Marketing Concepts: Product Layers and PLC
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Questions and Answers

What is the likely effect on the demand for petrol if its price increases by 30%?

  • Demand will only decrease a few percent. (correct)
  • Demand will remain unchanged.
  • Demand will double.
  • Demand will significantly decrease.

When consumers spend a large proportion of their income on a product, demand is likely to be price inelastic.

False (B)

What is one effect of strong branding on price elasticity of demand?

It reduces price elasticity of demand.

What is the purpose of extension strategies?

<p>To prolong the life of existing products (A)</p> Signup and view all the answers

Products that are very good substitutes for each other have ______ price elasticity of demand.

<p>high</p> Signup and view all the answers

Match the following promotional aims with their descriptions:

<p>Increase awareness = To inform customers about a new product Reach target audience = To communicate with a specific demographic Remind customers = To encourage repurchase of existing products Show product superiority = To motivate customers to switch brands</p> Signup and view all the answers

Investing in promotion campaigns can lead to an increase in frequency of product use.

<p>True (A)</p> Signup and view all the answers

Name one method of product adjustment.

<p>Updating</p> Signup and view all the answers

Which of the following is an example of above-the-line promotion?

<p>Television advertising (C)</p> Signup and view all the answers

A product with high market growth and high market share is classified as a __________.

<p>Star</p> Signup and view all the answers

In competitive markets, businesses selling identical products are likely to face price inelastic demand.

<p>False (B)</p> Signup and view all the answers

What is the purpose of informative advertising?

<p>To increase customer awareness of products for rational decision-making.</p> Signup and view all the answers

Match the following terms to their descriptions:

<p>Question marks = Low market share in a fast-growing market Stars = High market growth and high market share Cash cows = High market share in a low-growth market Extension strategies = Methods to prolong product life</p> Signup and view all the answers

What is a primary characteristic of cash cows?

<p>High market share with weak growth (D)</p> Signup and view all the answers

Repackaging a product is a form of price adjustment.

<p>False (B)</p> Signup and view all the answers

What type of product requires investment from cash generated by cash cows?

<p>Question marks</p> Signup and view all the answers

What is the primary aim of penetration pricing?

<p>To secure a foothold in the market with low prices (B)</p> Signup and view all the answers

Demand is price elastic for penetration pricing.

<p>False (B)</p> Signup and view all the answers

What effect does competitive pricing aim to avoid?

<p>Price war</p> Signup and view all the answers

A _______ is used when products are sold below the total cost of production to attract customers.

<p>loss leader strategy</p> Signup and view all the answers

Match the pricing strategy to its primary example:

<p>Penetration pricing = Introductory offers Competitive pricing = Gas petrol prices Loss leader strategy = Supermarkets Price leadership = Bank's interest rates</p> Signup and view all the answers

Which of the following is NOT a form of below-the-line promotion?

<p>Television advertising (D)</p> Signup and view all the answers

Which of the following is a disadvantage of penetration pricing?

<p>Customers may not accept a higher price after the introductory period (C)</p> Signup and view all the answers

A loss leader strategy can be applied to recycled products.

<p>False (B)</p> Signup and view all the answers

Reassuring advertising aims to attract new customers with a focus on emotional appeal.

<p>False (B)</p> Signup and view all the answers

What is the primary goal of persuasive advertising?

<p>To convince customers to purchase products.</p> Signup and view all the answers

What is one benefit of using a loss leader strategy?

<p>Attracting more customers to the shop</p> Signup and view all the answers

___ is a short-term incentive to encourage people to purchase products.

<p>Sales promotion</p> Signup and view all the answers

Match the following types of below-the-line promotion with their examples:

<p>Sales promotion = Buy one get one free offer Public relations = Press release Merchandising = Product layout in store Direct selling = Cold calling</p> Signup and view all the answers

Which promotional method allows for face-to-face communication and product demonstrations?

<p>Exhibitions and trade fairs (B)</p> Signup and view all the answers

Sponsorship is a method of below-the-line promotion that improves a brand's image by linking it with specific events.

<p>True (A)</p> Signup and view all the answers

What type of advertising may involve exaggeration to appeal to the audience's emotions?

<p>Persuasive advertising</p> Signup and view all the answers

What is one advantage of online distribution for customers?

<p>Ability to compare prices and reviews easily (A)</p> Signup and view all the answers

Businesses targeted in small markets usually prefer to avoid direct targeting of their customers.

<p>False (B)</p> Signup and view all the answers

What is an example of a digital distribution service?

<p>Spotify</p> Signup and view all the answers

Producers of luxury goods are concerned that selling their products in less prestigious places could damage their __________.

<p>image</p> Signup and view all the answers

Which of the following is NOT a benefit of online distribution for businesses?

