The Marketing Mix

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The Marketing Mix

• To market or sell its product successfully, a
  business must develop a strategy based on four
  key elements.

PRODUCT
PRICE
MARKETING MIX
PROMOTION
PLACE
How the elements are combined in the marketing
strategy is called the marketing mix
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PRODUCT

• Marketing

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Product

• The actual item that a customer purchases,
  including the packaging, image, guarantee and
  after-sales service.
• It is the means by which a business provides
  benefits for its customers. It is useless unless
  it provides a benefit for the user.
• A good or service that the business is trying to
  sell must be one that actual or potential
  customers want, meets their needs and they are
  willing and able to buy.
• Tends to be most important part of marketing mix
  as it determines price, how it will be promoted
  and where it is sold.

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Core, actual and augmented product

• Level 1 - Core
• this is the basic product or service - consists
  of the benefits customers are provided with when
  they buy and use a product
• Level 2 - Actual
• This consists of 5 elements - brand, quality,
  styling, features and packaging. These elements
  make up the product concept
• Level 3 - Augmented
• This includes additional features which help to
  enhance the products attractiveness and give a
  competitive edge - extended warranty, after-sales
  service, 0 credit

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Product Life Cycle

• In a modern industrial society changes are
  continually occurring in the market place.
• Technological developments
• Fashion
• Political pressures
• Economic circumstances
• Many other factors
• The consequence - products sooner or later become
  obsolete!

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Product Life Cycle

• Changes dictate that their will always be demand
  for new products while, at the same time, others
  will be in decline.
• Product life cycle helps organisations anlalyse
  process by which products emerge, grow, stabalise
  and decline over time.

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Product Life Cycle

• Development
• Product undergoing research development
• Costly and time-consuming period
• Development of prototypes extensive testing
• No revenue generated and high costs
• Introduction
• growth slow
• volume of sales low
• limited awareness of product
• necessary to create demand - heavy advertising
• losses made

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The Product Life Cycle

• Growth
• higher product awareness
• rapid increase in sales
• little competition
• highest unit profits
• Maturity
• fully established product
• sales level out
• more competition
• new marketing strategy required to hold market
  share (cut prices, increase advertising)
• development costs should have been paid back and
  product at its most profitable

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The Product Life Cycle

• Saturation
• Supply starts to outstrip demand
• Decline
• sales and profit in decline
• product old
• new products enter market
• consumers may switch loyalty

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Marketing Task 1

• Describe the three levels of product.
• (3 marks)
• Draw the product life cycle.
• (4 marks)
• Distinguish between the growth phase and the
  decline phase of the product life cycle.
• (2 marks)

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Solution Question 1

• The core product is the basic product or service
  and consists of the benefits customers are
  provided with when they buy and use a product
• The actual product is what the consumer actually
  buys and consists of elements such as brand,
  quality, styling, features and packaging
• The augmented product includes additional
  features which help to enhance the products
  attractiveness and give a competitive edge -
  extended warranty, after-sales service, 0 credit

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Solution 3

• During the growth phase, there is little
  competition from rival businesses whereas during
  the decline phase, new products are entering the
  market.
• During the growth phase, there is a rapid
  increase in sales whereas in the decline phase,
  sales have started to fall.
• During the growth phase, unit profits are high
  whereas during the decline phase, profits have
  started to fall.

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The exceptions to the rule..

• Some brands seem to go on for ever without any
  sign of decline
• Oxo
• Bovril
• Hovis
• Persil
• Heinz Baked Beans
• Kelloggs Cornflakes
• Smarties

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Extension strategies

• Methods employed to prolong life of the product
  and stop them going into decline stage - may lead
  to periods of sales growth.
• Promoting more frequent use of product
• Developing new markets for existing products
• Finding new uses for existing products
• Develop a wider range of products
• Developing style changes
• Altering packaging to appeal to different market
• Changing channels of distribution
• Changing prices
• Altering methods of promotion and advertising

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The Product Mix/Portfolio/Range

• A firms product mix or portfolio is the range of
  products that it produces.
• Very few single-product organisations
• No need for a direct relationship between items
  in an organisations product mix.
• e.g. Unilever - large multinational organisation
  with approx 400 brands worldwide. 40 in UK
  including Persil, Domestos, Birds Eye, Lynx,
  Knorr Slim-Fast.

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Advantages Disadvantages of a Product Mix

• Advantages
• Spreads risks
• Meets needs of different market segments
• Increases profits
• Raises profile of firm to become market leader

• Disadvantages
• If firm only produced one product and it failed,
  firm would fail.

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The Product Mix/Portfolio/Range

• Doesnt make sense to wait until products go into
  decline before launching a replacement.
• Loss of sales profits.
• Launch new products before existing ones become
  unprofitable.
• Different stages in the life cycle allows profit
  levels to be relatively stable.
• Profits can support development and launch of new
  products.

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Marketing Task 2

• Explain why a good product mix would help a
  business to remain successful
• (3 marks)
• Explain how an organisation can extend the life
  of a product.
• (3 marks)

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Solution

• The business can spread the risk of failure among
  a range of products which means that should one
  product fail, they would have other profitable
  backups to take the financial impact.
• Profit levels will be more stable and easier to
  manager as the business does not have to contend
  with financial peaks and troughs which makes it
  difficult to budget.
• Profitable products can support the development
  and launch of new products as they profits can be
  reinvested into this area rather than the
  business having to seek external sources of
  finance which could be risky.

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Solution

• A business could extend the life of a product by
  changing the price of it. If it reduced the
  price, it could lead to an increase in sales and
  sale revenue as more people are likely to buy it.
  
