1.3.5 Influence of Social Trends on Branding and Promotion

Question 1

1.3.5 Influence of Social Trends on Branding and Promotion -
Viral marketing

Answer 1

Viral marketing refers to a business using its existing social networks to promote a product or service.

Question 2

1. 3.5 Influence of Social Trends on Branding and Promotion
   - Social media

Answer 2

Social media use refers to businesses using digital platforms to create and share content socially.

Question 3

1. 3.5 Influence of Social Trends on Branding and Promotion

- Emotional branding

Answer 3

-Emotional branding refers to a business developing a brand that appeals directly to a customer’s emotional state.
Nike’s 2018 Kaepernick campaign was also an example of emotional branding.

Question 4

1. 3.6 Pricing strategies

- factors that influence a business’ pricing strategies

Answer 4

Costs - internal
Product life cycle -internal
Nature of the product - external
The degree of competition - external

Question 5

1. 3.6 Pricing strategies
   - factors that influence a business’ pricing strategies
   - costs

Answer 5

• Costs influence business’ pricing decisions because businesses usually aim to make a profit.
• A business’ price and costs determine how much profit the business will make. Businesses cannot afford to set a price lower than their costs forever.

Question 6

1. 3.6 Pricing strategies
   - factors that influence a business’ pricing strategies
   - Product life cycle

Answer 6

• Where a product is in the product life cycle determines whether the business will charge a high or low price for the product.
• When a new product is launched, businesses may charge higher prices to take advantage of exclusivity.

Question 7

1. 3.6 Pricing strategies
   - factors that influence a business’ pricing strategies
   - nature of the product

Answer 7

• The nature of a product affects pricing in 2 key ways:
• Whether a good is a luxury good will affect how much a business charges.
• Whether the good is hard to differentiate from competitors affects how much a business can charge. If it is similar (homogenous), then businesses usually price at a similar level to competitors.

Question 8

1. 3.6 Pricing strategies
   - factors that influence a business’ pricing strategies
   - Degree of competition

Answer 8

• The degree of competition affects the pricing decision of businesses because the more competition a business faces, the more options customers have.
• When customers have lots of options for similar products, businesses must compete to attract customers using a lower price.

Question 9

1.3.6 Pricing strategies -Price skimming

Answer 9

Price skimming is a pricing method where a business sets a relatively high initial price and then gradually lowers it over time. This is often used before a business faces competition in the market. Once competition arrives, there will be downward pressure on the price to fall.

Question 10

1.3.6 Pricing strategies Why is price skimming used? Benefits?

Answer 10

• Maximise revenue

- To cover fixed costs (research and development)

Question 11

1.3.6 Pricing strategies Why is price skimming used? - maximise revenue

Answer 11

• Price skimming is used to try and maximise revenue.
• Consumers who buy early on are willing to pay a higher price but the business can still attract other customers who can pay a lower price later on in the product’s lifecycle.

Question 12

1.3.6 Pricing strategies Why is price skimming used? - To cover fixed costs (research and development)

Answer 12

Price skimming can help to recover the costs of research and development, which can be expensive for technology products.

Question 13

1.3.6 Pricing strategies What is a disadvantage of price skimming?

Answer 13

• A disadvantage of price skimming is that it can slow down the growth of a product and this can give competitors more time to launch a competing product or service.
• A business does not maximise the number of sales at the start so competitors can get more of a chance to enter the market.

Question 14

1.3.7 Pricing methods

price penetrations

Answer 14

Price penetration is where a business tries to increase market share by offering a low initial price.

Question 15

1.3.7 Pricing methods

Why use price penetrations?

Answer 15

-When these goods or services enter the market, a business can attract customers from established competitors.

Question 16

1.3.7 Pricing methods

Disadvantage of penetration pricing

Answer 16

In the short term, price penetration can lead to lower average profits than would be earned with a higher price.
However, market share may be more important for the long-term profitability of a business.

Question 17

1.3.7 Pricing methods

Loss leaders

Answer 17

• Loss leaders are products or services that are sold by a business at a price where the business makes a loss (average revenue < average cost).
• Loss leaders can attract new customers or sell to existing customers, in the hope that they make extra (incidental) purchases.

Question 18

1.3.7 Pricing methods

Competitive pricing

Answer 18

• Competitive pricing is when a business sets its prices for its products and services based on what other businesses in the market are charging.
• Competitive pricing is used when the products in a market are similar.

Question 19

1.3.7 Pricing methods

Cost-plus pricing

Answer 19

• Cost-plus pricing is a pricing strategy where a business charges the customer based on what it costs to produce the product or service.
• They work out exactly what it costs to produce the product (or service) on average and then add a “mark-up” (extra amount) on top of this cost to make sure that the business makes a gross profit.

Question 20

1.3.7 Pricing methods
Cost-plus pricing
What is the “mark-up” in cost-plus pricing?

Answer 20

An addition to the cost of production to make sure the business makes a profit on each unit sold

Question 21

1.3.8 Price Wars -

the long pocket strategy

Answer 21

-Palich et al (2000) published a research paper describing the ‘Long Pocket Strategy’. Their research concluded that the business with the most money in the bank normally wins a price war between businesses.

Question 22

1.3.8 Market power

Answer 22

-Power in a market can show itself through predatory pricing or price penetration to win market share

Question 23

1.3.9 Influence of social trends

Answer 23

Businesses can change their selling price to reflect changing social trends including online sales and price comparison sites.

Question 24

1.3.9 Influence of social trends

Answer 24

Technology

Price comparison sites

Question 25

1. 3.9 Influence of social trends

- Technology

Answer 25

Technological advances have allowed many businesses to sell their products online.
High street retailers may update their approach to pricing to ensure that they can compete against online retailers.

Question 26

1. 3.9 Influence of social trends

- Price comparison sites

Answer 26

• Many businesses have also introduced price guarantees to reassure customers and reduce the impact of price comparison sites on business competitiveness.
• Skyscanner makes the cost of airline flights more transparent, forcing more airlines to compete on price.