Marketing Mix: The 4 P's and Extended Mix

• Marketing Mix is a business tool utilized by marketing professionals.
• The marketing mix determines a product or brand's offering.
• The marketing mix is often associated with the four P's: price, product, promotion, and place.

The Four P's (McCarthy, 1960)

• The offering to the customer can be altered by varying the mixed elements in the four P's.
• For a high-profile brand, increase focus on promotion and desensitize the weight given to the price.

Extended Marketing Mix

• Booms and Bitner added three more P's focusing on a service or knowledge-based economy: people, process, and physical evidence.

7 Ps and 7 Cs

• The 7 Ps represent the organization-facing perspectives: Product, Price, Place, Promotion, People, Processes, and Physical Evidence.
• The 7 Cs represent the customer-facing perspectives: Customer/Consumer, Cost, Convenience, Communication, Caring, Co-ordinated, and Confirmation.

Product

• Involves Design, Technology, Usefulness, Convenience, Value, Quality, Packaging, Branding, Accessories, and Warranties.
• Developing a product or service that no one wants to buy is futile.
• A successful company will determine what customers need or want, and then develop the right product with the right level of quality to meet those needs now and in the future.
• The product must provide value for the customer, based on the customer's perception.
• A product can be tangible or intangible, such as an insurance policy.
• There should be a system for regularly checking customer feedback on the product and supporting services.

Price

• Includes strategies such as: Skimming, Penetration, Psychological, Cost-Plus, and Loss leader etc.
• A product's worth depends on what customers are willing to pay.
• A small business can compete with larger rivals by offering superior value for money through additional services or details.
• Pricing must generate a profit, as it is the only element of the marketing mix that generates revenue.
• Considering price as the 'cost' to the customer highlights its importance.
• Price influences how a product is 'positioned' in the marketplace.
• Existing customers tend to be less price-sensitive than new customers.

Types of Pricing: New Product Strategies

• Skimming means setting a high price for a new, high-end product or a differentiated technical product to obtain maximum revenue before substitutes appear.
• After skimming the market, the producer can drastically lower the price to capture low-end buyers and frustrate competitors.
• Penetration Pricing is a marketing strategy to attract customers to a new product/service with a low price during initial offering.
• Penetration pricing creates customer awareness of the new product due to its lower price relative to rivals.

Product Mix Pricing

• Product Line Pricing involves setting prices across an entire product line.
• Optional Product Pricing means pricing optional or accessory products sold with the main offering.
• Captive Product Pricing focuses on pricing products that must be used with the main product.
• By-product Pricing means pricing low-value byproducts to eliminate or sell them.
• Product Bundle Pricing is the practice of selling packages of products together

Price Adjustment Pricing

• Discount and allowance pricing reduces prices to reward customer responses, like early payment or promotion.
• Segmented pricing adjusts prices to account for differences in customers, products, or locations.
• Psychological pricing is for the perceived psychological effect.
• Promotional pricing is uses temporary price reductions to increase short-run sales.
• Geographical pricing adjusts prices according to geographic customer location.
• Dynamic pricing constantly adjusts prices to meet individual customer needs and circumstances.
• International pricing is used for international markets.

Place

• Includes Retail, Wholesale, Mail order, Internet, Direct Sales, Peer to Peer, and Multi-Channel.
• The location where customers purchase a product and the means of distribution must be suitable and convenient.
• A product must be available in the right place, at the right time, and in the right quantity, while storage, inventory, and distribution costs are controlled.
• Delivery performance is one of the most essential criteria when choosing a supplier.
• More accessibility leads to increased sales and convenience for consumers.

Types of Place

• Retail involves selling goods directly to consumers as opposed to selling to another business.
• Wholesaler involves purchasing a large number of goods from producers/vendors, warehousing them, and reselling them to retailers.
• Direct selling means face-to-face presentation, demonstration, and sale of products/services, often at a prospect's home or office by independent direct sales representatives.

Promotion

• Promotion includes Special Offers, Advertising, Endorsements, User trials, Direct mailing, Leaflets/posters, Free gifts, Competitions, and Joint ventures.
• Promotion is how a company communicates its offerings.
• Promotion activities include branding, advertising, PR, sales management, special offers, and exhibitions.
• It must gain attention, be appealing, convey a consistent message, and provide a reason for the customer to choose the specific product.
• Good promotion is not a one-way communication; it encourages dialogue with customers.
• Promotion should communicate the benefits a customer gets from a product, not just its features.
• Promotional material must be easy to read, attract attention, and enable the customer to identify why they should buy.

Different Types of Promotional Activities

• Advertising is the activity of producing information for promoting the sale of products/services.
• Branding is an identifying symbol, words, or mark that distinguishes a product or company from competitors and registered with a regulatory authority.
• Endorsement involves a written or public statement by a celebrity, business, or professional group recommending the use of a product to the public.
• Promotion ensures internal stakeholders are aware of the value and attributes of your products, communicating effectively to staff/fellow employees and sharing expertise.

People

• 'People' includes anyone directly or indirectly involved in the product/service trade, mainly customer contact employees.
• Employee attitude and behavior create customer perceptions of service and influence customer satisfaction and purchase intentions.

Process

• Process includes the activities, procedures, and protocols by which service is delivered.
• Managing the process factor accounts for the perishability of services, which cannot be inventoried, stored, reused, or returned.
• Customer feedback is important, for tightening the process to meet customer needs.

Physical Evidence

• Physical evidence refers to an environment in which service results from an interaction between employee and customer, combined with a tangible commodity.
• Includes a representation of service: brochures, company stationery, business cards, reports, company website, etc.
• Making intangible services tangible is more important the more intangible the service.