• They could also extend the life by developing new
  markets for existing products. This would give
  the business access to a whole new market segment
  which would in turn increase sales.
• They could also update the packaging or alter the
  packaging to appeal to a different market. This
  could renew the products popularity amongst a
  different market segment e.g. teenagers, and
  extend the products life.

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Product line

• The product mix may contain product lines.
• These are groups of products that are similar.
• For example, Procter Gamble manufacture a hair
  care product line that includes Pantene, Herbal
  Essences and Head Shoulders.

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Costs benefits of having a product line

• Benefits
• Spreads the risk
• Gives consumers impression that organisation is a
  specialist producer in particular line of
  products
• Allows new products to be launched as existing
  customers willing to try them
• Costs
• Bad publicity for one product could affect sales
  across range
• Complicated operations with different machinery
  and processes for each different product

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Adding new product lines

• Tends to happen over time
• In response to new trends e.g. healthy eating
• To make more profits
• To show innovation to retailers
• To add interesting new tastes for consumers
• Products may also be dropped to increase
  profitability if product line is too long!

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Keeping product line fresh

• Important that organisations invest in research
  development.
• New products give competitive edge
• Improve quality and safety of products
• If product first on the market, allows monopoly
  situation for a period and higher prices.
• Very important to meet changing needs of
  customers

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Product innovation

• Development of new products is essential if
  businesses are to replace those in decline.
• Generation of idea from research or brainstorming
• Analyse idea
• Produce a prototype and test it
• Test market
• Adapt product - solve any problems
• Launch product
• Extremely high failure rate - 501 and costs huge
  sums of money and time

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Marketing Task 3

• Distinguish between a product mix and a product
  line.
• (1 mark)
• Explain the costs and benefits of a business
  having a product line.
• (4 marks)

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Solution

• A product mix is the range of products that a
  business produces whereas a product line is a
  group of products that are similar.

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Solution

• Having a product line allows new products to be
  launched as existing customers are more willing
  to try them which increases the chance of them
  being successful.
• It also spreads the risk because if one product
  is unsuccessful and ultimately fails, the
  business has other lines to fall back on.
• A cost of having a product line is that any bad
  publicity for one product could have a
  detrimental affect on affect sales across range.
  
• Another cost is that complicated operations with
  different machinery and processes for each
  different product would have a huge financial
  impact on the business.

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Branding

• Marketing

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Branding

• This can be a very successful marketing tool.
• Business chooses a word or symbol then registers
  them so they can only be used on its products.
• A brand is a product with a personality
• The aim of branding is to
• distinguish a product from its competitors
• make it instantly recognisable to the consumer

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Well known brands

• Name of the company
• Baxters
• Oxo
• Cadbury
• Heinz
• Name of the product
• Mr Kipling
• Fairy

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Benefits of branding

• Allows instant recognition
• Increased customer loyalty
• Repeat purchases
• Stable level of demand allows for better
  production planning
• Possibility to charge premium prices
• Opportunity to enter new markets
• Can convey image to consumer - snob value
• Money value of brand as an intangible asset on
  balance sheet
• Easier to launch new products on strength of the
  brand name.

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Drawbacks of branding

• Takes a great deal of time to establish
• High promotion costs to establish and maintain
• Bad publicity can affect whole brand
• Possibility of imitators and fake products -
  premium priced goods most vulnerable
• Danger of fashion change

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Marketing task

• Explain the costs and benefits of branding.
• (4 marks)
• (ID then explain why it is a cost or benefit)

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Solution - Positives

• Branding allows instant recognition of the
  product This is a benefit because consumers are
  more likely to buy the product instead of a
  competitors ensuring sales are maintained.
• A branded product enables a business to charge
  premium prices as it is seen by the consumers as
  being of higher quality and thus worth paying a
  little bit extra for. This should increase
  turnover/profitability
• Branding encourages increased loyalty from
  consumers who are less likely to be enticed away
  by rival products, in turn ensuring sales remain
  high.

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Solution - Negatives

• It takes a great deal of time to establish a
  brand name and during this time, sales may remain
  low which could have a detrimental financial
  impact on the business. Time could be better
  spent elsewhere.
• There is also a danger of fashion changing and
  the product no longer being regarded as worth
  having. This in turn would lead to reduced demand
  and reduced sales. Money spent establishing the
  brand would be wasted
• High promotion costs to establish and maintain
  the brand could outweigh the possible income from
  sales and put negative financial pressure on the
  organisation.

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Types of brands

• There are 2 main types of brands
• Manufacturers Heinz
• Own brands Tesco, Boots, Sainsburys

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Unique Selling Point (USP)

• A feature that allows a product to stand out from
  its rivals.
• Should offer the consumer some unique benefit
  that may motivate them to switch brands.
• e.g. Dyson

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Own brands

• Most major supermarket and retail chains offer a
  wide range of products under their own brand
  name.
• High-volume selling products would be considered.
  
• Retailers have reputation for value and/or
  quality e.g. Sainsburys, Boots
• Offers customers an additional choice.

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Benefits costs of Own Brands

• Benefits
• They can have goods made to their specification
  and price
• Own-brands often cheaper and attract more
  customers and therefore sales.
• Costs
• May be seen as lower quality than established
  brand
• Bad publicity will be associated with the
  supermarket or retailers name, not the
  manufacturer

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Marketing Task

• Describe the advantages of selling
• branded and
• own label goods
• for the supermarket and its consumers
• (4 marks)

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Solution

• Branded goods
• Consumers perceive these goods to be of higher
  quality and are more likely to purchase them
  which will increase the supermarkets sales.
• Consumers will enjoy the image of using branded
  products which give an additional snob value.
• Own label goods
• By selling own label products, the supermarket
  may be able to have a higher mark up as they may
  be able to resource products cheaper and do not
  have to spend as much on packaging.
• Consumers will benefit as they will have access
  to cheaper alternatives.