2.2 Making Marketing Decisions (Edexcel GCSE Business): Flashcards
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Define the design mix.
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Define the design mix.
The design mix is the combination of elements that make up a product's design.
What are the three elements of the product design mix?
Function, aesthetics and cost.
What does the 'function' of a product refer to?
Its intended purpose and the tasks it performs — the most important element, as it determines how well it meets users' needs.
refers to a product's visual and sensory appeal, such as its shape, colour and texture.
Aesthetics refers to a product's visual and sensory appeal, such as its shape, colour and texture.
Define the product life cycle.
The product life cycle describes the stages a product goes through from conception to its eventual decline in sales.
Name the five stages of the product life cycle.
Development, introduction, growth, maturity and decline.
True or False?
A product's cash flow is usually negative during the introduction stage.
True.
In introduction, cash flow is usually negative due to high promotion, advertising and distribution costs.
What happens to sales and cash flow in the maturity stage?
Sales growth slows at peak market penetration, but cash flow is positive as costs fall through economies of scale.
Define an extension strategy.
An extension strategy is a technique used to extend a product's life beyond its natural life cycle and boost sales.
What are the two types of extension strategy?
Product-related strategies and promotion-related strategies.
Give an example of a product-related extension strategy.
Product improvements (e.g. Samsung's new Galaxy models), line extensions (e.g. Diet Coke), or repositioning.
Introducing Diet Coke and Coke Zero as new versions of Coca-Cola is an example of a extension.
Introducing Diet Coke and Coke Zero as new versions of Coca-Cola is an example of a line extension.
Define product differentiation.
Product differentiation is a business's attempt to distinguish its products from those of competitors.
Give two benefits of successful product differentiation.
It can increase demand, build brand loyalty, and allow the business to charge higher prices.
True or False?
Product differentiation must always be a tangible, visible feature.
False.
Differentiation may be tangible or just a perception created in the consumer's mind.
Define price skimming.
Price skimming is a high profit margin, lower volume pricing strategy.
Define penetration pricing.
Penetration pricing is a lower profit margin, higher volume pricing strategy.
Give an example of a business using a low-margin, high-volume strategy.
Tesco uses a penetration (low margin, high volume) strategy.
A pricing model, like Spotify's, combines high profit margins with high sales volumes.
A freemium pricing model, like Spotify's, combines high profit margins with high sales volumes.
Why is it important to choose the right pricing strategy?
So the price reflects the brand and quality of the product; the wrong strategy can reduce profitability.
Name three factors that influence the choice of pricing strategy.
The number of USPs/differentiation, technology, level of competition, strength of brand, stage in the life cycle, and costs.
True or False?
A business with a strong brand and loyal customers can usually charge higher prices.
True.
A strong brand with loyal customers can command higher prices — e.g. Nike charges premium prices.
How does the level of competition affect pricing?
In highly competitive markets, prices are often set low (e.g. budget airlines); in less competitive markets, prices can be higher.
Products with many USPs and high can command higher prices.
Products with many USPs and high differentiation can command higher prices.
How might a business price a product across its life cycle?
Low at introduction to attract customers, higher in growth as demand rises, and lower again at maturity.
True or False?
A price matching policy means a retailer will match a competitor's lower price.
True.
Price matching means a retailer matches competitors' prices to stop customers switching away.
Why must a business consider its costs when setting prices?
Prices must cover the cost of production and provide a reasonable profit margin.
What is the purpose of promotion?
To generate customer awareness, interest and desire, and to build brand awareness and loyalty.
Name three methods of promotion.
Advertising, branding, special offers, sponsorship and product trials.
Define advertising.
Advertising is promotion through paid channels such as television, radio, print and online.
Give one disadvantage of advertising.
It can be expensive, its effectiveness is hard to measure, and many customers ignore ads.
Define branding.
Branding is creating a unique, identifiable name, design or symbol that differentiates a product from competitors.
