The Elements of the Marketing Mix (AQA GCSE Business): Flashcards

Price is the only element of the marketing mix that relates directly to sales revenue.

False.

Price should reflect the brand and quality of a product, and a low price may deter consumers who buy luxury goods as status symbols.

In most cases, an increase in price leads to a fall in demand for the product.

A pricing method is the approach a business uses to decide what prices to charge customers for its products.

Cost plus pricing is when a business calculates the cost of production and then adds a markup to set the final price.

True.

Cost plus pricing does not consider what rivals charge or the needs of the market, which are its main disadvantages.

Price skimming is when a business sets a high price for a new product when it is first introduced, then gradually lowers the price to ensure sales continue.

False.

Premium pricing uses a permanently high price to give customers an impression of high quality and luxury.

Penetration pricing is when a business sets a low price for a new product when it is first introduced to quickly capture market share, then raises the price later.

When a business sets its prices based on its rivals' prices, it is using competition pricing.

Loss leader pricing is charging a price below the average cost of a product to attract customers to buy other, profitable products.

Products with many USPs and high differentiation, a strong brand with a loyal customer base, and a less competitive market can all allow higher prices.

Prices may be set lower in the introduction stage, increase in the growth stage as demand rises, and need to be lowered again in the maturity stage.

Some retailers offer price matching policies to stop customers switching to a rival with a lower price.

The design mix is the combination of elements that make up a product's design, which are function, aesthetics and cost.

True.

Some manufacturers focus on one element more than the others, such as producing at the lowest possible cost and selling at a low price, and still make a profit.

Branding is the process of creating a unique and identifiable name, design, symbol or other feature that differentiates a product or company from its competitors.

Strong branding provides added value, the ability to charge premium prices, recognition and identity, and differentiation from competitors.

The product life cycle describes the different stages a product goes through, from its conception to its eventual fall in sales.

Sales rise slowly because the product is still new, while the business incurs high costs for promotion, advertising and distribution.

The growth stage of the product life cycle begins when sales increase rapidly and the business focuses on building market share.

False.

Maturity is characterised by high sales but slowing sales growth, and market saturation is likely.

The business may discontinue the product, reduce prices to clear stock or find new uses for the product.

An extension strategy is a technique used to extend the life of a product beyond its natural life cycle, usually once it reaches late maturity or decline.

The two types are product-related and promotion-related extension strategies, which are often used at the same time.

Launching new versions of an original product, such as a diet or sugar-free version, is known as a line extension.

True.

A loyalty scheme is a sales promotion, which is a promotion-related extension strategy designed to boost sales.

A product portfolio is the range of products or services offered by a business.

The first stage is to generate ideas, using sources such as customer suggestions, competitors' products, employees' ideas and research.

In new product development, a prototype is an early version of the product that shows how it can be manufactured and what problems may arise.

A test launch sells the product on a small scale to a limited market to see how well it sells, so changes can be made before an expensive full launch.

False.

Market research, research and development and producing trial products can all be very expensive.

An innovative new product creates a unique selling point (USP), which can justify a high price, for example through price skimming.

The Boston Matrix is a tool used to analyse a product portfolio by classifying products according to their market share and the market growth rate.

A cash cow is a product with a high market share in a mature market that is no longer growing.

Marketing focuses on maintaining market share and profitability, as the product needs only minimal investment.

A product with a low market share in a high-growth market is known as a problem child or question mark.

True.

Stars lead a growing market, and businesses typically invest in them to maintain or increase their market share.

Businesses often divest (move away from) dogs, which have a low market share in a low-growth market, to focus on more profitable products.

False.

The aim is a balanced portfolio, in which profitable cash cows fund the development of other products and unprofitable products are divested.

Promotion is the set of activities that raise awareness, create interest and prompt desire for a product amongst customers.

Promotion introduces a new product to consumers and informs them of its key features.

False.

Promotion reminds customers of an established product's specific attractions, such as its quality.

As well as increasing sales, promotion can be used to establish and improve a business's brand image.

Advertising is promotion through paid channels, such as television, radio, magazines, billboards and online adverts.

Advertising can be expensive, its effectiveness is difficult to measure, and many customers ignore adverts or switch over.

A sales promotion is a marketing technique that encourages purchase at the point of sale by offering temporary incentives or discounts.

False.

Sales promotions can attract deal-seeking customers who may not be loyal to the brand.

Sponsorship is an agreement in which a business gives financial or other support to an event, team or organisation in exchange for marketing exposure.

True.

Sponsorship may lead to negative publicity if the sponsored team, event or person is involved in a scandal or controversy.

