Marketing Mix: The 4Ps - Product

Marketing Mix: The 4Ps

• Marketing mix refers to the group of marketing tools that the business uses to pursue its marketing objectives in reaching and attracting the target consumers.
• The 4Ps are product, place, price, and promotion.
• They are all vital concepts in developing a marketing strategy.

Product

• Goods or services that businesses offer to satisfy consumer needs and wants.
• Products can be:
• Producer service
• Consumer Good
• Producer Good
• Consumer Service
• A successful product satisfies needs, fits the price range, has good design, and is unique.
• The product development process consists of:
• Idea generation through brainstorming
• Selecting the best ideas to research further
• Developing a prototype for manufacturing feasibility
• A test launch to a limited market to assess sales
• Full product launch to the entire market

Benefits of New Product Development

• Unique selling point (USP) can be made from being first in the market with an innovative product
• Higher prices can be charged for new product (known as price skimming)
• New products allow businesses to enter new markets
• A wider range of offerings leads to the possibility of higher sales through product diversification

Costs/Risks of New Product Development

• Market research cost has to be considered to carry out research and analysis
• There is wastage of materials and money during trial product development
• Possible lost sales may occur if the wrong market is targeted
• A company's image can be ruined if a product performs poorly or does not satisfy customer needs

Branding

• The creation of an identity for a business or product using names, logos, designs, slogans, etc.
• Brand image is the personality of a brand and how it differentiates itself.
• Brand loyalty is keeping consumers buying the brand instead of trying something else.
• Successful branding allows for recognition, higher pricing, and easier launches

Packaging

• The physical container/wrapping for a product.
• Packaging is significant in product promotion and selling appeal
• It protects the product through transportation and storage
• It delivers information like product details, pricing, and expiry dates
• It enables recognition through design, color scheme, and logo
• It helps maintain product freshness and quality

Product Life Cycle

• Stages a product goes through, including its introduction and retirement in terms of sales.
• PLC allows businesses to plan marketing strategies
• PLC allows businesses to predict the introduction of new products, manage investment and production efficiency, and utilize extension strategies to increase profitability.

PLC: Development Stage

• A product's created by the marketing team
• Includes idea discussion, selection of best ideas, prototype development and test launch
• There are no sales made, and lots of market research is done

PLC: Introduction Stage

• Full launch into the market
• Sales are low since consumers don't yet know about the product
• Revenue is low, the cost of production is not covered by sales
• Business invest in heavy advertising
• Products are sold at a higher price

PLC: Growth Stage

• Sales growing rapidly, the product brings high revenue
• Costs are now covered, making profit
• Promotion should be adapted to persuasive advertising
• Focus on creating brand loyalty and brand recognition
• Consumer price is higher than other competitors as the product is newer

PLC: Maturity Stage

• Sales are still increasing but slowly, as competition in the market rises
• Profit is at its highest
• There is a high amount of advertising to maintain sales growth
• Consumer prices are slightly reduced to be competitive

PLC: Saturation Stage

• Sales stabilize at the highest point, reaching a plateau
• Advertising is stable, continuing current campaigns and advertising
• Consumer prices are competitively priced, meaning prices are lowered with big discounts
• Encourages purchase, attracts late bloomers, slowdown demand and clears inventory

PLC: Decline Stage

• New products are coming into the market
• Products become outdated
• Sales start to decline greatly
• Advertising is reduced and eventually stopped
• Consumer price has to be reduced significantly

Extension Strategies

• Introducing NEW variations of the original product
• Selling products into new markets
• Redesigning and improving the products
• Increasing promotion
• Selling in new places

Marketing Mix: Price

• Understand Price as part of the marketing mix
• Pricing Strategy is used because different business and products will need different price
• Assess the advantages and disadvantages of Pricing Strategies

Pricing Strategies

• Competitive pricing: Setting a price similar to competitors' products already in the market
• Cost Plus Pricing: Setting a price by adding a fixed amount to the cost of production
• Price skimming (market skimming): Setting a high price for a new product unique from others on the market
• Penetration pricing: Setting a very low price to enter new markets by competition
• Loss leader pricing: Setting the price of a few products below costs to attract customers hoping they'll buy other products as well.

Competitive Pricing

• Setting price similar to competitors that are already available in the market
• Advantage: Realistic price level encourages sales, can avoid price wars and helps maintain relationships through fair pricing
• Disadvantage: High product costs are not covered with low price, product quality might be sacrificed, and researching competitor costs can be time-consuming

Cost Plus Pricing

• Setting a price by adding a fixed amount to the cost of making the product
• Advantage: Method is easy to apply, costs are covered and offers flexibility to change mark-up % depending on different markets
• Disadvantage: Price may be higher than competitors, profit made only when enough units are sold, no incentive to reduce cost (all costs are transferred to the price)

Price Skimming

• Setting a high price for a new product, unique from other products on the market
• Advantage: High price covers costs, uniqueness attracts customers and leaders to profits before competitors launch similar price
• Disadvantage: High price discourages some consumers and attracts competition

Penetration Pricing

• Setting a low price to enter a new market with the goal to quickly increase market share
• Advantage: Good for newly launched products, ability to enter new market easily without heavy competition and can build market share quickly
• Disadvantage: Profit per unit is low and brand image is tainted to 'cheap' which makes it hard to increase later.

Loss Leader Pricing

• Setting a low price for a short period of time to increase sales
• Advantage: effective in selling inventory, increase sales during economic downturn and a great way to boost sales
• Disadvantage: Revenue is decreased and possibility of starting price competition with competitors leads to lowering price again

Factors Influencing Pricing Decisions

• The cost of production includes raw materials, labor, and manufacturing expenses
• Target market encompasses the needs, preferences, and purchasing power of potential customers
• There is also competition, which refers to prices charged by competitors for alike products/services
• Other things to consider are Economic Conditions like inflation, interest rates, and consumer confidence

Dynamic Pricing

• Changing the price of a product based on factors and conditions like demand level, supply, and competitor pricing.