The Marketing Mix

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The Marketing Mix

• Also referred to as the 4Ps

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Human Responsibility 4Ps
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Marketing Mix

• The balance of product, price
• promotion and place is the key to products being
  successful in the market place.

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The 4 Ps

• The right Product
• At the right Price
• Where Promotion is appropriate
• And its sold in the right Place for the type of
  product it is

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The Product
i

• Product
• Price
• Promotion
• Place

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The Product

• An object or a service that is mass produced or
  manufactured on a large scale with a specific
  volume of units. A typical example of a mass
  produced service is the hotel industry. A less
  obvious but ubiquitous mass produced service is a
  computer operating system. Typical examples of a
  mass produced objects are the motor car and the
  disposable razor. www.wikipedia.com

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The Product

• For a product to be successful it will need to be
  carefully designed, developed and tested.
• Which costs money.
• The product is refined and made ready to be
  launched to the public.
• A graph of sales can then be plotted over the
  life of the product, this is called the PRODUCT
  LIFE CYCLE
• X Time and Y volume of sales

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Product Life Cycle
Can you label each section of a products
lifecycle?
Maturity
Growth
Decline
Volume of Sales
Obsolete
Introduction
TIME
Development
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2
3
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5
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Introduction

• Once a product has been developed by the RD dept
  of a firm it is ready to be launched on the
  market.
• At this point the sales will begin to climb
  slowly over time, hence the graph rises slowly
  (slow rate of adoption)
• cost of product will be high
• sales volume low
• no/little competition - competitive manufacturers
  watch for acceptance/segment growth
• There may be losses
• demand has to be created by a marketing strategy
• customers have to be prompted to try the product

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Growth

• The sales continue to rise as the public become
  aware of the product
• costs reduced due to economies of scale
• sales volume increases significantly, the graph
  rises rapidly (faster rate of adoption)
• profitability
• competition begins to increase with a few new
  players in establishing market
• prices controlled to maximize market share

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Maturity

• Mature stage
• costs are very low as you are well established in
  market no need for publicity.
• sales volume peaks
• increase in competitive offerings
• prices tend to drop due to the proliferation of
  competing products
• brand differentiation, feature diversification,
  as each player seeks to differentiate from
  competition with "how much product" is offered
• very profitable

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Decline

• Decline or Stability stage
• costs become counter-optimal
• sales volume decline or stabilize
• prices, profitability diminish
• profit becomes more a challenge of
  production/distribution efficiency than increased
  sales
• consumer demand for spare parts, maintenance and
  or product servicing

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Obsolescence

• Product no longer manufactured and sold
• New product has replaced this one
• End of the line
• Obsolete

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Revitalisation

• Before the product reaches death whilst it is in
  decline
• The product can be revitalised

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Revitalisation
Maturity
Growth
Decline and revitalisation
Product life extended
Volume of Sales
Introduction
TIME
Development
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Frequent Revitalisation
Maturity
Decline and revitalisation
Growth
Product life extended
Fast rate of adoption
Volume of Sales
Introduction
TIME
Development
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FAD products
A Fad product has a very short life cycle and is
very quickly adopted onto the market. This quick
adoption rate is given by the rapid rise in the
graph. Maturity is very short and decline equally
rapid.
Maturity
Volume of Sales
Decline
Growth
Death
Introduction
TIME
Development
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FASHION products
A Fashion product has a very rapid rate of
adoption onto the market. This quick adoption
rate is given by the rapid rise in the graph.
Maturity and decline can depend on the fashion in
question.
Maturity
Decline
Growth
Volume of Sales
Death
Introduction
TIME
Development
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Trends in FADs
FADs come and go very quickly, but with FADs come
trends. A trend is plotted by looking at the
performance of the FAD products on sale. If you
consider, yoyos, utube, myspace, so there is a
trend towards using PCs and away from
conventional toys
Volume of Sales
Yoyo
Utube
Myspace
Death
TIME
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Slow rate of adoption
A product that is adopted slowly has a low growth
in sales, tending to have a longer lifecycle.
Volume of Sales
Maturity
Growth
Decline
Introduction
TIME
Development
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Mobile music lifecycles
Ipod MP3 player
Walkman
CD Walkman
Volume of Sales
iPhone
TIME
1980
1985
1990
1995
2000
2005
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Product Churning

• Some companies deliberately keep the lives of
  certain products short
• Producing new and improved products at frequent
  intervals.
• This stimulates purchasers to have the latest
  version of the product.
• Popular in the 1980s with electronics and car
  industry

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Product

• In summary
• A product is examined on three levels
• The core product is the benefit of the product,
  for example the convenience of a car
• The actual product is the tangible, physical
  product, for example the car
• The augmented product is the customer service
  support offered, for example warranty, guarantee
  and after-sales service

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Product

• In summary
• The quality of a product depends on factors such
  as its
• Aesthetics
• Performance
• Maintenance, ease of servicing
• Durability
• Range of features
• Ease/effectiveness of use
• Brand name

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Marketing Mix
ii

• Product
• Price
• Promotion
• Place

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Price

• The price of a product can be a significant
  determinant in the market success of a product.
  Pricing is a complex business, and the price will
  be determined by a number of factors
• The objectives of the company
• Elastic demand
• What the market will bear
• Cost of production

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Company Objectives

• Price will depend on
• Whether the company is seeking to maintain or
  expand its market share
• Whether it is trying to reach a certain return
  for a level of investment
• Whether it is trying to achieve a steady rate of
  growth
• Whether it is trying to keep up planned levels of
  output

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Elasticity of demand

• Price can be determined by elastic demand
• Elastic demand is determined by how much demand
  changes with a small change in price
• If demand remains the same when there is a price
  change then it is said to be inelastic
• If demand changes dramatically when there is a
  change in price it is said to be elastic.

