Understanding the Marketing Mix

The Marketing Mix

• The marketing mix gives businesses a framework to create and implement successful marketing strategies

Introduction to the Marketing Mix

• The marketing mix, sometimes known as the 'Four P's', includes product, price, place, and promotion
• The four components of the marketing mix work together to meet the needs/wants of a target market while achieving company objectives
• Businesses can differentiate themselves from competitors, maximize marketing impact, and achieve long-term success, by understanding and manipulating the marketing mix

The Four P's of the Marketing Mix

• Product
• Price
• Place
• Promotion
• Businesses combine the 4 P's of the marketing mix to maximize chances of success

Goods

• Goods are tangible objects that can be handled, used, and stored
• Consumer goods are used by an end consumer
• Durable goods are used repeatedly, such as mobile phones, vehicles and beds
• Non-durable goods are consumed soon after being purchased, like chocolate bars, deodorant and milk
• Producer goods are used by businesses to produce other goods, like tools and office equipment
• Services are intangible actions, not touched or seen
• Personal services are provided for individuals; tutoring, hairdressing or travel insurance
• Commercial services are provided to businesses; commercial cleaning or specialist recruitment
• Electrical goods may be sold with product guarantees, or customers can purchase additional insurance as accompanying service

Developing a New Product

• One way to stay ahead of competitors involves developing new products and innovating existing ones
• The process of new product development involves generating ideas, developing prototypes, and test launches prior to full launch

Stages in New Product Development

• Generate ideas using customer suggestions, competitor products, employee ideas, and market/technical research
• Weigh ideas, dropping some, while choosing others for research, relating closely to costs and likely demand
• Research includes forecast sales, market share size, and cost-benefit analysis for ideas
• Develop a prototype so operations can see how product can be manufactured, including problems and difficulties to fix
• Computer simulations often produce 3D prototypes
• Test launch the developed product on a small scale for feedback
• Changes may be needed prior to a large-scale launch
• Digital products like apps and software use beta versions for test-launching
• Full Launch is when the finalized version of the product is launched to the entire target market

Costs & Benefits of New Product Development

• Cost: Time-consuming to collect and analyze market research for a new product
• Benefit: New products spread premises or salaries fixed costs
• Cost: Research and Development and design can be expensive
• Benefit: Diversifying products reduces reliance on certain customers or markets
• If the target market is wrong, or if market/technical research leads to an inappropriate product or service = low sales
• Can create a unique selling point by developing a new innovative product for the first time
• If the new product fails to meet customer needs = damage to brand
• This USP can be used to charge a high price for the product as well as be used in advertising
• Charge higher prices for new products, including innovative new products
• Price skimming pricing strategies can be implemented for innovative new products

Packaging

• Packaging is the physical container or wrapping for a product, also used for promotion
• Packaging is designed to present products attractively, communicate quality, catch the customer's eye, provide information and establish the business brand image
• Brands invest in creative and environmentally friendly packaging because of competition
• This is increasingly important for businesses placing a greater emphasis on sustainability and CSR policies

Memorable Packaging Examples

• Apple IPhone packaging designed to open slowly: box lowers slowly because first customers lift the box top
• Ferrero Rocher chocolates are individually wrapped in gold foil, placed in fluted paper cups, and arranged/stacked in a clear carrying case
• Tiffany's packaging, including its iconic Blue Box, represents the entire retail enterprise
• Pringles uses a resealable paperboard tube to ensure freshness and prevent damage

Product Life Cycle

• The product life cycle describes the stages a product goes through from conception to eventual decline in sales
• There are typically five stages: development, introduction, growth, maturity, and decline
• Marketing strategies should be tailored to each stage to ensure long-term success

Product Life Cycle Strategies by Stage

• Marketing during product development focuses on creating awareness and generating interest
• The business usually incurs high costs for research and product testing
• Marketing during product introduction focuses on creating awareness and generating interest
• The introduction stage is characterized by slow sales growth as the product is still new
• The marketing strategy growth is to differentiate and build brand loyalty
• During growth stage sales increase rapidly
• The marketing strategy during maturity aims to maintain market share and increase profitability by cutting costs
• Maturity stage is characterized by high but slowing sales growth, and market saturation
• During decline, marketing revolves around discontinuing, reducing prices (clearing stock) or finding new uses of the product
• Decline begins when sales decline as the product becomes obsolete

Extension Strategies

• Extension strategies = techniques used by businesses to extend the life of a product beyond its natural life cycle
• These strategies maintain profitability for a product that has reached the late maturity or decline stage
• Two types of extension strategies implemented: product-related and promotion-related
• Product-related extension strategies involve changing or modifying the product to make it more appealing
• This includes product improvements, line extensions and repositioning
• Promotion-related extension strategies involve changing promotional activity, such as advertising and price promotions

Types of Pricing Strategies

• Sales promotions discount prices as part of the strategy to boost sales (ex: coffee shops offering a loyalty program)

Boston Matrix

• Analyzes their product portfolio and make strategic decisions
• The matrix classifies products into cash cows, problem children, stars, and dogs, according to market share and growth rate

