Download 6. Marketing Mix Instructions

MARKETING MIX
The key marketing activities are: product, price,
promotion and place. These are the ”4 Ps of
Marketing”
Learning Objectives
• Students must…
• Know that marketing mix refers to the key marketing activities
undertaken by a business: the product, its price, the advertising
effort (promotion) and the distribution (placement) of the product
• Students should…
• Apply their knowledge of each of the 4Ps to a given product
• Explain how each concept (product, price, promotion and
placement) contributes to the combined marketing effort (marketing
mix) for a product or service.
• Students could…
• Evaluate the marketing mix for a product and make
recommendations based on their analysis of the relative
contributions of each of the 4Ps.
The Marketing Mix – the 4 Ps of Marketing
• Product – the management of the product(s) offered by the
business, including the intangible aspects of the product
(reputation, convenience, etc).
• Price – the management of price, i.e. pricing objectives, pricing
tactics, and the approaches to making pricing decisions
• Place – the management of distribution channels, location of
the business, and the in-store presentation of the product to the
consumer
• Promotion – the management of the methods businesses use
to attract customers, e.g. advertising, direct marketing, sales
promotion, viral marketing, etc.
Watch the Marketing Mix (video) – the 4Ps of Marketing
Marketing
Mix
Milan’s
Business
Jillian’s
Business
David’s
Business
Mark’s
Business
Ben’s
Business
Product
Haircutting
Service
Boarding,
Training and
Grooming
Dogs
Custom
Skateboards
Lemonade
Sales to
Support
Charity
Designer
Water Drinks
for Fundraising
Price
Discount
Price
skimming
Competitive
Pricing
(Mark-up?)
Price
Skimming
(Competitive
Pricing?)
Place
Mobile, at
customer’s
home
At home, farm
has special
facilities
Parent’s
Garage
Next to a Car
Wash
Customer
Event
Promotion
Word-ofmouth, client
referrals
Brochures,
Word-ofmouth,
referrals
Internet Site,
referrals
Personal
Sales, Product
Display
Advertising,
Word-ofmouth, Sales
Task: Watch the video and complete the table.
What is the Marketing Mix for the business in your Marketing Plan Assessment?
The First P is: Product
• “Product” includes the management of the product from start to
finish (See: the Product Life Cycle)
• Topics to consider include…
• Tangible versus intangible aspects of the product
• Brand name and trademarks
• Type of product (consumer and business products)
• Product profile, product mix, product portfolio (lines, width, depth)
• Total product attributes
• Strategic Planning (Product Life Cycle Concept) – four stages
•
•
•
•
Introduction – follows product research and development
Growth – sales rise
Maturity stage – popular and profitable
Decline stage – sales and profitability decline
• Life Cycle and Marketing Mix – strategies for 4Ps appropriate to each
stage of the Product Life Cycle
The Second P is: Price
• “Price” involves setting a price for a product (fees, rents, charges,
fares, rates, etc)
• Topics to consider …
• Different objectives
• Profit objectives set a specific level of return or profit margin
• Sales objectives set a specific level of sales or market share
• Status quo objectives aim to maintain a level of profit or market share
• Different tactics consider…
• What the consumer will pay – consumer orientation – considers total product
• What the product costs – production orientation – considers fixed and variable costs
• Various approaches to pricing
• Mark-up pricing
• Break-even pricing
• Price skimming
• Penetration pricing
• Competitive pricing
• Price reductions
Various Approaches to Pricing
• Various approaches to pricing
• Mark-up pricing – add a percentage of profit to per unit cost
• Break-even pricing – setting a price that will return to the business
the initial costs, quickly, i.e. recovering initial costs is the priority
• Price skimming – setting the price high at first because there are
consumers ready and willing to pay more, e.g. new computer chip
• Penetration pricing – setting the price low to gain a greater share of
a market (underprice the competition)
• Competitive pricing – setting the price to compete with existing
competitors in the market; equal the competition’s price
• Price reductions – discounting techniques to effectively lower price
without actually reducing the price (discounts for large volume
purchases, reward for loyalty, club membership, buying in bulk, etc)
Some Depth to Explain How Prices are Calculated
• Calculating prices
• Cost pricing – add up costs then add in a desired amount of profit
• Mark-up pricing – add up costs then add a percentage of cost
• Demand pricing – find out how much the consumer will pay
• Competitive pricing – setting the price to compete with existing
competitors in the market
• Regulated prices – the price is set by government or an authority
• Recommended prices – some manufactures and wholesalers set
prices for dealerships or retailers; manufacturers suggested prices
help achieve the manufacturer’s overall business objectives.
Examples are car manufacturers and Walmart.
The Third P is: Place or Placement
• “Place” is the where the product is sold
• Topics to consider …
• Distribution channels and the physical distribution of the product
• Direct – manufacturer to consumer
• Indirect – manufacturer to wholesaler and retailer to consumer
• Links or nodes in the distribution chain
• Distributors – they receive large volumes of product from the
manufacturer and transfer products to regional wholesaler channels
• Wholesalers – they collect large volume of products from different
distributors, and serve a regional system of retail outlets by repackaging
goods for retail stores
• Retailers – maintain connection with consumers in local market
• Non-traditional links include backwards integration of channels (Walmart
Inc. owns the distribution channel), and Internet sales
The Fourth P is: Promotion
• “Promotion” is how the customer learns of the product and
aims to introduce a new product, create an interest in the
product, and reinvigorate falling interest in a product
• AIDA model guides promotion (attention, interest, desire
and action)
• Promotion methods include…
• Advertising – product and corporate advertising
• Advertising campaigns (seven steps)
• Direct marketing (mail, leaflets, telemarketing)
• Sales promotion (free samples, contests, games, special prizes,
coupons, point of sale displays)
• Sponsorship of big event
Products have a typical Life Cycle
• Products begin by being researched, designed and introduced
to the market.
