3.3 Marketing mix

3.3.1 Product:

• The limitations and benefits of developing new products
• Brand image; impact on sales and customer loyalty
• The role of packaging
• The product life cycle: main stages and extension strategies; draw and interpret a product life cycle diagram
• How stages of the product life cycle can influence marketing decisions, e.g. promotion and pricing decisions

3.3.2 Price:

• Pricing methods (benefits and limitations of different methods), e.g. cost plus, competitive, penetration, skimming, and promotional
• Recommend and justify an appropriate pricing method in given circumstances
• Understand the significance of price elasticity: difference between price elastic demand and price inelastic demand; importance of the concept in pricing decisions (knowledge of the formula and calculations of PED will not be assessed)

3.3.3 Place – distribution channels:

• Advantages and disadvantages of different channels, e.g. use of wholesalers, retailers or direct to consumers
• Recommend and justify an appropriate distribution channel in given circumstances

3.3.4 Promotion:

• The aims of promotion
• Different forms of promotion and how they influence sales, e.g. advertising, sales promotion
• The need for cost-effectiveness in spending the marketing budget on promotion

3.3.5 Technology and the marketing mix:

• Define and explain the concept of e-commerce
• The opportunities and threats of e-commerce to business and consumers
• Use of the internet and social media networks for promotion

What is Marketing Mix?

‌The marketing mix refers to the set of actions, or tactics, that a company uses to promote its brand or product in the market. There are 4Ps which make up marketing mix – Price, Product, Promotion and Place.
However, nowadays, the marketing mix increasingly includes several other Ps.

You watch this lesson in video format here

‌Price

‌Price is the amount of money producers are willing to sell or consumer are willing to pay for the product.

‌Pricing Methods

‌Cost plus pricing = Cost of producing the product plus a profit
Method is easy

• If costs go up, price can be adjusted easy
• Lose sales if the selling price is a lot higher than your competitor’s price

Competitive pricing = Product priced similarly to or just below the competitor’s price

• Sales are likely to be high as the price is competitive
• Researching your competitor’s prices can take time

‌Psychological pricing = Charging high prices for a high-quality product so consumers purchase it as a status symbol

• Prices just below a whole number ($1.99)
• Charge low prices for some items to attract customers into the store

Penetration pricing = Low price for a new product in order to attract customers from existing competitor’s products.

• Useful if launching product to a new market
• Ensures product will be sold so the product enters the market
• The low initial price can create an expectation of permanently low prices amongst customers who switch

‌Price Skimming = High price is set for a new product on the market
Can make people think product is good quality because it’s expensive

• Consumers may not buy the product because they think its overpriced

Promotional pricing = Product sold at a low price for a short period of time.

• Useful when clearing old stock that doesn’t get sold
• Promotes the business
• Low sales revenue as prices are low

‌Product

‌Product is the good or service being produced and sold in the market. This includes all the features of the product as well as it’s final packaging.

‌Types of products

• ‌Consumer goods – consumed by people (final users of the product) example, the grapes are an input to making the wine. Therefore, the wine is the consumer good while the grapes would be a producer good. Milk, TVs, Phones, all items in your local supper market and so on.
• Consumer services – services for people (final users of the service) Restaurants, Travel services such as a flight, insurance, media and so on
• Producer goods – goods produced for other businesses to use (e.g. machines, raw materials)
• Producer services – Services for other businesses (e.g. Corporate lawyers, business consultants)

‌Successful product are:

• ‌Unique
• Satisfies consumer needs and wants
• Low production cost to make profit
• Quality of the product that is kept consistent with the product image
• Introduced to the market before competitors

‌Why is brand image important?

‌Brand image is an identity given to a product that differentiates itself from competitors’ products.

Brand loyalty when customers keep buying the same brand again and again instead of switching over to competitors’

‌Advantages of Brand images:

• Consumers recognize their product more easily when looking at similar products- helps differentiate one company’s product from another.
• Their product can be charged higher than less well-known brands – if there is an established high brand image, then it is easier to charge high prices because customers will buy it, nonetheless.
• Easier to launch new products into the market if the brand image is already established. Apple is one such company- their brand image is so reputed that new products that they launch now become an immediate success.