A such as buy-one-get-one-free is a temporary incentive used to boost sales quickly.
A special offer such as buy-one-get-one-free is a temporary incentive used to boost sales quickly.
What is sponsorship?
Sponsorship is when a company gives financial support to an event or team for marketing exposure — e.g. Arsenal's Emirates Stadium.
True or False?
Sponsorship carries no risk to a business's reputation.
False.
Sponsorship can bring negative publicity if the sponsored party has a scandal — e.g. Adidas dropped Kanye West in 2022.
What is a product trial?
A product trial tests the market by first selling in a confined area to gauge demand and collect feedback.
Name three technological trends used in promotion.
Viral marketing, social media, and e-newsletters.
Define viral marketing.
Viral marketing uses online platforms to promote products with content that is easily shared and commented on.
Many businesses now promote their brands using short-form video on platforms like .
Many businesses now promote their brands using short-form video on platforms like TikTok.
True or False?
When using e-newsletters, a business should send as many emails as possible.
False.
A business must be careful not to send too many emails, which may annoy potential customers.
Define place (in the marketing mix).
Place refers to where customers purchase a business's products or services.
Define distribution channel.
A distribution channel is the chain of intermediaries through which goods move from the business to the end customer.
What is a three-stage distribution channel?
It moves the product producer → retailer → customer — e.g. Toshiba sells laptops to Currys, who sell to customers.
What is a two-stage distribution channel?
It moves the product directly from manufacturer to customer (e-tailing) — e.g. Ryanair sells tickets on its website.
Selling a product directly from the manufacturer to the customer online is known as .
Selling a product directly from the manufacturer to the customer online is known as e-tailing.
True or False?
A three-stage distribution channel sells directly from the producer to the customer.
False.
A three-stage channel goes producer → retailer → customer; the two-stage channel sells direct.
Define drop-shipping.
Drop-shipping lets a business sell products without holding stock; goods are shipped directly from the producer to the customer.
Why has online distribution become so popular?
Because of the convenience and accessibility it offers to consumers.
Amazon is known as a third-party provider, offering businesses an online marketplace and infrastructure.
Amazon is known as a third-party logistics provider, offering businesses an online marketplace and infrastructure.
How does selling on Amazon help a small business?
It provides the infrastructure and marketplace to reach a wider audience and boost sales without building its own distribution.
True or False?
Many businesses now generate the bulk of their sales by selling on Amazon.
True.
Many businesses now generate the bulk of their sales on Amazon's marketplace.
Why must the elements of the marketing mix work together?
A change in one element can significantly impact the others, so they must be coordinated.
Which element is the 'heart' of the marketing mix, and why?
The product, because it determines the price, target audience and promotion strategy.
If a product is priced too low, it may be perceived as quality, leading to lower sales.
If a product is priced too low, it may be perceived as low quality, leading to lower sales.
True or False?
Launching a premium version of a product may require changing the other parts of the mix.
True.
A premium version may need a higher price, a different audience and a new promotion strategy.
How can using exclusive distribution (place) affect the other elements?
It may require a higher price to reflect the product's exclusivity.
Define competitive advantage.
Competitive advantage is the features of a business and its products that customers perceive as superior to rivals.
What do 'distinctive' and 'defensible' mean for competitive advantage?
Distinctive means it is different from competitors; defensible means competitors cannot easily copy it.
An marketing mix is one that correctly combines each element in the best possible way.
An integrated marketing mix is one that correctly combines each element in the best possible way.
Give two sources of competitive advantage.
Quality, low price, delivery times, reliability, ethical stance, or design.
True or False?
A business can only gain a competitive advantage through low prices.
False.
It can come from many sources — quality, design, reliability, ethics, and more.
Give a real example of competitive advantage from an ethical stance.
Tony's Chocolonely uses cocoa that is 100% free of slave/child labour.
How does Nike use an integrated marketing mix?
High-quality product, premium price, a unique brand promotion ('Just Do It'), and a seamless online/offline place.
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