Boston Matrix Products and Marketing Actions

• Cash Cows require minimal investment and generate significant positive cash flow
• Marketing should maintain market share and profitability of Cash Cows
• Funds from Cash Cows can develop new products
• Problem Child/Question Marks have a low market share in a high-growth market
• Marketing focuses on increasing market share and brand recognition of Problem Child/Question Marks
• Stars have high market share and high growth, generating significant positive cash flow
• Marketing for Stars revolves around building brand recognition and increasing market share
• Dogs have low market share in a low-growth market with little potential: often divested

The Marketing Mix: Price

• Price relates directly to sales revenue and is vital
• Understanding customers, competitors and costs leads to prices which maximize revenue and profitability
• Appropriate pricing meets customer needs/expectations
• Pricing should reflect brand and quality
• Otherwise, there is a risk of reduced profit

Factors to Consider When Choosing a Pricing Strategy

• Products with many USPs and high differentiation can command higher prices (ex: Dyson vacuum cleaners charge a premium because unique)
• Online platforms can affect pricing strategies
• Candy Crush Saga uses a freemium strategy to generate a high profit margin
• In highly competitive markets prices may need to be set low
• Strong brands may set higher prices
• The introduction stage may involve lower prices
• Prices may increase, and later decrease, with product growth
• Prices must cover cost of production and provide a reasonable profit margin

Pricing Strategies

• Retailers adjust pricing to remain competitive online
• Pricing has changed to reflect price comparison, using price-matching policies

Common Pricing Strategies

• Pricing strategy is determines the most effective prices to charge customers
• Profitable, competitive, successful, and influence market positioning

Cost-Plus Pricing Strategy

• Business calculates the cost of production and adds markup
• Ensures a profit is made on each product
• However, it doesn't consider the needs of the market and ignores the pricing approach of competitors

Skimming Pricing Strategy

• Business sets high price for a new product and gradually lowers the price to ensure sales continue
• Useful for established brands with high demand
• Recover its development and marketing costs
• However, loyal customers might not like paying high prices and check what competitors offer

Penetration Pricing Strategy

• Business sets a low price for a new product/service to quickly capture market share and attract price-sensitive customers
• Customers might perceive product quality to be low

Competition Pricing Strategy

• Business responds to competitors' prices and effective in a highly competitive market
• The business manages continually monitor and adjust competitors prices
• The low price limits amount of profit

Promotional Pricing Strategy

• It Generates high volumes of sales, catches attention, but generates lower profit
• Is influenced by high customer emotions, and compulsive buying behaviours
• The business is in constant need of monitoring market trends, and customer needs

Place

• Place refers to where customers purchase products and the channels used

Value Chain

• The value chain used to move the product from start to finish
• Has competitive impact and advantage
• Requires innovative methods and channels, and responds to changing values

Two Distribution Channel Types:

• Three-stage moves product from the producer to the retailer to the customer
• Used for high profit margin goods
• Two-stage moves product directly from manufacturer to customer, often online

Retailing and Etailing

• Retailers buy goods from manufacturers/wholesalers and sell in small quantities to consumers
• Retail adds value with convenience and services
• Business can exist as independents, multiples, department stores, supermarkets, hypermarkets, markets or stalls
• Etailing is trade and services over the internet
• Requires cheap, easy to use, but attractive, safe and competitive strategies

Benefits and Problems with Etailing:

• Direct and cheap promotion to wide markets
• Dynamic Pricing that is prone to hacking

Promotion

• Generating awareness, interest and desire, communication of value proposition and building loyalty

Promotion Methods

• Above the Line includes advertising through traditional media, Below the Line includes other sales methods
• Advertising uses creative mediums and specialists, but is often expensive
• Sponsorship provides exposure as public relations
• High profile events are aligned with brand values

The various types of Product Trials:

• Product trials involve a test market to assess consumer and forecast sales
• Product trials provide customer feedback
• Businesses select individuals and promote to gauge feedback on market

Sales Promotions:

• Sales Promotions use incentives to boost purchase and clear stock
• Easy to use for clearing high stock and sales volume as well as raising cash

Branding:

• Creates and Identifies a unique design or symbol.
• Aligns with celebrities to add strength

Above-the-Line Promotion

• Aims at reaching a wide audience through traditional channels to create product awareness
• Channels also typically include television, radio, newspapers, magazines and outdoor advertising

Types of Above-the-Line Promotion

• Informative: Provides factual information about a product, service or brand. Example: Pharmaceutical companies may decide to make a television advert that provides information on the medication's proven benefits
• Persuasive: Is designed to influence consumers' attitudes and behaviors towards products or services. Example: Package holiday companies aim their services at families, emphasise excellent weather and use images of children having fun in posters
• Reassuring: Aims to remind existing customers that they made the right decision. Example: Coca Cola reassures its customers through the use of television advertising.

Advantages and Disadvantages of Above-the-Line Promotion

• Achieves a higher level to those able to mass produce. However, this is particularly ineffective for targeted sectors
• Strong Brand and reputation, however is especially prone in today's times
• Marketing messages are easier and clearer as there is a smaller scope

Below-the-line Promotion

• Utilises direct control and influence
• Direct marketing to customers, particularly, as is measurable
• Results in spam and established customer database

The use of Technology for market:

• Mobile tech and online commerce has greatly increased business opportunities
• Respond quickly to technological changes: targeted online advertising, viral marketing, social media and enewsletters
• Social Media now more important to stay online, share and easily distribute

Facebook and Youtube:

• Is easily, swiftly and directly shared with wide reach for advertises
• Targeted accurately