The Marketing Mix (Cambridge (CIE) A Level Business): Flashcards

Services are non-physical activities provided by people or businesses that cannot be touched or stored and are usually performed at the time of purchase.

True.

Businesses often add services to a physical item to provide extra value and improve customer satisfaction and loyalty.

Tangible attributes are the physical features of a product that can be touched, seen or measured, such as size, colour, design, materials and weight.

Intangible attributes such as brand reputation, warranty and emotional value are often the reason a customer chooses one brand over another, even when the tangible features are similar.

Product development is the process of creating and launching new goods or services.

It helps a business respond to changing customer needs and stay ahead of competitors. It can also increase sales and market share, extend the product life cycle and take advantage of new technology.

Creating prototypes or test versions of a new product often results in waste, especially if expensive materials are used.

False.

A failed product can damage trust in the brand as a whole, leading to reduced sales of existing, successful products in the range.

Product differentiation is where a business distinguishes its products from those of competitors by creating functions or features that help them stand out.

Successful differentiation can increase demand, increase brand loyalty and allow the business to charge higher prices.

A business can differentiate through marketing and branding, packaging, functions and features, customisation and customer service.

A unique selling point (USP) is a distinguishing factor or characteristic of a product, service or brand that sets it apart from its competitors.

True.

If a business offers something that is difficult to imitate, it becomes harder for competitors to win customers. This gives the business a competitive advantage.

The five stages are development, introduction, growth, maturity and decline.

False.

Cash flow is usually negative in the introduction stage. Sales growth is slow while the business pays high costs for promotion, advertising and distribution.

The decline stage starts when sales fall as the product becomes obsolete or is replaced by newer products.

Extension strategies are techniques used to extend the life of a product beyond its natural life cycle in order to boost sales and maintain profitability.

The two types are product-related extension strategies and promotion-related extension strategies.

Introducing new variants of an original product, such as a diet version, is a product-related extension strategy known as a line extension.

The Boston Matrix is a tool used to analyse a product portfolio by classifying products into four categories based on their market share and the market growth rate.

A cash cow is a product with a high market share in a mature, low-growth market. It generates significant positive cash flow but has low growth potential.

True.

Question marks have a low market share in a high-growth market. Businesses usually invest in them to increase market share and turn them into stars, so cash flow is often negative.

A star is a product with a high market share in a high-growth market. It generates significant positive cash flow and has potential for continued growth.

False.

Dogs have a low market share in a low-growth market. They generate little revenue and have no growth potential.

It classifies products only on market growth rate and market share, ignoring factors such as competition, technology and customer preferences. A high market share does not guarantee profitability in a highly competitive market.

With many competitors, a business may use price reductions, loyalty schemes or product updates to maintain customer interest and defend market share.

A harvest strategy protects existing market share, streamlines operations to maximise profit and extracts cash flows to invest in other products or ventures.

Dogs are usually divested, meaning the product is sold off or the business plans an orderly exit from the market. A dog may be kept if it still generates some cash flow.

The three main influences are costs, price elasticity of demand (PED) and the other elements of the marketing mix.

False.

With elastic demand, even a small price rise could lower sales, so firms tend to keep prices low. It is inelastic demand that gives room for higher prices.

Competitive pricing is matching or undercutting the prices charged by competitors in order to increase sales.

A race to the bottom can occur when firms keep cutting prices to match rivals, regardless of the actual value of the product.

Penetration pricing is launching a product at a deliberately low price to win market share fast, with the aim of raising the price later.

True.

Low prices mean low profits in the market, so potential competitors may decide the market is not worth entering.

Price skimming is setting a high introductory price and lowering it over time.

Early adopters pay a high price, so high profit margins help the business recover research and launch costs quickly.

Price discrimination is when a firm charges different prices for the same product in order to maximise its revenue.

Dynamic pricing is continuously adjusting prices in real time to reflect demand, supply and other market conditions.

False.

Dynamic pricing requires advanced data systems, algorithms and constant oversight, which add complexity and cost.

Cost-plus pricing is calculating the cost of production and adding a markup that covers the business's desired profit margin.

Contribution pricing sets prices that cover the direct costs of producing a product and also contribute to covering indirect costs.

False.

Cost-based pricing is based on internal costs, so it ignores customer demand and willingness to pay. It also does not consider competitor pricing.

Psychological pricing is setting prices that take into account the customer's emotions, beliefs and attitudes towards a product, such as a price of 9.99 rather than 10.

Promotion aims to enhance business image, compete with rivals, support new products, increase sales revenue and provide information to customers.

Advertising is the use of the media, such as television, newspapers and radio, to promote products or brands.

False.

Advertising can reach large audiences, but it is an expensive promotional strategy. Businesses often pay external specialists or media agencies to create the adverts.

Sales promotion is the use of incentives or discounts, often temporary, to encourage customers to buy products.

During the promotion, revenue per item is reduced, so more units must be sold to break even.

Sales promotions are an effective way to clear excess inventory, promote a new product or raise cash quickly.

Direct promotion is communicating directly with customers through email, text message, social media or post.

True.

Direct promotion is measurable, so businesses can track their results and adjust their strategy accordingly.

Digital promotion is the use of online and electronic technologies to promote a business's products or services to consumers.

Customers may ignore adverts because of high competition and digital noise, and ad blockers reduce visibility. Campaigns need up-to-date skills, and negative feedback can spread quickly.

Packaging is designed to catch the customer's eye, communicate the quality of the product, provide key information and establish the brand image, as well as protect the product.

Brands are investing in creative and environmentally friendly packaging as they place a greater emphasis on sustainability.

A brand is the set of names, symbols, design elements and associations that customers link to a product, service or business.

The positive associations of a strong brand carry over to new items, which reduces the need for heavy introductory advertising.

Place in the marketing mix refers to where customers purchase a business's products and how the products are moved from producer to consumer.

Locating in areas with high foot traffic can achieve high sales volumes. Using innovative online channels helps reach customers who prefer to shop online.

True.

E-commerce makes it easier for consumers to shop online and have products delivered, so many businesses offer convenience and fast delivery to meet customer needs.

Channels of distribution are the intermediaries through which physical products move from the business to the end consumer.

Small retailers often lack the space or cash flow to hold large amounts of inventory, so they can buy little and often from a wholesaler.

False.

Each intermediary adds a markup, so the two extra markups from the wholesaler and the retailer push the selling price up for customers.

It is used when there are no physical retail stores, or when the wholesaler can sell directly to bulk-buying consumers such as schools, hotels or large events.

The producer to retailer to consumer channel is common where customers need support or advice when selecting a product.

The producer must handle delivery, returns and customer service itself, which can be expensive and time-consuming.

Digital distribution is the process of delivering products or services electronically, usually over the internet, without physical transportation or traditional retail outlets.

Digital distribution needs no packaging, delivery or physical inventory, whereas physical distribution has higher costs from shipping, warehousing and staff.

Physical distribution is still required for tangible goods such as clothing and furniture.