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What the market will bear

• Price can be affected by the type of product
  being sold
• Radically new products are harder to determine a
  price for than products that are developments on
  existing offerings.
• When this is the case market research needs to be
  carried out in order to determine what the
  highest price can be charged to ensure a targeted
  level of sales.

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designer v traditional
Traditional
Radically New
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Costs

• Price will always be affected by costs
• Material Costs which are variable, raw
  materials etc
• Production Costs fixed, machines, tools,
  buildings
• Distribution costs variable, transportation
• Higher volume of sales will mean lower production
  costs and likewise lower volume of sales will
  lead to higher production costs. This is known as
  economy of scale.

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Henry Fords production line
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Pinball machine production line
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Costs

• Working out the final price can be calculated by
  a cost plus strategy.
• This involves estimating the average cost of
  producing and marketing the product and adding a
  mark up for profit.
• contribution pricing is similar, but takes
  account of the variation of production costs for
  different levels of sales

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Price

• A company may choose to not to use any of the
  above to determine the price.
• It could set its price to compete with a rival
  company.
• It could also set its selling price by using a
  market research strategy to determined perceived
  value.
• Such a strategy will usually be accompanied by a
  promotional strategy and emphasise quality and
  value of the product.

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Price and the Product Life Cycle

• The strategy adopted to determine a products
  price will change throughout its lifecycle
• Early in a products life the price maybe high
  however the price will reduce by improvements in
  the production process and economies of larger
  scale production.

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Price and the product life cycle
Maturity
During the introduction phase of a products life
a pricing strategy could be to price the product
low to stimulate interest. This is known as
MARKET PENETRATION. Alternatively you might price
the product at a high level to reach a smaller
target market and create an image of
exclusiveness and quality. This is know as MARKET
SKIMMING
Growth
Decline
Volume of Sales
Product sales dying
TIME
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2
3
4
5
6
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Price and the product life cycle
During the growth stage the aim of a company will
be to keep prices steady in order to encourage
new and repeat purchasers. However during this
phase of a product's life the competition will be
known and it is possible that either the price of
the product will be reduced to make the product
more competitive or new features will be added to
the basic product to give it added value
Maturity
Decline
Volume of Sales
Product sales dying
TIME
1
2
3
4
5
6
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Price and the product life cycle
During the maturity stage the aim
Maturity
Decline
Volume of Sales
Product sales dying
TIME
1
2
3
4
5
6
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Price and the product life cycle
In the decline phase of a product life cycle
decisions will have to be made about how long the
decline can be sustained. The strategies may not
involve price changes but the company will look
for ways in which to cut the costs that they
incur in producing, distributing and marketing
the product
Volume of Sales
TIME
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2
3
4
5
6
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Trigger and Incremental Products

• Another aspect of product development is the
  distinction between trigger and incremental
  products a company will sell.
• Trigger products will be marketed on their own
  merit but incremental products are sold on the
  goodwill created by the trigger product.

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Trigger Products

• TRIGGER products are key products in a companys
  product range which will prompt a potential
  customer to make a purchase.
• Examples are computer hardware and the operating
  software.
• Tescos TRIGGER products are its range of
  groceries.

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Incremental Products

• INCREMENTAL products are not worth buying on
  their own, they are add ons to the purchase of a
  trigger product.
• Examples are computer printer and the word
  processing software.
• Tescos incremental products are its services
  like photography, insurance and the like.

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Consumers
Late majority
Early majority
Early adopters
Volume of Sales
Laggards
Innovators
TIME
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Categories of purchaser

• Innovators are those consumers most likely to
  take a risk and buy radically new innovations
• Early adopters are slightly more cautious than
  innovators but are the targets of a companys
  marketing strategy
• Early Majority wait to see a product become
  established before taking the risk.
• Late majority wait until they see the price drop,
  or for special offers which will enable them to
  purchase.
• Laggards purchase at the end of a products life
  from cultural or financial reasons. They may just
  feel compelled to buy the product for social
  reasons.

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Price a summary

• Demand
• Costs (need to cover all costs incurred)
• Government taxes
• Competition
• Stage in the life cycle (price increases in
  growth and falls decline)

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Price a summary

• Methods of pricing include
• Penetration pricing price set artificially low
  to gain market share once achieved, the price is
  increased
• Price skimming if product has competitive edge,
  a high price can be set this will fall with
  increased supply
• Psychological pricing charging 1.99 rather
  than 2.00
• Predatory pricing undercutting competitors,
  creating price wars

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Marketing Mix
iii

• Product
• Price
• Promotion
• Place

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Promotion

• If a companys products are to succeed people
  need to know about them.
• Promotion is about image creation both for the
  company and for specific products and about
  creating loyalty to brands and products in
  various ways including the use of monetary
  incentives.