<p>Increased geographical limitations (C)</p> Signup and view all the answers

Match the following examples to their respective areas of impact:

<p>Netflix = Digital entertainment distribution E-books = Digital reading Online healthcare = Education and health services Dynamic pricing = Price differentiation strategies</p> Signup and view all the answers

The impact of the coronavirus pandemic has had no effect on the shift towards digital distribution.

<p>False (B)</p> Signup and view all the answers

What feature allows businesses to monitor consumer behavior on their website?

<p>Tracking visitor movement</p> Signup and view all the answers

What is a major disadvantage of a one-level distribution channel?

<p>Intermediaries add a profit margin to the product (A)</p> Signup and view all the answers

Wholesalers help producers to manage their inventory effectively.

<p>True (A)</p> Signup and view all the answers

What is the primary function of a wholesaler in a two-level distribution channel?

<p>To buy in large quantities and break down products into smaller bundles for retailers.</p> Signup and view all the answers

The nature of the product is a key factor when choosing a __________ channel.

<p>distribution</p> Signup and view all the answers

Which of the following is an advantage of using a two-level distribution channel?

<p>Reduces producers' inventory costs (D)</p> Signup and view all the answers

Match the distribution channels with their advantages or characteristics:

<p>One-level channel = Retailers take a profit markup Two-level channel = Wholesalers buy in large quantities Retailers = Sell products to consumers Producers = Focus on production only</p> Signup and view all the answers

Producers often prefer to communicate with wholesalers rather than retailers.

<p>False (B)</p> Signup and view all the answers

Name one factor that producers should consider when selecting a distribution channel.

<p>Cost, market reach, or the nature of the product.</p> Signup and view all the answers

Flashcards

Product Extension Strategies

Strategies to extend the life of a product before it enters decline. They help businesses generate more cash by leveraging existing products.

Product Adjustment Strategies

Strategies that involve improving, updating, repackaging, or expanding the product range.

Product Updating

Updating a product with technical improvements or new features to improve its appeal.

Adding Value by Improvement

Adding value to a product by improving its features or functionality.

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Extending Product Range

Expanding a product line by offering new variations or options to appeal to a wider audience.

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Repackaging

Changing the packaging of a product to give a new impression to customers.

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Promotion Strategies

Strategies that involve boosting sales by investing in promotion campaigns, even though the product itself remains unchanged.

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Product Line

A group of products that are similar and share a common purpose or target audience.

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Price Elastic Demand

A situation where a small change in price leads to a large change in the quantity demanded of a product.

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Price Inelastic Demand

A situation where a change in price has little or no impact on the quantity demanded of a product.

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Price Elasticity of Demand

The extent to which a change in price leads to a change in the quantity demanded of a product.

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Substitute Effect

When the price of one product goes up, demand for a similar product increases.

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Income Elasticity of Demand

The amount of change in quantity demanded caused by a change in the buyer's income.

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Above-the-Line Promotion

A marketing strategy aimed at raising awareness of a new product through various media channels like TV or social media.

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Informative Advertising

A form of advertising that aims to build customer awareness and understanding about a specific product.

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Penetration Pricing

A pricing strategy where a business charges a low price for a short period of time to attract customers and gain market share.

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Penetration Pricing Disadvantage

Customers are attracted by the low price during the introductory offer but may not be willing to pay the higher price later.

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Competitive Pricing

A pricing strategy that involves setting prices in line with competitors to avoid price wars and maintain market share.

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Loss Leader Strategy

A pricing strategy where products are sold at a price lower than their total cost of production to attract customers to the store and increase sales of other products.

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Loss Leader Strategy Purpose

The loss leader strategy is used for products that would lose their value completely if not sold, like expired food.

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Loss Leader Strategy Benefit

The loss leader strategy works because the profit from other products sold at a higher margin can compensate for the loss on the loss leader.

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Loss Leader Strategy Limitation

The loss leader strategy is not suitable for products that can be reused or have a long shelf life, as they would still have value even if not sold immediately.

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Persuasive Advertising

Advertising that aims to convince customers to buy products by emphasizing the benefits of a specific brand or product.

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Reassuring Advertising

Advertising that focuses on reassuring existing customers to continue buying and feel good about their choice.

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Below-the-line promotion

Any promotional activity that does not involve traditional advertising methods (like TV or print ads). It often involves direct interaction with customers.

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Sales Promotions

Short-term incentives designed to encourage immediate purchases. They can be used to attract new customers or reward loyal ones.

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Public Relations

Activities aimed at improving the public image of a business through communication with different audiences.

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Press Release

A written statement given to the media to share important information.

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Press Conference

A meeting with the media to present information and answer questions.

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Sponsorship

A promotional strategy where a brand associates itself with an event, often a sports event, to gain visibility among the public.

