Center mind map
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2.2 Marketing decisions
1. When is low price appropriate?
The easiest way of making a profit is by increasing the price of your good or service
(Price = what the customer pays)
However, if the price of a product is too high, then demand will fall
Sometimes, to keep a decent level of demand, a business needs to reduce its prices
2. What is premium pricing?
Premium pricing is when you put the prices high, so that it is perceived to be of higher value
It is done to exploit the tendency of buyers to assume that a higher price is a better product
3. What is competitor pricing?
The business sets its prices similar to competitors
Often where there is very little product differentiation
In this situation, price is not the best way of attracting customers
4. How should pricing be adapted to reflect on the rest of the marketing mix?
If you have a unique, differentiated product, you can charge higher prices
If you have an undifferentiated product, you may have to charge cheaper prices
If you are selling in a place with high competition, reducing prices may be needed to give you a competitive advantage
If you are selling in a place with little competition, you can increase prices as there is no competition
Prices may need to be put up
To cover the cost of the advertisement
To make even more profit from the increase of sales
Reducing prices to attract more customers
5. What is the link between price and profit?
Sales revenue = PRICE per unit x number of units sold
Sales revenue is directly linked and impacted by the price
6. What is the link between differentiation and price?
Differentiation - uniqueness, what makes your product stand out from competition
If you have a product that is unique and the only thing in its market, then you can charge higher prices
If your competitors have similar products (undifferentiated), then you may need to charge lower prices to attract customers
7. What is margin pricing strategy?
When you work out how much the product costs, then increase this until you get the profit margin you want
8.What is meant by a volume pricing strategy?
Producing lots of a product at a low cost
This allows the business to benefit from economies of scale
Saving costs by buying in bulk
Common for simple, standardised products
9.What impact will a volume strategy have on distribution and costs?
Increase distribution as there are more products to sell
10.What is the link between differentiation, quality and a margin strategy?
Differentiation and quality can impact all of the factors listed below
This in turn means that the pricing strategy may have to change
11.State 6 factors that will influence a business’ pricing strategy
Cost of raw material
Product life cycle
Methods of production
1. What is promotion?
The way a business communicates its products and services with customers
In recent years, technology, the internet and mobile phones have enhanced promotion
2. What is the link between promotion, brand image and sales?
Promotion can change your brand image
Positive brand image = more sales
Negative brand image = less sales
3. Give 2 examples, benefits and drawbacks of each
of the following promotional methods:Advertising,
Sponsorship, Product trials, Special offers, Public relations
Television / radio / digital / newspapers / outdoors
You can reach lots of people
Digital is free
TV and print can be expensive
Difficult to analyse the impact to sales
Nissan sponsors 2016 Olympics / Nike sponsor Cristiano Ronaldo
Businesses provide products and services in return for publicity
People associate two things together creating positive consumer attitudes
Bad if done inappropriately
If the sponsor does something negative, the businesses image is hurt
Sample shampoo / temporary free subscription (Netflix etc.)
Effective in making customers try your products
(AKA sales promotion)
Discounts and BOGOF (Buy One Get One Free)
Encourage more sales
Can clear a businesses stock
Can be expensive
Good publicity creates a positive brand image
You can become popular with pressure groups
Negative publicity can hurt your brand image
4. State two factors that will impact on the choice of promotion used by a business
Size of business
Nature of the market
Type of product
5. What is a brand?
The personality or image of a product
6. What is the difference between a strong and a weak brand?
Strong brands are easily recogniable
Weak brands cannot add value and generate loyalty like a strong brand can
7. What is the link between strong brand and brand loyalty?
Customers are loyal to a strong brand that they know and trust
8. State 4 ways in which technology can help a business to undertake promotion
Targeting advertising on websites
Social media and viral advertising
Emails and newsletters
9. What is viral advertising?
Using social media to increase sales and / or boost brand awareness