Core Business Concepts: Product, Pricing, Promotion, Supply & Demand
Packaging Fundamentals
Packaging is the physical container or wrapping for a product. Its key functions include:
- Protects and transports the product.
- Improves selling appeal.
- Displays product information.
- Ensures suitability for the product and easy dispensing.
- Promotes brand image.
Brand Concepts
Brand Name
The unique name of a product that distinguishes it from other brands, giving it an identity of its own.
Brand Loyalty
When customers consistently purchase a particular brand instead of a competitor’s brand.
Brand Image
The image or identity given to a product that differentiates it from competitors’ brands.
Product Life Cycle & Strategy
Product Life Cycle
The stages a product passes through from its introduction, through growth, maturity, and eventual decline.
Product Life Cycle Stages
The stages include: development, introduction, growth, maturity, saturation, and decline.
Extension Strategy
A method of extending the product life cycle when it has reached the maturity or saturation stage.
Common Extension Strategies
- Use a new advertising campaign.
- Sell into new markets.
- Sell through different outlets.
- Introduce new variations of the original product or service.
Supply and Demand Principles
Supply
Supply is determined by the decisions of producers.
Factors Affecting Supply
Supply is affected by:
- Price
- The cost of producing the goods
- Taxes and subsidies
- Improvements in technology
- Climate
Demand
Demand is determined by the decisions of consumers.
Factors Affecting Demand
Demand is affected by:
- Price
- Price of substitute products
- Taste and fashion
- Advertising
- Consumers’ income
- Price of complementary products
Pricing Strategies
Cost-Plus Pricing
The cost of manufacturing the product plus a profit mark-up.
Penetration Pricing
When the price is set lower than competitors’ prices to enter a new market.
Price Skimming
A high price is set for a new product upon its market introduction.
Competitive Pricing
The product is priced in line with or just below competitors’ prices to capture more market share.
Promotional Pricing
When a product is sold at a very low price for a short period.
Psychological Pricing
When particular attention is paid to the effect that a product’s price will have on customers’ perceptions.
Price Elastic Demand
Demand changes by a greater proportion than the price change.
Price Inelastic Demand
Demand changes by a smaller proportion than the price change.
Marketing & Promotion Essentials
Promotional Mix Elements
Advertisements
Includes:
- Television
- Radio
- Newspapers and magazines
- Posters/billboards
- Cinemas
- Leaflets/direct mail
- Internet
Promotional Offers
Includes:
- Price reductions
- Gifts
- Point-of-sale displays and demonstrations
- After-sales service
- Free samples
- Competitions
- Money-off coupons
Personal Selling
Goods sold directly to the customer, often where advice is needed or the product’s exact nature can vary.
Public Relations (PR)
Concerned with promoting a good image for the business. Often takes the form of sponsoring an event.
Advertising Types
Persuasive Advertising
Advertising or promotion that aims to persuade consumers they need the product and should buy it.
Informative Advertising
The emphasis of advertising or sales promotion is to provide full information about the product.
Target Audience
The potential consumers of a product or service.
Customer Service
Concerned with keeping customers happy by making them feel important and building a good relationship between the business and its customers.