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Chapter 11 - The marketing mix - Coggle Diagram
Chapter 11 - The marketing mix
Elements of the marketing mix
The marketing mix is the combination of product, price, promotion and place that is used to ensure that customer requirements are met
Marketing is the process that anticipates, identified and supplied customers requirements profitably
Product includes design, function, colour, level of service and quality
Price may be high or low in relation to costs or competition prices
Promotion is the methods used to inform and persuade customers
Place is the distribution channels to get the product to the consumers
Product
The difference between goods and services
Product includes goods (physical items), and services (non physical items), as well as products that include both
All aspects of the product must give customers satisfaction if customer relations are to be good
Product attributes
Product attributes are the characteristics that make a product what it is
Can be tangible, physical attributes that make a product such has shape or materials
Also could be intangible, invisible attributes like quality, fashionable...
Most products have a combination of both, meeting customers needs and wants
Tangible attributes for a car are engine size and power, seat cover material, size of luggage storage
Intangible attributes to a car is the ownership showing high income, impression on peers, freedom to drive fast
Importance of product development
Product development is the creation of products with new or different characteristics that offer added value to the customer
This can happen either with an entirely new product, or through modifying an existing one
Takes place to: maintain or improve sales, build up a brand image, make it difficult for competitors to enter the market
Essential in markets where customers needs are changing, and where competitors are always looking for an advantage
Failure to develop new products will mean the business is likely to close unless it constantly re-invents its products in the eye of the customer
Asset led product development
Product develop may be asset led
These products will be developed by research and development within a business and the business will then seek markets to sell them in
Market-led product development
Businesses use market research to find out what customers are interested in
They the design a product that will meet those neds
This is customer focusses product development
Product differentiation and unique selling point (USP)
Product differentiation is the degree to which customers perceive a product or brand to be different from the competition
It enables a business to build value and customer loyalty
A unique selling point is the one particular factor that makes a product different
Consumers then feel that only this product meets their needs as a result they will often be willing to pay a premium prce
Product differentiation or a USP can be achieved through: Advertising, marketing, price, individual design, performance, packaging, brandings, distribution methods
Product Portfolio analysis
Product Lifecycle and decisions about extension strategies
Describes 5 stages, from development to decline
Many products fit into this pattern but with differing timescales
If there is no extension strategy the business will continue to decline, stop selling and lose remaining profits
Stages of the product lifecycle
Development - New product is released and created but it not put on general sales, there may be limited test marketing
Introduction - New product is launched into the market, sales are slow to start with, heavy advertising and promotional costs to make consumers aware of the new product
Growth - Once established, sales increase fast as promotion, media attention and consumer awareness takes effect
Maturity - Sales will level out, as consumers interested are buying/have brought the product, intense competition and heavy promotion costs
Decline - Sales fall quickly as consumers are less interested and product may be replaced due to new technology
Extension strategies - Includes special offers, promotions, altering the marketing mix for a rebrand
How product lifecycle stage influences marketing activities
Product
Development would be developing ideas and prototypes
Introduction would be initial design or service
Growth would be modifying in light of introduction feedback, making more models
Maturity would be continuing existing modes, stopping the lower selling models, adding brand extension to models
Decline would be selling the profitable model, only extending with low-cost changes
Price
There would be no development
Introduction is high (skimming), low (penetration), at going market rate
Growth is possible lower to attract more sales
Maturity is lower to keep sales as competition arrives
Decline is lowered or heavy discount
Promotion
Development is awareness before launch
Introduction is heavy advertising and promotion to raise awareness
Growth is continuing to capture sales and loyalty
Maturity is heavy due to fight competition or with less good customer loyalty
Decline is much reduced to save costs or special offers
Place
There is no development
Introduction would be concentrating on key test areas
Growth is wider distribution to gain more access to consumers
Maturity is continued to widen distribution or concentration on profitable areas
Decline is continued wide distribution or concentration on profitable areas
Boston Matric analysis and its use
Method of representing firms products in terms of market share, rate in which market is growing
Cash cows have a high share of a slow growing market, market leaders, support of the marking of a firms other products not in a strong position ('Milking the cash cow')
Question marks have a small share of a fast growing market and are at risk of being overtaken by competition, may turn into 'star' products, need significant spending on marketing
Stars have a high share of a fast growing market, successful product for a firm, high spending on marketing needed to ensure position maintained
Dogs have a small share of a slow growing market, may be chosen to 'divest' or stop producing/selling these, may also choose to keep to revive in extension strategies
Impacts of product portfolio analysis on marketing decisions
Considers the range of products a business produces in the light of the market it operates in
Considers market growth, market share, segmentation in order to plan the best range of products to meet marketing objectives
Ensures there is always a replacement product, there is flexibility in a changing market situation, thee is revenue to cover loss from a failing product
Pricing methods
Types of pricing strategy
How a business sets its prices over a medium to long term timescale
Demand and supply theory indicated that lower prices will mean more sales, but it is more complicated than that
Prices are linked to consumer preferences (a high price seen as a quality product, so more sales follow)
A business can consider setting a price within a range from highest possible to lowest possible
Factors influencing setting a price
Competition: Consumers are aware of a range of prices, so a business must decide where to place its price in relation to those of its competitors
Costs of production: A business must set a price that covers the cost
Price elasticity of demand: sensitivity of demand to a change in price
Quality: A higher price can be charged if consumers can be led to see that the product is high quality or unique to a business