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One-level Channel

A distribution channel where products move directly from the producer to the consumer, without any intermediaries.

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Two-level Channel

A distribution channel where products move from the producer to a wholesaler, then to retailers and finally to the consumer.

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Wholesaler

A business that buys large quantities of goods from different producers and then sells them in smaller quantities to retailers.

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Drawback of One-level Channel

Loss of direct control over the marketing mix, such as pricing, promotion, and distribution.

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Drawback of Two-level Channel

Increased product cost due to the wholesaler's profit margin.

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Advantage of Two-level Channel

Manufacturers can focus on core production activities without managing multiple retailer relationships.

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Advantage of Two-level Channel

A distribution channel where the cost of delivering goods to retailers is borne by the wholesaler.

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Retailers

Businesses that sell products directly to consumers.

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Digital Distribution

The ability of online platforms to distribute products directly to customers, bypassing traditional intermediaries like retailers or distributors.

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Lower Start-up Costs (Online)

Online distribution reduces the cost of establishing a business, as it eliminates the need for physical stores, inventory, and associated staff.

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Global Reach (Online)

Online platforms enable businesses to reach a global audience, expanding their customer base beyond geographical limitations.

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Data-Driven Insights (Online)

Online businesses gain access to vast amounts of data about their customers, allowing them to personalize offerings and tailor marketing strategies.

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Customer Benefits of Online Distribution

Online platforms provide a convenient way for customers to compare prices and read reviews before making a purchase.

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Online Marketing

The use of online platforms to market and advertise products directly to consumers, often using targeted advertising techniques.

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Dynamic Pricing

Businesses using data to adjust prices based on factors like demand, time of year, or location.

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Customer Behavior Tracking (Online)

Online platforms allow businesses to monitor customer behavior, understanding how users navigate their websites and interact with products.

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Study Notes

Total Product Concept

  • Products are interpreted in three layers:
    • Core product: The benefit derived from using the product (e.g., iPhone: communication).
    • Actual product: The tangible and intangible aspects of the product (e.g., iPhone: packaging, color, facial unlock).
    • Augmented product: Features that enhance the product's usability (e.g., iPhone: after-sales service, warranty).

Product Life Cycle (PLC)

  • The PLC tracks sales levels of a product over time, from launch to decline.
  • Stages:
    • Development: Research and design (high costs, no revenue).
    • Introduction: New product, slow initial sales, high costs (often not profitable).
    • Growth: Rapid increase in sales, new customers, falling unit costs.
    • Maturity: Stable market share, some competitors leave market.
    • Decline: Sales decrease, possible to price high, new technology, or new products emerge.
  • Extension strategies are used to prolong the life cycle: product adjustments or promotion.

Boston Matrix

  • Analyzes the market standing of a business' products.
  • Evaluates products by market share and market growth.
  • Categories:
    • Stars: High market share, high market growth, need investment.
    • Cash cows: High market share, low market growth, generate high profit, used to fund other products.
    • Question marks: Low market share, high market growth, may be profitable if investment is made.
    • Dogs: Low market share, low market growth, unlikely to be profitable, need to reconsider.

Pricing Strategies

  • Cost plus pricing: Adding a markup percentage to the cost of the product for retail.
  • Price skimming: Launching a product at a high price for a limited time (recover development costs quickly, before competitors emerge).
  • Penetration pricing: Launching a product at a low price to gain market share and attract customers (can help gain market share quickly, gain competitive edge).
  • Competitive pricing: Pricing in line with competitors.
  • Loss leader pricing: Selling a product below cost to attract customers hoping customers buy other more profitable goods as well.
  • Price discrimination: Adjusting prices based on time or market segments.

Promotion

  • Promotion aims to attract new customers and retain existing ones.
  • Types:
    • Above-the-line promotion: Advertising via media (TV, radio, print).
    • Below-the-line promotion: Direct marketing, sales promotions, public relations.
  • Factors influencing the method chosen include:
    • Cost
    • Market type
    • Product type
    • Stage in product lifecycle
    • Competitors' promotion
    • Legal factors

Place (Distribution)

  • Distribution Channels:
    • Zero-Level: Producer to consumer (e.g. direct sales, online).
    • One-Level: Producer to retailer to consumer (e.g., big retailers).
    • Two-Level: Producer to wholesaler to retailer to consumer.
  • Factors in choosing the best channel:
    • Product nature (perishable/complex).
    • Cost
    • Market
    • Control.
  • Internet and digital distribution impact:
    • Global reach, 24-hour access, targeted marketing, monitoring customer behavior, dynamic pricing.

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Description

This quiz explores the Total Product Concept and the Product Life Cycle (PLC) stages. Understand the core, actual, and augmented product layers, along with the progression of a product from development to decline. Test your knowledge on these essential marketing principles.

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