Marketing Mix: The Four P's

Marketing Mix

• The marketing mix offers a framework for creating and implementing successful strategies.
• It is also know as the Four P's, product, price, place, and promotion.
• These four elements work together to meet the needs of a target market and achieve company goals.

Learning Objectives

• Recognize the costs and benefits of new product development.
• Explain the purpose of packaging and branding.
• Identify the stages of a product's life cycle and possible extension strategies.
• Describe pricing strategies.
• Recognize the advantages and disadvantages of distribution channels.
• Clarify various promotional forms and their impact on sales.

New Product Development

• In the first step, ideas are generated through customer feedback, competitors' products, employee ideas, and market research.
• The second step is choose the best idea based on costs, demand, sales forecasts, market share, etc.
• Next is to develop a prototype to solve production issues using computer simulations and 3D models.
• The fourth step is test launch the product on a smaller scale.
• The launch is the final version.

Costs of New Product Development

• Market research collection and analysis can be time-consuming.
• Investment in research and development can be expensive.
• Low sales can result if the target market is wrong or if the product is not apprpriate for the market.
• The brand can sustain damage if the new product fails.
• Production of trial products can be costly, especially if involving innovative materials or components.

Benefits of New Product Development

• It generates more sales to existing customers.
• It spreads fixed costs.
• It diversifies the business with its product offerings.
• It can establish a unique selling point by creating innovative products.
• Charging more for new products is possible.

Brand Image

• A strong brand image creates a unique and distinguishable name, design, symbol that differentiates the product/service or company.
• This adds value, thus allowing higher prices.
• Branding is a strategic tool for raising awareness, strengthening customer connections and devotion, and gaining competitive edge.

Types of Branding

• A corporate brand uses a company name or logo to promote its products and services, performed by Nestle, Nike, and Apple.
• A product brand promotes a specific product by using a unique name, design, or symbol. Ex. KitKat, Coca-Cola, and McDonald's Big Mac.
• A private label uses a retailer's name to promote the product or service. Ex. ASDA chocolate and Tesco's Finest range.

Building A Brand Image

• Unique selling points make a product stand out and build its reputation. Apple uses this by sleek design and high quality materials.
• Creating compelling advertising resonates with the target audience, increases awareness, and communicates its value. 'Share a Coke' campaign is an example.
• Sponsorship with events aids brand exposure and aligns the brand with certain values or associations. Nike sponsors events such as the Olympics and athletes.
• Social media enables a community and a loyal following to be built. Glossier uses this strategy.
• Emotional branding builds emotional connections with consumers by appealing to their values and beliefs. Brands like Patagonia and TOMS have built their brand doing this.

Role of Packaging

• Is the physical container or wrapping and has promotional and appeal to sales purposes.
• Serves to present products attractively.
• Communicates the product quality.
• Catches consumers attention while providing key product information
• Establishes a brand image.

Product Life Cycle

• Describes different stages a product goes through, from its conception to decline in sales.
• There are five stages which include: development, introduction, growth, maturity, and decline.

Product Life Cycle - Development

• Focuses on designing and developing a product.
• Incurs high costs for research, market research, and product testing.
• Has negative cash flow.

Product Life Cycle - Introduction

• Product is launched.
• There is slow sales growth.
• Typically has negative cash flow because of high promotion, distribution, and advertising costs.

Product Life Cycle - Growth

• Sales begin to rapidly increase.
• The business focuses on growing its market share by increasing production.
• Has positive cash flow.

Product Life Cycle - Maturity

• There are high in sales but slowing sales growth.
• Market saturation is likely.
• Cash flow is positive due to economies of scale.

Extension Strategies

• Refers to approaches used to extend a product's life beyond its natural life cycle.
• Designed to boost sales and profitability for products in late maturity or decline.
• Implemented through product-related and promotion-related strategies at the same time.

Extension Strategies - Product-related

• Involves modifiying the product to make it more appealing, improving or adding features, increasing capacity, or changing the appearance.
• Includes product improvements and repositioning.

Extension Strategies - Promotion-related

• Modifying promotional activity related to the product (advertising, pricing, or sales).
• Includes changes to advertising, price promotions, or sales promotions.