Product Strategy

• Product strategy forms the basis for executing a product roadmap and subsequent product releases.
• It allows the company to focus on a specific target market and feature set instead of trying to be everything to everyone.

Elements of A Product Strategy

• Defining the target customer/market.
• Describing customer perception of your product versus competition.
• Stating the product's value for customers; what problems does it solve?
• Detailing how the product will be priced, perceived, and sold.

Creating Your Product Strategy

• Identify market problems, including interviewing your target market, understanding the competitive landscape, and how you will differentiate yourself.
• A product strategy changes over time as learning occurs.

Product Innovation

• Product innovation is the creation and introduction of new or improved goods/services.
• Product innovation might involve inventing a new product, improving technical specs/quality, or adding new components/desirable functions to an existing product.

Product Development

-Product development, also called new product management, is a series of steps that includes conceptualization, design, development, and marketing of newly created or rebranded goods/services.

New Product Development Process

• Stage 1: Idea Generation is the starting point where new ideas for a new product are developed in a brainstorming session at meetings, coming from internal and external sources.
• Stage 2: Idea Screening selects one idea based on: Utilization (how the target customer will utilize it), Resources (type, quality, price of available resources), and Ethical Aspect (societal responses).
• Stage 3: Product Concept Development develops the concept of the selected product, with alternative concepts often developed according to customer needs.
• Stage 4: Marketing Strategy Development introduces the product, describes the target market price, channel of distribution, and profit goal.
• Stage 5: Business Analysis analyzes the product from a cost, sales, and profit standpoint, figuring out if the product satisfies the company's objectives.
• Stage 6: Product Development presents the product to the market for testing, helping the organization decide whether to launch it through Test Marketing.
• Stage 7: Commercialization properly introduces the product to the market and product life cycles begin.

Product Diffusion

• Diffusion is the process by which a new idea/product is accepted by the market.
• The rate of diffusion is the speed at which the new idea spreads from one consumer to the next.
• Consumers can be grouped by how quickly they adopt a new product, from early adopters to those who might wait until the last minute.

Innovators

• Well-informed risk-takers who try a new product; they are 2.5% of the market.

Early Adopters

• This group adopts early, but it's after careful thought, and makes up 13.5% of consumers.

Early Majority

• These consumers avoid risk, only adopting the product when it has been proven by the early adopters, influenced by recommendations as well as social acceptance, and these represent 34% of consumers.

Late Majority

• somewhat skeptical consumers acquire a product only after it has become routine. They make up 34% of consumers.

Laggards

• Those who avoid change may not adopt a new product until traditional alternatives no longer are available, making up about 16% of consumers.

Product Life Cycle

• Product life cycle is the course of a product's sales and profits over time, and the product life cycle (PLC) deals with a product's life in the market with respect to costs and sales.
• The five stages of each product lifecycle are: product development, introduction, growth, maturity, and decline.
• A company's positioning and differentiation strategy must change as the market competition changes.
• Products have a limited life, product sales pass through distinct stages, profits vary by stage, and different marketing is required at each life cycle.

Introduction Stage of the PLC

• Sales are low, costs are high, profits are negative, and marketing builds product awareness. Also, offering a basic product, using a cost-plus formula, and building selective distribution are important considerations.

Growth Stage of the PLC

• Sales are rapidly rising, and average cost per customer is rising as well, with rising profits coming from the market. Offering service & offering warranty while implementing a penetration strategy, all while building intensive distribution.

Maturity Stage of the PLC

• Sales peak, its low cost per customer which leads to high profits.
• Maximizing profits while guarding the market share, while aiming to diverse the brand by matching or beating competitors.

Decline Stage of the PLC

• Includes Declining sales, Low Cost per consumer, and dwindling profits. It's key to reduce expenditures, while phasing out weak items through a selective redistribution of remaining stock.

Special Categories of PLC

• Style is a basic form of expression.
• Fashion is a currently accepted style. distinctiveness, emulation, mass fashion, and decline.
• Fads are fast-moving fashions.

Four Introductory Marketing Strategies

• These include Rapid-skimming strategy, Slow skimming strategy, Rapid-penetration strategy and Slow-penetration strategy.

Marketing Strategies for Growth Stage

• Improve Product Quality and Features, Add New Models and Flanker Products, Enter New Market Segments, Increase Distribution, Switch to Preference Advertising, and Reduce Prices.

Market Modification

• Sales volume equals the number of brand users multiplied by the usage rate.
• Expand the Number of Users includes conversions, new segments, and winning over customers.

Product Modification

• Stimulate sales by improving quality, features, or styles.
• Quality improvement boosts functional performance, and feature improvement adds features that expand performance, while style improvement makes the product look better.

Decline Stage Strategies

• An appropriate plan is to either Increase Investments or Focus on selective niches.
• Implementing Harvesting Strategies with Divesting (drop) and developing systems for identifying weak products are key. It's also important to recognize many firms will abandon declining markets.

Product Mix

• Product Mix the whole portfolio a company offers for sale.
• Product lines are groups of related products constitutes a product line.
• Width of Product mix refers to the number of product lines the company offers.
• Length of the product mix is the total number of items.
• Average line length = Total length/Number of lines

Depth of Product Mix

• The depth of the product mix is the assortment of all sizes, colors, and variations offered for each product in the product line.

Consistency of Product Mix

• refers to the closeness exhibited by the product lines in production requirements, distribution, and end usage.
• For consumer goods they are distributed using similar channels and produced using similar facilities.