Name the four P’s
Product, price, place, promotion
What type of promotion is advertising at a cinema?
Above the line
What type of promotion is advertising through mailshots?
Below the line
At what stage of the product life cycle is a business most likely to use promotion to raise product awareness?
Re-sequence the following: Make tactical decisions, Set corporate objectives, decide pricing strategy
Set corporate objectives, decide pricing strategy, make tactical decisions.
A business always calculates selling price by adding a set %age on to the total costs
Cost plus plicing
What pricing strategy sets a high price at product launch in order to maximize revenue and establish a premium brand, despite lower market share than might otherwise been the case
State a drawback of penetration pricing
Low profits per sale, lower brand image, need to sell a high quantity in order to reach break even point
State a drawback of skimming
Low market share, high price puts some customers off, risk of being under-cut by a competitor using destroyer pricing
Once a pricing strategy is decided, pricing tactics are used to fine tune / refine the price. State 2 tactical activities
BOGOF, timed promotions & money off, introductory offers, promotions linked to advertising campaigns
A strategy of ‘price discrimination’ means
Selling the same product to different niches of the market at different prices, eg cinema tickets to children, adults, students & OAPs. Flights which reduce as the flight date approaches.
Name the pricing strategy: Prices are calculated based on the ‘direct costs’ (eg cost of buying T-shirts & paints to personalize each) only, not the indirect costs (eg cost of market stand & cost of advertising for the business).
State a benefit / reason for using contribution pricing
Good for a special ‘one off’ order for a large volume of stock, eg someone approaching you to design and sell a batch of 50 identical T-Shirts for a charity fun run. It is sensible to ignore the normal ‘indirect’ costs of advertising and a market stall / shop for this one-off enquiry – on the assumption they are expecting a discount for bulk buying (economy of scale). Do not use for all pricing decisions – otherwise the ‘indirect costs’ never get paid.
Name the pricing strategy: Prices are calculated based on the ‘direct costs’ plus the proportion of indirect costs (overheads) that each product represents. EG if a business manufactures 5 product lines and product group A takes 50% of factory space to manufacture, then 50% of rent should be apportioned (spread over) product A. If 60% of the advertising budget is spent promoting product group C then the cost of this product needs to include 60% advertising costs
Absorption pricing. The name comes from the fact that all overheads need to be absorbed by each product group in the proportion to the costs each represents.
State 2 benefits of selling online
Larger catchment area, cheaper as less overheads, allows manufacturer to sell direct, reducing the supply chain hence increasing profits
When might a business use penetration pricing?
To launch a new product where the objective is to maximise market share.
What is the most important consideration when thinking about the 4 different elements of the mix?
Make sure they all co-ordinate
Are all 4 P’s equally important for each product:
No. The key is to decide which is the lead ‘P’ for each product, get this right, then manipulate the other 3 P’s to support this. Eg premium price for a premium product
Which P are point of sale displays in shops linked to
Which P would a decision to expand using franchises have most impact on
Place. Product, price & promotion all remain centrally controlled