Pricing Strategies

• Essential in in terms of long run profitability, competiveness and success.
• Understanding customers, competitors, and production costs can maximize sales revenue and profit.
• Effects market positioning of the brand and ability to compete.

Cost-Plus Pricing

• Calculates the cost of production and determines the final price by adding a markup.
• Markup covers the cost of production and the desired profit margin.
• Advantage: easy, quick and guarentees profit.
• Disadvantage: does not consider market needs or competitor pricing.
• Commonly used by manufacturers of standard goods like washing machines.

Price Skimming Pricing

• Entails setting a high price for new products or services.
• The business lowers the price to guarantee sales continue.
• Effective for popular brands.
• A high price will recoup development and marketing costs quickly.
• Only effective for reputable brands because customers may get tired of paying a high price.

Penetration Pricing

• Business implements this by setting a low price for a new product or service at first.
• Effective for capturing market share and attracting price-sensitive customers.
• Price will increase overtime.
• Customers perceive the item as low-value and limits the profit outcome.

Predatory Pricing

• The business prices are set so low that competitors cannot compete.
• The market is illegal and can harms custumers and reduces choice.
• Allows businesss to dominate marketplace.
• Acts as a barrier of market entry for other firms.
• Negative impact to businesse's reputation, not a sustainable strategy.

Promotional Pricing

• The pricing strategy takes customer emotions into consideration.
• Consumers are encouraged and display compulsive bahaviors.
• Bogof offers - buy one get one free

Premium Pricing

• High price is set in attempt to give impression of high quality and luxury.
• Effective for designer brands.
• Should not be confused with a price skimming strategy
• Helps to distinguish products from competitors and elevates brand identity.
• A disadvantage would be ignorance of price conscious cutomers and high production costs with quality raw materials.

Place

• The place in the marketing mix focuses on the site customers purchase a business' goods as well as the route used to get products from the producer to the consumer.
• Strategic placement and distribution can give a business a competitive advantage.
• Changing consumer behaviors impact how companies distribute.

Distribution Channels - Four Stage

• Producer -> Wholesaler -> Retailer -> Consumer
• Used by smaller businesses with little space.
• The Coca-Cola Company sells to wholesalers, who then sell to retailers.

Disribution Channels - Three Stage

• Producer -> Retailer -> Consumer
• Utilized for high demand products with high costs of distribution.
• Toshiba distributes laptops to retailers like Walmart or Currys.

Distribution Channels - Two Stage

• Producer -> Consumer
• Commonly used for products sold online, such as German Wings (airline).

E-Commerce

• Distribution channels have been greatly impacted from e-commerce leading to it's growth and shift from product-based businesses to service-based businesses.
• Businesses must adapt strategies to adjust to consumer needs to stay competitive.

Growth of E-Commerce

• Online distribution has become popular because of convience and accessibility.
• Drop-shipping means businesses can distribute products without the need stock.
• Amazon is a third-party logistics provider.

Aims of Promotion

• Generating customer awareness, interest, and desire.
• Communicate a value proposition to potential customers to differentiate it, and the product from competitors.

Types of Promotion

• Wide choice of promotional tools and techniques.
• Methods must be appropriate for each target audience and budget.

Promotion - Advertising

• Can reach wide audiances.
• Can create a specific brand image or message.
• A disadvantage is it can be expensive and is difficult to measure its effectiveness.

Promotion - Direct Marketing

• Targets specific audiances while providing personalization.
• Can track results.
• Intrusive and expensive if you need to purchase customer databases.

Promotion - Sales Promotion

• Quick sales boost through engagement.
• It helps to clear out stock.
• Targets specific groups.
• Deals can reduce revenue significantly and only attract one-time customers.

Promotion - Personal Selling

• Builds relationships with customers.
• Offer personalised advice and guidance.
• A disadvantage is training costs and it can be difficult to scale the approach to a larger audience.

Promotion - Sponsorship

• Builds brand awareness and credibility.
• Connects with the target audience on a more emotional level.
• Sponsorships come at an increased cost and often do not drive sales.

Promotion - Public Relations

• Boost its credibility and reputation.
• Cost effective but time consuming.

Promotion - Digital Communication

• Can targets specific customers.
• Provide feed back in real time.
• Can be easily ignored and expensive.