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Promotion
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Sales Promotion

• In store promotions known as push strategies
• Newspaper adverts or coupons to encourage
  purchasers to seek out the product, known as pull
  strategies

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Advertising

• A radically new product will need to be launched
  on to the market in such a way that potential
  purchasers understand what the product does, as
  well as selling the idea that it is worth buying
• Dyson Adverts

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Advertising

• The Dyson vacuum cleaner did this very well.
• A new concept was advertised on TV and in
  newspapers.
• The product was made colourful in order that
  potential purchasers saw a design element to it.

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Advertising

• Newspapers and Magazines
• TV
• Hoardings
• Leaflets
• Posters
• TV channels
• Internet (viral)

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Publicity

• Unlike advertising
• Newspaper articles
• PR Public Relations
• Image
• Company doesnt control what others write

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Personal Selling

• Door to door
• Cultivate contacts
• Salesperson can persuade potential customer to
  buy
• Sales force

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Exhibitions and Trade fairs

• Trade fairs useful for influencing those in the
  trade
• Home Exhibition
• Boat Show

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Promotion - summary

• Promotion
• Decisions have to be made on how best to promote
  the product and bring it to the attention of
  potential customers.
• The intention is to win new customers or persuade
  them to change brand loyalty.

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Promotion - summary

• Methods include
• Short-term promotions such as Buy One Get One
  Free (BOGOF), competitions and coupons
• Exhibitions and trade fairs
• Publicity campaigns
• Personal selling/sales representatives
• Can be expensive and risky, careful budgeting
  required.
• The acronym AIDA is used with promotion and
  advertising draw attention, create interest,
  generate desire, invite action.

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Promotion - summary

• Advertising
• Advertising is used to bring a product to the
  attention of potential customers.
• When deciding on the appropriate way to advertise
  a product you should consider
• overall costs,
• the target market or audience
• and the most appropriate medium.

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Promotion - summary
Medium Advantages Limitations Cost issues
Television Very high, mass market coverage low cost per exposure can generate powerful emotive response can include images sounds and special effects Quick, fleeting exposure target markets selected by scheduling, for example between 4opm and 6pm for children Expensive key viewing times very expensive
Radio Very good local impact high geographic selectivity national radio effective for consumers on the move (for example in a car) Audio only fleeting exposure fairly low attention, background noise Relatively low cost for local radio. Higher rates for national commercial stations
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Promotion - summary
Newspapers and magazines Very good local markets, national or geographic selected coverage broad acceptability high believability prestige magazines often very high-quality images Very short life generally poor image quality in newspapers no guarantees of positioning of advert High cost in national and prestigious magazines right hand page often more expensive than left (readability)
Direct mail Very high audience selection can be personalised with mail-merge systems Often discarded as junk mail poor image Relatively high cost per exposure
Billboards Flexibility high repeat exposure local targeting positioned in high traffic areas to catch mobile consumers some are electronic with several adverts repeating Little audience selectivity image only easily vandalised Generally low cost key sites (for example outside airports) can be very expensive
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Promotion - summary
Online High selectivity instant can be powerful, moving images and sound can be as long as viewer wishes can be interactive direct access to supplier increasingly popular Small by rapidly growing audience relatively low impact anxiety over invasion of personal space linked to spam and spyware Low cost purchases can be made directly for the advert
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Marketing Mix
iv

• Product
• Price
• Promotion
• Place

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Place

• Place refers to how the product is distributed to
  the target market
• In the right place at the right time
• Geographical Placement
• Physical Placement
• Direct Marketing

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Place

• Geographical Placement
• Local
• Regional
• National
• International
• Companies sometimes launch products in one
  location to see how they will sell

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Place

• Physical Placement
• Right place right time
• JIT (just in Time)
• JIT
• Costs in transport not storage
• Diverse destinations
• Missing launch dates impact on publicity
• Efficient

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Place

• Direct marketing
• Door to door
• Mail order
• Company owned stores (SONY)

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Place - summary

• Place
• Or placement refers to the location where a
  customer can purchase a product. It is sometimes
  known as the distribution channel. It can
  include any physical store or shop as well as TV
  shopping channels and the internet

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Place - summary

• There are four main channels of distribution
• Manufacturer-Consumer e.g. mail order, farm shops
• Manufacturer-Retailer-Consumer e.g. high-street
  stores
• Manufacturer-Wholesaler-Consumer e.g. furniture
• Manufacturer-Wholesaler-Retailer-Consumer e.g.
  medium-size convenience stores (large
  supermarkets often cut out the wholesaler)
• Functions of distribution channels include
  contacting prospective buyers matching the offer
  to the buyers needs negotiating agreement on
  price and terns and storing and transporting the
  products.

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Marketing Mix
v

• SAQ Task

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Task

• Use a product of your choice and explain how each
  stage of the product life cycle is catered for in
  the design process.