Marketing Mix: Product, Price, Place, Promotion

Learning objectives By the end of this lecture students will be able to: ▪ Identify the costs and benefits of developing new products. ▪ Describe the role of packaging and branding. ▪ Identify the stages of the product's life cycle and extension strategies. ▪ Describe the methods of pricing str...

Learning objectives By the end of this lecture students will be able to: ▪ Identify the costs and benefits of developing new products. ▪ Describe the role of packaging and branding. ▪ Identify the stages of the product's life cycle and extension strategies. ▪ Describe the methods of pricing strategies. ▪ Identify the advantages and disadvantages of different channels of distribution. ▪ Explain different forms of promotion and how they influence sales. Marketing Mix ▪ The marketing mix provides a framework for businesses to create and implement successful marketing strategies ▪ Sometimes known as the 'Four P's', it represents the key elements of a marketing strategy: product, price, place, and promotion ▪ These four components work together to satisfy the needs and wants of a target market while achieving the company's objectives New Product Development 1. Generate ideas 2. Select the best idea New product concepts are discussed and Ideas are weighed up with some dropped and brainstormed using customer suggestions, others chosen for further research ideas from competitors’ products, employees’ This decision relates closely to costs and ideas and information collected through likely demand market and technical research Research includes looking into forecast sales, size of market share, and cost-benefit analysis for each product idea New Product Development 3. Develop a prototype 4. Test launch 5. Full launch of the product This allows the operations The developed product is sold to on a The finalised version of the product is department to see how the product small scale to a limited market to see launched to the entire target market can be manufactured, any problems how well it sells before its full launch or difficulties arising from its Changes may be needed prior to an production and how to fix them expensive, large scale launch Computer simulations are often used Digital products like apps and to produce 3D prototypes on screen software run beta versions, which is a method of test-launching Costs of New Product Development The costs of producing trial products, including Market research Investment in Research the costs of wasted collection and analysis and Development and materials, can be regarding the new design can be very significant especially if product is time- expensive innovative consuming materials/components Low sales if the target are used market is wrong or if market or technical Damage to the brand if research leads to the the new product fails to development of an meet customer needs inappropriate product or service for the market Benefits of New Product Development Sell more products/services to existing customers Developing new products spreads fixed costs like premises or salaries across a wider range of products Diversifying the products it offers means a business is less reliant on certain customers or markets Can create a unique selling point by developing a new innovative product for the first time in the market Charge higher prices for new products  The Importance of Brand Image Developing a strong brand involves creating a unique and identifiable name, design, symbol or other feature that differentiates a product/service or company from its competitors This can help a business to add value as customers are often willing to pay higher prices for brands they recognise and trust Branding is a strategic tool that helps businesses create awareness, develop strong customer relationships, generate loyalty and sets them apart from competitors Types of Branding Manufacturer/Corporate branding refers to the use of a company name or logo to promote all the products or services offered by the company This type of branding is used by companies like Nestlé, Nike, and Apple Product branding refers to the use of a unique name, design, or symbol to promote a specific product E.g. KitKat, Coca-Cola, and McDonald's Big Ma Own brand or private label branding refers to the use of a retailer's name to promote a specific product or service and is often used by supermarkets E.g. ASDA chocolate, Tesco's Finest range, and Sainsbury's Basics range  Ways to build a brand image Unique selling points (USPs Advertising USPs are the features that make a Brands can create compelling ads that product/service stand out from its resonate with their target audience, raise competitors brand awareness, and communicate their value proposition Brands can build their reputation by emphasising these unique With the right advertising strategy, qualities in their marketing efforts brands create a strong emotional E.g. Apple is known for its innovative connection with their audience and and sleek design and use of quality inspire brand loyalty materials, which sets its products E.g. The "Share a apart from its competitors Coke" campaign encouraged people to buy Coca-Cola bottles with their friends' names on them and was a massive success  Ways to build a brand image Social media Emotional branding Sponsorship With the right social media A strategy where companies build Partnering with events, organisations, or individuals strategy, brands can build a strong emotional connections with can help brands gain exposure and build their loyal following and create a their customers by appealing to their reputation by aligning themselves with positive community around their values, beliefs, and emotions associations or values brand E.g. Brands E.g. Nike has sponsored many high-profile E.g. Glossier's social media like Patagonia and TOMS have built athletes and sports events, such as the Olympics strategy