Demand: A product in high demand may be sold at a high price
Pricing strategy: The overall plan to achieve objectives will include decision on pricing
Pricing strategies for existing or new products
Market skimming: A market skimming price is high, above costs, used for innovative technology based products or fashion items, so lack of competition allows a high price to cover research and development costs
Market penetration: is prices set very low, with a low profit margin to attract as many customers as possible, gain brand loyalty, and prevent competition in the market, suitable for a mass market where price is important in decisions
Competition pricing: Is setting a price based on competitors charge, price may be high or low, high price (prestige pricing) is linked to quality, a lower price will appeal to a consumers desire for low spending
Price discrimination: setting a different price for the same good for different types of consumers (Based on geography and regions, time like seasons
Cost based pricing: Full cost pricing adds a percentage or fixed amount to average cost of production but also has to account for market conditions, Contribution costing makes sure all variable costs are covered by adding a percentage or fixed amount, means it is lower priced than full cost pricing (Wide product range)
Pricing tactics or methods
Once a pricing strategy is selected, a business has to set the price
Loss leaders sell products at below cost to encourage consumers to buy additional products (remote low cost, but has to buy batteries at a high cost)
Psychological pricing: Setting a price just below a whole number so that the customer feels the product is cheaper (£3.99 not £4,00)
Dynamic pricing: different buyers offered different prices (plane ticked differ for what time the flight is boooked)
Bait and hook prices: Selling a product at a low price and charging a high price for connected essentials (cheap printers, expensive ink)
Promotion methods
Objectives and usefulness of different promotion methods
Promotion is a range of activities that communicate and interact with consumers in order to inform, so that attitudes and buying behaviour change
Advertising promotion
Above the line promotion methods used paid-for media space, in mass media
Purpose isn't to buy, but to raise awareness of the product or brand, and create a desire to buy
TV advertisements (expensive but reach a mass audience)
News paper advertising (less expensive, mass audience, adverts kept)
Radio adverts (target specified), magazines advertisement (targets specific groups),
Billboards (large mass audience, provide little information),
Internet advertising (small group advertising, easy not to notice),
Paid for advertising and promotion only via social media
Cinema advertising (only reaches cinema audiences)
Sales, direct and digital promotion
Below the line promotion is a range of activities that communicate with consumers without paying for media space, closely targeted at desired market segment
Direct selling and direct mail (face to face contact, direct customer contact, telephone, home calling, mail)
Point of sale promotions (In store posters, displays and demonstrations, flyers, dump bins and rack all draw attention of customer to product or sale promotion)
Sales promotions (Persuades to actually buy: Buy One Get One Free (BOGOF), Sales like 10% off for a week, free gifts and samples)
Digital promotions on social media that isn't directly paid for, use of 'influencers'
Use of online reviews (customers leave comments that may be used to attract interest)
Sponsorship (Giving money in return for a variety of ways of obtaining recognition, such as name/logo on shirts, TV Credits)
Public relations/publicity (Press releases, media stories, activities for charity and community)
Trade fairs and exhibitions (Drawing customer attention to a business)
Role of packaging in promotion
What the consumer sees when they are buying
Acts as protection, security for control and transport convenience, gives information about the contents
Reinforces messages from other promotional methods as well as display legal requirements
Role of branding in promotion
Branding involves creating a name, symbol or design that identifies and differentiates a product or business from others in the mind of the consumer
Having a brand image means customers will build up loyalty to the product
Easier to get distributers to stock the product and new products can be marketed successfully using the brand name and image
Successful branding takes time and concerted marketing sing a coherent integrated marketing mix
Promotional mix
A business will not use all possible promotional methods
The promotional mix is the integrated, coordinated combination of methods chosen to achieve marketing objectives
Purpose is to inform, persuade or to build a brand image
Target Audience is consumers in general, a mass market or a niche
Finance is how much money is available and what the costs of methods being considered is
Product life cycle is the stage of production reached
Competition is how competitive the market is, and how competitors are promoting their products
Legal constraints are the trade descriptions and similar laws
Place
Different channels of distribution
Place includes the location where products are sole and the ways in which products are moved from producer to buyer
Some producers sell directly to customers, others use intermediaries through which goods and services pass in a number of stages, there may be more than 1
Intermediaries
Wholesalers: Link producers and retailers, break large units into smaller units and provide storage
Retailers: Sell directly to consumers providing storage and an outlet
Agents: Arrange sales without taking ownership of the product, often for import or export
Advantages are lower marketing costs,Lower storage costs
Disadvantages are loss of profit to intermediary, loss of control over selling conditions
Factors influencing choice of distribution channel
Cost: A short distribution channel will have lower cost
Product type: perishable or short-shelf life products must reach out to consumers quickly
Market type: mass market products will need intermediaries, niche products may be sold more directly
Customer preference: Customers want different things, so producers se channels that appeal to different customer wants
Producer preference: producers may wish to keep control of the selling process, or may wish to and over to intermediaries that are more specialized
Selling through intermediaries
Producers selling through intermediaries must ensure conditions are right for the product
Providing product displays and equipment they design, incentives for intermediaries, promotional materials, special offers, training
The internets for the 4Ps
Internet has changed distribution
Promotion, distribution, and selling online is now called e-commerce
Large firms like Amazon and Ebay now provide selling services for individuals and businesses
Internet sales are increasing rapidly in all countries, providing 30-40% of sales revenue for a producer
Provides online advertising (popup banners), websites (online catalogues), dynamic pricing (customers offered different prices), direct sales distribution (digital products downloaded immediately), social media (2 way communication online)
Consistency in marketing mix
Marketing mix elements must be integrated and reinforce each other to give the same message
Message must relate to the business, product, and market to form a cohesive whole