• Products enter a growth stage when they are successful and
their sales begin to rise. Profits are reinvested in the business
to produce more products to fill distribution channels.
• Product sales peak and stabilize as product becomes mature.
Competition causes product differentiation and lowering of
prices. Various pricing strategies are appropriate.
• Product sales decline as product loses popularity. Firms either
consolidate their efforts in smaller niche markets or withdraw
the product. See Product Life Cycle Diagram
Sales and Profit
The Four-stage Product Life Cycle
Stage 1
Stage 2
Stage 3
Stage 4
Introduction
Growth
Maturity
Further
Growth
New
product
Sales
rise
Profitable
Sales
or Sales
Decline
Time
Loss
0
Profit/Loss
Marketing Mix differs at each LC Stage – must be managed
Marketing Mix
Product
Introduction
Minimal differentiation of product
Basic level of product quality
Price
Relatively high to recover costs – price skimming
Alternatively, relatively low to gain market share –
price penetration
Promotion
Develop primary demand – consumers learn of
the product
Place or distribution
Sparsely distributed because the product is new
to the market
Marketing Mix differs at each LC Stage – must be managed
Marketing Mix
Product
Growth
Increased differentiation of product
Improved level of product quality
Price
Softening- gaining market share with lower prices
Promotion
Develop selective demand – focusing on target
groups
Place or distribution
Wider coverage (product gains access to retail
outlets and increases coverage)
Marketing Mix differs at each LC Stage – must be managed
Marketing Mix
Product
Maturity
Active differentiation (new features developed)
Highest product quality (continuous improvement)
Price
Promotion
Place or distribution
High level of price competition
Heavy spending with focus on product differences
and intangible aspects
Complete coverage
Marketing Mix differs at each LC Stage – must be managed
Marketing Mix
Product
Decline or Further Growth
Few or no product differences,
Increasingly unwanted or shift to smaller niche
markets
Decline in product quality
Price
Promotion
Place or distribution
Rising prices if scarce, or falling prices if surplus
Minimal effort to advertise
Falling coverage as retailers abandon product
Example – The Introduction Story
• In general, products have a stage of life where they are first
developed and then offered for sale
• Business undertakes market research to learn consumer needs
• The basic product is developed (few features offered)
• Ex: “A Blackberry” was at first only one product
• Pricing is determined mostly by the need to recover initial
development and production costs; a “hot” new product may
sometimes be priced high to skim off profits
• See: pricing section (cost recovery pricing)
• Promotion focus is on making consumers aware of the product
• e.g. choosing a brand name, identifying markets, building consumer
awareness of the product, piggybacking on existing products
• Placement is practically non-existent, distribution channels
need to be filled by production, retailers are not interested
• “No one is asking for the product! ”
Example – The Growth Stage Story
• The consumer has learned of the product and likes it.
• From word-of-mouth by early adopters (first users)
• From advertising the product
• Product is relatively undifferentiated (few features offered)
• Ex: Ford Model T Sedan!! Only one colour offered.
• Pricing is determined mostly by the depth of demand, some
need to recover initial development and production costs
• See: next section (cost recovery pricing)
• Promotion focus is on educating the consumer to the brand
name and initial features
• e.g. introducing the brand name, getting magazines to review the
product’s features,
• Placement is sparse, distribution channels as yet unfilled by
production, retailers reluctant to carry the product
• “Sorry! The product has not arrived at our warehouse yet! ”
Example – The Maturity Stage Story
• The product is established, there are competitors in the market,
and the consumer must learn of the differences
• Advertising promotes the products distinguishing features
• Product is differentiated (many features offered)
• Ex: Mobile phones compete on functionality, reliability and prices
• Pricing is competitive (compete by offering more features)
• See: next section (competitive pricing, value pricing)
• Promotion focus is on product features (differentiation) and
intangible aspects (quality, reputation)
• e.g. making the consumer aware of changes and improvements (New
and Improved!)
• Placement is good, distribution channels are filled with
products, retailers carry and display the product
• Aisle promotion, product displays are well developed and on-going
Example – The Decline Stage Story
• The product is no longer popular, there is little interest in
the differences, small niche markets may provide demand
• Advertising expenditures fall, shift focus to niche markets
• Product is much less differentiated
• Ex: A few high-end LP records are sold in a niche market
• Prices may rise if niche market demand develops, or fall
as retailers offer discounts to clear unwanted product
• See: next section (price reductions)
• Promotion is minimal unless a niche market appears
• e.g. falling profitability, no value in educating the consumer
• Placement is shrinking, distribution channels receive
fewer orders from retailers
• Specialty retailers may provide for niche markets, otherwise - gone
Write the section 2.4 Market Mix
• Review each aspect of the 4Ps with respect to your
product.
• You are doing this to be certain your activities support the
marketing objectives. It is important that your activities are
“coherent”, i.e. that they are appropriate and accomplish
the marketing goals.
• Reviewing the 4Ps is an excellent way to understand how
the business brings its product to market and to evaluate
the success of the marketing plan.