has helped the their entire brand identities around and the World Cup brand build a loyal following their commitments to environmental and social causes The Role of Packaging Packaging is the physical container or wrapping for a product. It is also used for promotion and selling appeal Packaging is normally designed to Present products in the most practical yet attractive way Communicate the quality of the product Catch the customer's eye when they shop Provide key information to customers Establish the business brand image The Product Life Cycle The product life cycle describes the different stages a product goes through from its conception to its eventual decline in sales There are typically five stages in the product life cycle: development, introduction, growth, maturity, and decline  Development The focus is on designing and developing the product The business usually incurs high costs for research and development, market research, and product testing Implication Cash flow is usually negative during this stage, as the The Product company is investing heavily in the product without generating any revenue Life Cycle, Cash flow and Introduction Marketing The stage begins when the product is launched Characterised by slow sales growth as the product is still Strategy new and unknown to most consumers Implication Cash flow is usually negative as the business usually incurs high costs for promotion, advertising and distribution The Product Life Cycle, Cash flow and Marketing Strategy Growth Maturity ▪ The product enters this stage when sales ▪ Characterised by high sales but slowing sales begin to increase rapidly growth ▪ The business focus shifts to building market ▪ Market saturation is likely share and increasing production to meet this growing demand. Implication Implication ▪ Cash flow is usually positive during this stage as sales revenue continues to come in and costs are ▪ Cash flow usually turns positive during this stage reduced through economies of scale and as sales revenue increases and costs are spread efficient production processes out over a larger volume of production  Extension Strategies Extension strategies refer to the techniques used by businesses to extend the life of a product beyond its natural life cycle These strategies are designed to boost sales and maintain profitability for a product that has reached the late maturity or decline stage of its life cycle There are two types of extension strategies which are often implemented at the same time Product-related extension strategies Promotion-related extension strategies Extension Strategies Product-related Promotion-related ▪ Changing or modifying the product to ▪ Changing promotional activity related to make it more appealing to customers the product ▪ This could involve improving or adding ▪ This could involve changes to advertising, features, increasing capacity or different pricing tactics or attractive sales redesigning its appearance promotions ✓Product improvements ✓Changes to advertising ✓Line extensions ✓Price promotions ✓Repositioning ✓Sales promotions Types of Pricing Strategies Choosing the right pricing strategy is essential for a business to be profitable, competitive, and successful in the long run By understanding their customers, competitors and costs businesses can set prices that maximise sales revenue and profits Pricing can play a significant role in the market positioning of the brand and help a firm to compete with rivals  Cost plus ▪ The business calculates the cost of Advantages production and then adds a markup to determine the final price ▪ A simple and quick methods of calculating a price for a product ▪ The markup covers the cost of production plus the business's desired profit margin ▪ It ensures that a profit is made on each item sold ▪ This pricing strategy is simple and is commonly used by manufacturers that Disadvantages produce standardised goods e.g. washing ▪ It does not consider the needs of the market machines ▪ The pricing approach of competitors is ignored  Price skimming Advantages ▪ This is effective when an established brand is introducing a new product and there is a high demand for it ▪ The high price helps the business to recover its development and marketing costs quickly Disadvantages The business sets The business will then ▪ Only effective when used by strong brands with a high price for a new gradually lower the an established and loyal customer base product/service when price to ensure sales ▪ Loyal customers may become tired of paying it is first introduced to continue high prices for new product versions and look the market to see what competitors offer Penetration Advantage ▪ Customers are attracted to buy the product at a low price leading to high sales volume and market share ▪ The business sets a low price for a ▪ Competitors unable to match or beat the low price are new product/service when it is first forced out the market leading to less competition introduced ▪ This is effective when a business Disadvantages wants to quickly capture market ▪ Customers may perceive that the product is of low quality if share and attract price-sensitive the product is sold at a low price customers ▪ Once they have enough customers, ▪ Selling at a low price limits the amount of profit made the business will start to raise the price Predatory pricing Advantages ▪ This method allows a business to gain a dominant position in the market ▪ The business sets prices so low that it drives its ▪ It acts as a barrier to entry for firms considering selling in the market competitors out of the market ▪ This strategy is illegal in many Disadvantages countries as it is considered anti- ▪ Use of this strategy may have a negative impact on a competitive and harms businesses reputation customers by reducing choice ▪ It is an expensive strategy for which a business needs in the market sufficient finance to fund Competitive