Public relations (PR) is building positive relationships with the public and managing reputation, through activities such as media relations, crisis management and community outreach.

Social media marketing targets promotional activity at users of online communities, such as video-sharing and social networking sites.

It needs consistent time and effort, negative comments can be seen by all users, and changing algorithms can reduce the reach of content.

The promotional mix is the combination of promotional activities a business selects to inform, persuade and remind customers of its products or brand.

The factors are the finance available, competitors' actions, the nature of the product, the nature of the market and the characteristics of the target market.

True.

Social media advertising can cost very little per click, and small businesses can even host free pages on social media platforms.

The business may need to respond with its own promotion to avoid losing market share.

Businesses selling luxury or premium products often advertise in more exclusive publications, such as glossy fashion magazines.

Products with wide appeal are often promoted through the mass media, such as TV, radio or national newspapers.

False.

Niche products are better promoted using highly targeted methods, such as local outdoor advertising aimed at customers in a particular area.

Businesses choose the media their target market uses, for example social media rather than newspapers to reach young people.

A successful promotional mix is one that meets the marketing objectives and the specific criteria set by managers.

A successful promotional mix should balance the rest of the marketing mix.

It gives good coverage of the target market, is high quality to reflect the brand's values, and uses a variety of advertising and below the line methods.

Place is where customers buy a business's products and the routes used to move them from producer to consumer.

Locating in an area with high foot traffic can help a business achieve high sales volumes.

True.

The growth of e-commerce has led many businesses to invest in their online presence, offering convenience and fast delivery.

Distribution channels are the intermediaries through which goods or services move from the business to the end customer.

In a three-stage distribution channel, the producer sells to a wholesaler, who then sells to a retailer, from which the consumer buys.

The large retailer buys stock directly from the manufacturer, stores it in its warehouses and sells it to consumers in its stores.

False.

Retailers serve consumers buying small quantities for personal use, while wholesalers suit customers buying in large quantities.

Telesales is selling products, particularly services, directly to customers over the telephone.

When customers order by post or phone after looking through a brochure or catalogue, the business is selling by mail order.

Selling directly removes the need for expensive retail or wholesale outlets and gives the business direct contact with customers.

E-commerce is the trade of goods and services over the internet.

False.

Businesses can also sell through third-party online platforms, which gives small businesses the chance to reach large audiences.

Businesses face competition from around the world, need large warehouses and stock control systems, and miss out on face-to-face feedback from customers.

Online businesses can use dynamic pricing techniques to maximise profit during periods of high demand.

Automation can suggest complementary products that are often bought at the same time.

True.

Personal services such as beauty treatments or home improvements are carried out in person, so e-commerce is not suitable for selling them.

Consumers can easily shop around and compare prices, shop conveniently at any time and from anywhere, and buy from worldwide retailers for more choice.

Products cannot be handled or tried out before purchase, so customers often find them unsuitable.

False.

Customers in low-income countries may be unable to buy online because of poor infrastructure, which limits the potential market size.

Many consumers worry about identity theft or fraudulent use of their credit cards.

M-commerce refers to transactions carried out on a mobile phone.

Most businesses have developed optimised applications that let customers browse and buy their products on mobile phones.

Businesses use text messaging and instant messaging, often through their app, to send special offers, website links and product surveys.

An integrated marketing mix is one that combines each element of the marketing mix in the best possible way.

False.

A change in one element can have a significant impact on the others, so the elements must work together.

The product is what the customer is buying, so it determines the price, the target audience and the promotion strategy.

Customers may see the product as low quality, which can lead to lower sales.

An integrated marketing mix can build a competitive advantage by creating a cohesive strategy that sets the business apart from its rivals.

The product is often basic and may be sold at a high price to recover development costs. It needs significant promotion to build awareness and has limited distribution.

During the growth stage, a wider range of distribution channels is set up to increase product availability.

True.

Prices may be lowered to remain competitive and defend market share, while products are intensively distributed to maximise market coverage.

Promotion becomes minimal and focuses on retaining loyal customers.

An economic downturn may require more aggressive promotion and price discounts to keep customers whose incomes are squeezed.

New rivals may force changes to pricing, product features or promotional strategies, and innovative rival products may require product improvements or rebranding.

True.

Advertising restrictions may limit promotional options or require changes to promotional messaging.

Advances in technology, such as the rise of e-commerce, may require changes to the place and promotion elements of the marketing mix.

Social trends towards ethical behaviour or environmental awareness can influence promotional messaging and product or packaging design.