be enough to cover the fixed costs and to return a profit.
Marketing mix:def
the four key decisions that must be taken in the effective marketing of a product.
Product life cycle:def
the pattern of sales recorded by a product from launch to withdrawal from the market and is one of the main forms of product portfolio analysis.
Product life cycle cons? explained? (points against it)
the product life cycle is based on past or current data - it cannot be used to predict the future. explanation: Just because a product's sales have grown over the past few months does not mean that they will continue to grow until a long period of maturity is reached - sales could crash very quickly with no chance of an extension strategy being employed. Think of all the fashions that died out - such as platform shoes or flared jeans - and then made a comeback. In contrast, sales of other products can, against all predictions, grow and grow.
extension strategies:def
these are marketing plans to extend the maturity stage of the product before a brand new one is needed.
To be really useful, a product life-cycle analysis needs?
to be used together with sales forecasts and management experience to assist with effective product planning.
Identifying how cash flow might depend on the product life cycle?
■ Cash flow is vital to business survival and ignoring the link between cash flow and product life cycles could be very serious. Figure 18.5 shows this typical relationship. ■ Cash flow is negative during the development of the product as costs are high, but nothing has yet been produced or sold. ■ At introduction, the development costs might have ended but heavy promotional expenses are likely to be incurred - and these could continue into the growth phase. In addition, there is likely to be much unused factory capacity at this stage, which will place a further strain on costs. As sales increase, then cash flow should improve - precisely when this will happen will depend on the length of consumer credit being offered. ■ The maturity phase is likely to see the most positive cash flows, because sales are high, promotion costs might be limited and spare factory capacity should be low. ■ As the product passes into decline, so price reductions and falling sales are likely to combine to reduce cash flows. Clearly, if a business had too many of its products either at the decline or the introduction phase, then the consequences for cash flow could be serious. This introduces the next concept
how do managers determine the appropriate price?
■ Costs of production ■ Competitive conditions in the market ■ Competitors' prices: ■ Business and marketing objectives: ■ Price elasticity of demand ■ Whether it is a new or an existing product:
Benefi ts of an eff ective USP
■ Effective promotion that focuses on the differentiating feature of the product or service. ■ Opportunities to charge higher prices due to exclusive design/service. ■ Free publicity from business media reporting on the USP. ■ Higher sales than undifferentiated products. ■ Customers more willing to be identified with the brand because 'it's different'.
importance of he complete brand image or lifestyle offered by the good?(point to rememeber)
■ In assessing whether a product offers good value, price is only one factor. The complete brand image or lifestyle offered by the good is increasingly important in a world where many consumers have so much choice and their incomes are rising. A low price for a prestige lifestyle product could easily destroy the image that the rest of the marketing mix is attempting to establish.
whats gained by low-price strategy at all times?(point to rememeber)
■ In the world of fast-moving consumer goods, there is often surprisingly little to be gained by adopting a low-price strategy at all times - consumers expect good value, not necessarily low prices. 'Good value' means that all aspects of the marketing mix are combined and integrated together so that consumers accept the overall position of the product and agree that its image justifies the price charged for it.
Product life cycle stages?
■ Introduction ■ Growth: ■ Maturity or saturation: ■ Decline:
effect to pricing methods of a businesses products overtime?(point to rememeber)
■ It would be incorrect to assume that one firm will use the same pricing method for all of its products. This would be unwise as the market conditions for the different products could vary greatly. It would, therefore, be important for the business to apply different methods to its portfolio of products, depending on costs of production and competitive conditions within the market.
marketing managers should ensure that market research is used to?(point to rememeber)
■ Level of price can have such a powerful influence on consumer purchasing behaviour that marketing managers should ensure that market research is used to test the impact of different levels of price on potential demand.
when can Competition-based pricing be used?
■ Price leadership often exists in markets where there is one dominant firm and other firms simply charge a price based upon that set by the market leader. ■ Some markets have a number of firms the same size, but prices are still similar in order to avoid a price war. An example of this would be the large petrol companies. ■ Destroyer pricing exists when firms note the price of competitors' products and then deliberately undercut them in order to try to force them out of the market. ■ Market pricing is where the price charged is based upon a study of the conditions that prevail in a certain market. This is sometimes also called consumer-based pricing, because, when the market is studied, it is in many ways the actions of consumers in that market that are actually being looked at. However, a study of the market is, in fact, more detailed than just looking at the responses of the consumers
How do these fi rms compete with each other in oligopolistic industries,?
■ Price wars to gain market share: ■ Non-price competition: ■ Collusion:
Assisting with the planning of marketing-mix decisions explained
■ When would you advise a firm to lower the price of its product - at the growth or at the decline stage? ■ In which phase is advertising likely to be most important - during introduction or at maturity? ■ When should variations be made to the product - during introduction or at maturity? By thinking about these questions you can begin to see how significant an awareness of the product life cycle can be to marketing managers
Developing effective long-term relationships can be achieved by?
■ targeted marketing - giving each customer the products and services they have indicated - from past purchases - they most need ■ customer service and support - essential to building customer loyalty, call centres have been criticised for letting existing customers down and many businesses are now focusing on improving these ■ providing as much information to customers as possible - about product materials/quality/features and service levels ■ using social media - some CRM systems integrate social media sites like Twitter, LinkedIn and Facebook to track and communicate with customers. Enterprise Feedback Management soft ware platforms such as Confirmit and Satmetrix combine a company's internal survey data withtrends identified through social media to allow businesses to make more accurate decisions regarding which products to supply to satisfy customers
types of PED
■Perfectly inelastic demand ■Inelastic demand ■Unit elasticity ■Elastic demand ■Perfectly elastic demand
price importance in marketing mix?(points for it)
■Price can have a great impact on the consumer demand for the product ■ determine the degree of value added by the business to bought-in components ■ influence the revenue and profit made by a business due to the impact on demand ■ reflect on the marketing objectives of the business and help establish the psychological image and identity of a product.
Marketing mix is made up of what 4ps?
■product. ■price ■ Promotion ■Place Not all of these 4Ps have the same degree of significance in every case. It is vital that these elements fi t together into a coherent and integrated plan.
pricing strategies come under the heading of market orientated pricing are?
❏ Perceived-value pricing ❏ Price discrimination ❏ Dynamic pricing