pricing Promotional pricing The business sets its prices based on its competitors' prices ▪ This pricing strategy takes into account the customer's Advantage emotions, and compulsive This is effective when a business is in a highly behaviours in responding to competitive market and wants to maintain its market share price promotions Disadvantage ▪ E.g. a business may have a Bogof The business must continually monitor its offer - buy one get one free competitors' prices and adjust its prices accordingly to remain competitive Premium pricing Advantages The high price helps the business differentiate its products from competitors ▪ The business sets a high price for its product which gives customers an It emphasises exclusivity and improves the value of a brand impression of high quality and luxury Premium-priced goods often attract attention from celebrities ▪ This is effective for designer brands such and the media which reduces the need for promotional activity as Chanel and Ritz Carlton Hotels Disadvantages ▪ Premium pricing should not be confused with price skimming, where a high price Large numbers of more price-conscious customers are is set for a short period at a product's ignored which limits sales revenue launch Premium-priced products require high quality raw materials and components so variable production costs are usually high Place Place in the marketing mix refers to where customers purchase a businesses products and the distribution channels used to move the product from producer to consumer In a competitive environment, location and distribution decisions can give a company a competitive advantage Changing consumer needs can impact the way businesses distribute their products Place ▪ Place in the marketing mix refers to where customers purchase a businesses products and the distribution channels used to move the product from producer to consumer ▪ In a competitive environment, location and distribution decisions can give a company a competitive advantage ▪ Changing consumer needs can impact the way businesses distribute their products E-Commerce Distribution channels have been impacted by social trends such as the growth of e-commerce and the shift from product-based businesses to service-based businesses Businesses have adjusted their distribution strategies to better meet the needs of customers and stay competitive  The Growth of E-commerce Example ▪ Amazon is known as a third-party logistics ▪ Online distribution has become provider (3PLs) increasingly popular due to the convenience and accessibility it offers to consumers ▪ They provide small businesses with the infrastructure and a well-known online ▪ Drop-shipping allows businesses to sell marketplace, which allows them to reach a wider products without holding stock audience ▪ When products are ordered they are shipped directly from the producer to the customer ▪ This reduces the cost and complexity of distribution, making it easier for businesses to sell online The Aims of Promotion Promotion plays a crucial role in generating customer awareness, interest and desire for a product It communicates a businesses value proposition to potential customers and helps to differentiate the product or business from competitors Types of Promotion Businesses have a wide choice of promotional tools and techniques They must select the most appropriate methods for their product, target audience and budget  Method Advantages Disadvantages Advertising ▪ Can reach large audiences and ▪ Memorable advertising campaigns can television, radio, print increase brand awareness be very expensive media, online advertising ▪ Can create a specific brand ▪ The effectiveness of advertising is and outdoor advertising image or message often difficult to measure ▪ Many customers tune out or ignore advertising Direct ▪ Targets specific audiences and ▪ Can be intrusive as customers may Marketing allows personalisation of the perceive it as spam email, text message, message to individual customers social media or post ▪ Can also be costly, especially if ▪ Businesses can track results and businesses need to purchase adjust their strategy accordingly customer databases Sales promotion ▪ Can quickly boost sales or customer ▪ Heavy discounting reduces free samples, bogof, engagement through impulse revenue significantly discount coupons, loyalty purchases ▪ Attract deal-seeking customers who cards, and rebates ▪ Can help to clear out stock or may not be loyal to the brand promote a new product ▪ May reduce sales of full-priced ▪ Can be targeted at specific groups of products customer  Method Advantages Disadvantages Personal selling ▪ Builds relationships with customers ▪ Hiring and training sales potential customers one-on- Can provide personalised advice staff increases costs one either in person or through and guidance to customers ▪ Difficult to scale the approach to larger digital channels audiences Sponsorship ▪ Builds brand awareness and ▪ Sponsoring high-profile events or provides financial or other credibility properties can be expensive support to an event, team, or ▪ Creates emotional ▪ May not directly drive sales organisation connections with the target ▪ Negative publicity is a risk audience Public ▪ Can enhance a business’s reputation ▪ Can be time-consuming Relations (PR) and credibility ▪ Difficult to measure the direct impact media relations, product ▪ Cost-effective when compared with of PR activities on profits launches, crisis management advertising or personal selling and community outreach Digital communication ▪ Can be highly targeted to specific ▪ Easily ignored or filtered out by social media, search engine customer segments customers optimisation ▪ Can provide real-time engagement ▪ May require significant investment in and feedback from customers technology or data infrastructure ▪ May not be effective for reaching older or less tech-savvy customer segments