‌Roles of packaging

‌Protects the product

• Easy for transportation
• Allows the product to be used easily
• Promotes the product and brand name – as it will be printed on the packing
• Attractive and appealing to customers – logos and images used
• Consistent with the brand image of the product (e.g. High end product in a fancy packaging)

‌Product life cycle

There are stages, introduction, growth, Maturity, decline

‌Extending the product life cycle

• ‌Introduce new variations of the original product
• Sell the product into new markets (e.g. distribute to other countries)
• Increase and create new advertising campaigns
• Lower the price
• Make changes to the product (e.g. new packaging, new tastes, colours

‌Promotion

‌Marketing activities used to communicate with customers and potential customers to inform and persuade them to buy a business’s products.

The aim of promotion is to increase awareness, create interest, generate sales or create brand loyalty.

‌Aims of promotion 

• Increase sales and market share
• Create a brand image
• Introduce new products to the market
• To compete with competitors

‌Informative advertising – Give audience detailed information about the product
Persuasive advertising – Tries to persuade audience that they need the product

You can watch this lesson in video format here

‌Advertising methods

‌Local newspaper:

• Cheap, Lots of information, Permanent copy.
• Not every one reads news paper anymore
• local or national television
• Seen by many people, video can be interesting, choose which time to advertise
• Very Expensive
• No targeting of audience, only good if you want to attract everyone

‌Specialist magazines

• Read by audience with certain characteristics e.g car magazines, sport magazine
• Social media
• Can target specific audience
• Billboards
• Reach wide range of locals
• Increase awareness
• Leaflets Cheap
• Permanent copy
• Range of audiences (given to anyone)
• May not be read

‌Place

‌Place refers to how the product is distributed from the producer to the final consumer. There are different distribution channels that a product can be sold through.

‌It is very important to make products available in the right place at the right time in the right quantities

‌Distribution is achieved by using one or more distribution channels, including:
Retailers

• Distributors / Sales Agents
• Direct (e.g. via buying or selling of products on online services or over the Internet.)
• Wholesalers

‌A distribution channel can be defined as:
“all the organisations through which a product must pass between its point of production and consumption”

‌Producer to consumer 

‌Products sold directly to customers – This is when the manufacturer sells the products to the customers who are the final users of the product.

• Very simple
• Suitable for some types of products
• Lower price for consumers
• Not many customers live near factories so it is difficult for them to buy the products
• Transporting products to consumers can be expensive and not worth it.
• May not be suitable for some types of products

‌Producer to retailer to consumer

‌Producer sells products to retailers who then sell the products to the consumers

• Lower distribution costs (Only need to transport to the retailers not individual customers)
• No direct contact with customers

‌Producer to wholesaler to retailer to consumer

‌Wholesaler divides large bulks of products into smaller ones for small retailers to buy.

• Reduce storage cost for manufacturer and retailers
• Reduce transportation costs
• Small retailers can buy small bulks from wholesalers so products don’t expire
• Wholesalers can give advice to small retailers on what is selling well
• Price is higher for retailers and consumers
• Wholesaler may not sell every product
• Longer time until products reach consumers which may be bad for fresh products

‌Other P’s

‌Physical Evidence: How we reassure our customers, e.g. impressive buildings, well-trained staff, great website?
People: Who are our people and are there skills gaps?
Partners: Are we seeking new partners and managing existing partners well?

‌Technology and the marketing mix

‌The internet is also used for promotion and advertising of products.
Internet and other technologies used by businesses to  market and sell goods and services to customers.

Examples of e-commerce include online shopping, internet banking, online ticket-booking, online hotel reservations etc.

‌Businesses advertising on social networking sites

• ‌Can target specific types of consumers
• Advertisements and information can be edited/updated quickly
• Quite cheap
• Customers may find online ads annoying
• Pop up advertisements cost money
• Advertisement can be edited by audience in a bad way (e.g. internet memes

‌Business advertising on their own website

• ‌Don’t need to pay for ads if website already hosted
• Ads can be changed/updated anytime
• Can provide more information on their own website
• Fewer viewers
• May not be seen by most people