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Transcript
Learning outcomes
On successful completion of this section you will be able explain the
marketing mix as a set of coordinated strategies designed to satisfy the needs
of particular target markets, and demonstrate the interdependence of the
marketing mix elements. In particular you will be able to:

Identify the marketing mix as a component of the marketing process.

Identify the elements of the marketing mix for goods and services
including product, pricing, distribution and promotion

Demonstrate that a marketing mix should meet the needs of a
specific target market

Demonstrate that a marketing mix should be consistent with the
resources and capabilities of the organisation

Prepare an action plan to implement and measure the effectiveness
of the marketing mix elements

Ensure that planned activities comply with legal ethical and
environmental constraints.

Identify the specific marketing mix elements being employed to
market a nominated good or service to a target market.

Explain the impact that each mix element has on each of the other
elements.

Demonstrate that customer satisfaction and organisational objectives
are best achieved by a coordinated marketing mix.
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Plan an appropriate marketing mix
The marketing mix
4
What is a marketing mix?
4
Product
5
Price
5
Place
7
Promotion
8
People
13
Process
13
Physical evidence
14
Where does the marketing mix fit with the overall marketing
process?
14
The marketing mix and target marketing
17
Coordinating the marketing mix
20
Interdependence of the 4Ps
20
Marketing mix and your resource capability
23
Implementing and measuring the marketing mix
26
Why is planning important?
26
Developing the plan
26
Legal constraints
29
Pricing
29
Promotions
30
Feedback to activities
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3
3
The marketing mix
What is a marketing mix?
What’s the purpose of marketing? It could be to:

sell something—that is the way to make profit, and profit is what
keeps businesses in business.

convince people not to buy (in public sector marketing, an example
of this is the campaign against cigarettes).
Often before any selling takes place we have to go through the process of
finding our customers and making sure we have the goods and services they
want. This process is rather like mixing up the ingredients for a cake. If you
put different amounts of different ingredients in, you get a different result.
The outcome is the ‘marketing mix’.
You may also have heard marketing mix referred to as the ‘complete market
offering’ or the ‘four Ps of marketing’. Usually, it’s simply referred to as the
‘4Ps’:

product

price

place

promotion.
There are other Ps—especially in relation to services marketing. Briefly,
these are: people; process; and physical evidence. We will discuss these too
shortly.
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Product
The first group of ingredients in the cake, or the ‘first P’, is called ‘product’.
If you are dealing with something tangible this would include such things as
product components, that is:

design

size

weight

colour

packaging

taste and smell

quality level.
If you are looking at a service, it would be a detailed analysis of exactly
what is being offered to the customer.
Activity 1: Product
Continuing our cake analogy, what part of the process is ‘product’?
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Now check your answer with the comments in the Feedback to activities at the end of
this topic.
Price
The second group is called ‘price’. Price can be anything from the price of a
tin of baked beans to the interest rate charged by a bank (the price of
money). Usually the degree of competition plays a great part in determining
the price you can set. So does supply and demand.
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There can also be more than one price for your goods or services. For
example, the price per item may be reduced if a large number of products
are bought at one time (ie, bulk buying).
Price can depend on what use goods or services are being put to. An
example of this is the different interest rates charged by a bank to borrowers
who want to buy a house to live in, compared to those who are buying to
rent it out. In some cases price can vary depending on when the product or
service is used. Look at off-peak electricity for example.
In any event it’s up to you to make sure the customer is prepared to pay
whatever price you decide to charge. After all, what’s the good of having a
cake made perfectly to specification if the customer decides not to buy it
because of the price?
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Activity 2: Price
What factors do you think influence the prices set by the McDonalds fast food chain?
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Now check your answer with the comments in the Feedback to activities at the end of
this topic.
Place
The third group of ingredients is called ‘place’. This word is not a very clear
description of what we mean because we are talking about the distribution
of a product or service. (However, it’s a lot easier to remember 4Ps than
‘3Ps and a D’.)
It’s the process by which the cake moves from our farm, factory or office to
some location where the customer can conveniently purchase it. Marketing
decisions about distribution involve the amount of stock you are prepared to
hold and often whether goods should be sent by road, rail or air.
The most important decisions are usually about what ‘marketing channels’
you should use. This is simply the best method of getting the right product
to the customer at the right time.
The options would include:

direct supply by post or personal delivery

supply to an agent, intermediary or retailer who then deals with the
customer

supply to a wholesaler or master agent who, in turn, supplies a number
of agents or retailers.
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Promotion
The fourth and final group is ‘P’ for promotion. This involves how we tell
the customers we have the exact products (or services) they want and how
we encourage them to buy from us instead of from a competitor. In other
words, we have the product they want, right here and now. And our product
is far better than the competitors’ ones.
There are four ways of promoting products: advertising; public relations;
sales promotion; and personal selling. Together these are known as the
promotional mix.
Advertising
Advertisements on radio, television, or in newspapers and magazines are
popular ways to advertise. In other cases large billboards are placed by the
side of the road or on railway stations. Many organisations advertise by
printing leaflets or catalogues which are posted or distributed to letterboxes.
This is called ‘direct mail advertising’.
Activity 3: Advertising
1
List the ways your organisation or one you are familiar with, advertises its goods or
services. If the advertisements are printed, collect samples.
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2
Also collect samples of advertising from a competitor of the organisation you chose in
the above activity. Whose advertising do you think is the most effective? Ask some
other people for their comments and compare their thoughts to yours.
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Now check your answer with the comments in the Feedback to activities at the end of
this topic.
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Public Relations
The second method of promotion is called ‘public relations’.
Marketers use public relations to influence the opinions and attitudes of
their target groups, including public interest groups, customers,
shareholders, employees, media and governments.
They use a range of public relations activities such as special events,
newsletters, sponsorship, publicity, and lobbying. The goals of these
activities are

to create and maintain a long term business relationship

to enhance corporate image and company reputation

to foster goodwill and understanding
For publicity, the idea is to convince the media that you have a story to tell
that people would be interested to hear. It could be about a new product or
service you are releasing, an event you are involved in, a big sale you have
obtained or some important news about your organisation. If you can
convince the media people that your story is ‘newsworthy’ they will print it,
show it or broadcast it without charge to you. As you can probably guess
this is not easy to do, but it’s certainly worth a try!
Sales promotion
Third comes ‘sales promotion’ which is not the same as advertising. .
Advertising tells the customer about some feature or characteristic of the
product. Sales promotion, on the other hand, offers the customer ‘something
extra’, or the possibility of something extra, if the product is purchased.
Below are examples

‘Our Bank housing loans feature low interest, no fees and a quick
decision’ is an advertisement.

‘Take a housing loan from Our Bank and go in the draw for a 14-day
holiday in Singapore’ is sales promotion.
Sales promotion can also be internal, for example, a sales force incentive.
Personal selling
The final way of promoting your product is by ‘selling’. That is where either
you or a sales representative talk face-to-face with a customer. It can be in a
retail store, at a factory, in an office or over the counter at a bank. In any
event, as you can see, not only is selling not the same thing as marketing,
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but it is only one element in the number of activities called the marketing
mix.
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Case study
The New Electronic Motor
Bernard has perfected a new electronically controlled motor. He has spent
the past six years on the project and knows from his background in the
motor industry that it will be a sure-fire winner. The machine is reliable,
inexpensive and a money-saver due to its low running and maintenance
costs.
He has manufactured a number of basic models of the motor in his factory
unit. He has also contacted a few of his friends in the motor industry who
have come to see his invention and declared it to be a most exciting
design breakthrough. But no-one wants to buy it.
Bernard is contemplating the motors when David, a family friend, walks
in.
‘All these motors are still here?’ asks David.
‘Yes. I can’t understand it,’ replies Bernard. ‘I know that this product is a
winner. I worked in the industry for years. All my old colleagues have
had a look at it and say that it is marvellous. And yet nobody seems the
slightest bit interested in buying one!’
‘Well,’ responds David. ‘Who else knows about it?’
‘Who else needs to know? Everyone in the motor industry has seen it.
If they had any sense they would be beating my doors down to get one.’
‘Yes,’ David replies. ‘All your colleagues know and keep telling you how
good it is. But how about people who buy motors rather than just design
them? Have you contacted them to tell them about your motor — and to
check whether the motor you have made is the type and design they
want?’
Bernard sighs. ‘You know, I never thought of it like that.’
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Check your progress
Bernard has asked you to give him some advice on how he should proceed with his new
product. What advice will you give him? Just some general ideas will do.
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No doubt you would have advised him to:

analyse his market opportunities

select his target markets

develop the marketing mixes.
Did you mention things like finding out who the customers are and what
they really want? Then perhaps some promotional ideas Bernard could try?
And making sure his prices were right and the distribution methods were all
worked out?
If so, you certainly know what a marketing mix is and where it fits in to the
overall marketing process.
Bernard’s problem is that he has lost sight of the fact that people buy what
they see as benefits from a product. They don’t buy something just because
it’s a technical wonder. So he may get great pleasure from his technical
friends’ admiration. But he won’t get much market information from them.
Indeed the admiration may make it even harder for Bernard to do the basic
job of marketing, ie, finding out what the customer wants, and providing it
while making a profit.
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People
People who deliver a service have a critical role in defining that service. For
instance, one waiter may see his role as merely taking down orders, relaying
these to the chef and transporting the dishes to the table. Another waitperson
may see his or her role as that as well as making sure that the customers
have a lovely time—and this means anything from making conversation
with them to filling up their water or wine glasses every now and again.
People who deliver a service also have a role in defining customers’
perceptions of that service. As a customer (at, say, a restaurant), do you feel
better about the restaurant if the waitperson attending to you is friendly and
accommodating?
The customers, on the other hand, may influence the image of that service
(when that service is consumed in public). For example, a restaurant might
have a certain image because of who the people are who patronise them. For
example, a restaurant frequented by celebrities will have a ‘prestigious’
image—and the restaurateur will be able to charge high prices precisely
because customers pay for the image (and not for the food).
To maintain or cultivate a certain image, managers would try and control the
type of employees and consumers they have—as well as the behaviour of
these people.
Process
In marketing services, we speak of a production and service process. This
process may occur during a set period. For example, the time during which
you, as a customer spend interacting with the waiter is the entire production
and service process (the encounter itself is what’s referred to as the service
encounter). In this case, the service was produced and consumed in one set
period—during the course of the service encounter.
In some other types of services (eg, a telephone service), the production and
service process takes place over an indefinite period. Your initial service
encounter—with, say, a technician—would be just one element of the total
production and consumption process. Other elements of the production and
service process will include your use of the telephone itself and any other
interactions with physical assets and tangible evidence (which we’ll be
describing shortly).
In marketing their service, managers need to consider the process (ie, the
production and consumption process). They also need to consider the way in
which service staff interact with customers during the process.
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Physical evidence
Again, let’s go back to our restaurant analogy. As a diner, what impression
would you get if the waiter was attired in a grubby shirt? Do you also notice
the decor of the restaurant, the lighting and the music? These aspects of the
service are what we call ‘physical evidence’. When you saw the grubby
shirt, did you wonder how clean the restaurant is? The manager would not
have intended that you got that message—but that is the message you did
get.
Physical evidence provides consumers with a guide as to the quality of the
service.
The types of physical evidence can be categorised as:

physical environment—eg, air quality, lighting, architecture,
behaviour and appearance of staff.

communications—eg, invoices, advertisements and delivery
vehicles.

price—eg, if the price is high, the consumer would expect high
quality service.
In marketing their service, managers need to be aware that if they control
and manipulate physical evidence to their advantage. For example, physical
evidence can act to shape a customer’s first impression (ie, even before the
service encounter). It can help reduce customers’ anxiety (eg, in some
restaurants, you can see right through to their clean kitchen). It can also help
provide sensory stimulation (eg, soothing music).
Where does the marketing mix fit with
the overall marketing process?
Remember that the essence of marketing is locating customers and
providing them with the goods and services that precisely fit their needs and
wants.
In order to do this we must be sure that the ‘ingredients’ of product, price,
place and promotion are added in the correct quantities. In this topic and
most textbooks each of the ingredients or the 4Ps are dealt with separately.
In reality, however, they heavily rely on each other. For example, when you
make a decision about pricing you will affect product, place and promotion.
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Activity 4:
You are the marketing manager for a major soft drink company and the decision has
been made to change the ingredients of your major two-litre product. Suggest how this
will impact on the other areas of the marketing mix, ie, price, place and promotion.
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Activity 5: The real world
Think about a product or service offered by your organisation. Write down how you know
what it is your customer really wants.
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What did you find out? Were the comments what you expected? Did any comments
surprise you?
Finding out what your customer really wants is at the very heart of the
marketing mix.
Did you notice that the comments on Activity 4 assumed that you already
knew, at least in general terms, who your customers were?
Let’s now briefly review how the marketing mix is related to target
marketing.
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The marketing mix and target
marketing
It would be rare that an organisation could sell to all the individuals or
organisations in their marketplace. So the marketers identify particular
customers whose wants they feel they can satisfy to the highest degree. This
may mean not selling to some groups of customers. The starting point for
target marketing is segmentation.
Market segmentation
Market segmentation is the process of dividing the total market into smaller
groups, which have similar characteristics. Your different customers are
looking for different benefits from the goods or services you provide. For
example, we don’t all wish to drive the same car or wear the same jeans or
drink the same coffee. The Toyota company is a good example of how an
organisation has met the needs of different customers by varying models,
prices and options.
Some common categories used to segment consumer markets are:

geographic—urban/rural, city size, climate, regions

demographics—age, sex, income, ethnic background

pyschographic—social class, personality, lifestyle

behaviour towards the product—benefits desired and product usage
rates.
In the business market, the above categories are used along with:

customer location

type of customer—size, industry, structure

type of buying situation.
Market Targeting
After the process of market segmentation, marketers will need to decide
which market segments to enter. There are three alternative market targeting
strategies

market aggregation strategy

single segment concentration strategy

multi-segment strategy
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Market Positioning
‘Positioning’ is the image or perception that customers have of a particular
brand or company compared with the competition. The key word here is
perception. Customers evaluate a particular product in the light of their
perception of it, no matter what anyone else says about the product. Once an
organisation has decided what markets to target, it will decide how to
communicate to its customers. Or, where will it position itself in the
marketplace? For example some companies may position in relation to their
competitor, whereas others may position themselves according to the
attributes of the product or by price.
Thus it is imperative that a tailor-made marketing mix is developed for each
target market. The marketer must recognise that the pricing, distribution and
promotion as well as the product itself must combine in such a way that they
satisfy the segments needs to the highest degree.
Activity 6
Use the space below and suggest how Telstra may segment their market.
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Now check your answer with the comments in the Feedback to activities at the end of
this topic.
There must be both a current and a future mix for each target market, and
both must provide benefits that meet customers’ needs.
You can see that selecting a target market and developing the marketing mix
for that market are closely linked. It is hardly possible to consider either
aspect without the other. In fact, the requirements of a target market —
product, price, place, promotion — practically determine the nature of the
mix.
The two go hand in hand.
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Finding out what your customer really wants is at the very heart of the
marketing mix.
Let’s now review briefly review how the marketing mix is related to target
marketing.
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Coordinating the marketing mix
The job of the marketer is to locate customers and supply them with the
goods and services that precisely fit their needs and wants.
In doing this, the marketers have to take account of some factors beyond
their control such as competition, raw material supplies, production issues,
the economic climate and government activity. Other factors within the
control of the marketer, at least to some extent, are the range of products or
services offered and the way the marketer communicates with the customer.
Coordinating the market mix means bringing it all together, ensuring: that
the elements of the mix are consistent with one another; and that together
they match the customer’s requirements better than competitors do.
A coordinated marketing mix will best achieve customer satisfaction and
your organisation’s goals.
Interdependence of the 4Ps
The marketing mix is a set of coordinated strategies to satisfy the
requirements of a particular target market. All four elements of the
marketing mix must be consistent with one another. In other words, the 4Ps
are interdependent. They are like a chain, the overall strength of which is
determined by the weakest link.
It is true that if you can read the market well, you will usually develop a
good marketing mix. They go hand in hand. But it’s not as simple as that in
practice. There are a few flies in the ointment.
Very few of us can read a market to perfection. It requires great insight into
not only what people are feeling and doing now, but also what they will do
in future. That insight is a rare gift.
Also social, economic and personal circumstances can change quite quickly
and unpredictably, whether for better or worse.
So we strive for perfection, but are not shocked when one of the 4Ps doesn’t
‘fit’, causing the marketing mix to be out of balance.
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Activity 7: Co-ordinating the marketing mix
Think of a ‘luxury’ item you’re familiar with (eg, expensive perfume).
Suppose you are a sales manager of the local subsidiary for the company that sells this
product. You are scheduled to give a presentation to regional sales representatives at a
professional development seminar.
Your topic is how your company co-ordinates its marketing mix. Think of one product
from the range.
You need to:

link observable activities to the four Ps (ie, how elements such as limited
distribution channels, high price, promotional mix (eg, special promotional offers
and advertising), brand and packaging form an integrated approach in the
company’s marketing strategy)

show the interrelatedness of the 4Ps.
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Activity 8: The sandwich shop
]
The shop in the centre of town where you buy your lunch is losing customers, and the
owners want to find out why. They believe that their marketing mix may be out of balance,
and have asked you to advise them. In the following circumstances, which of the 4Ps is
most likely not to fit?
(a) Relatively few young females patronise the shop at lunch time.
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(b) Very few people come for breakfast.
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(c) A recent offer to supply food to offices for lunch meetings aroused little interest.
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(d) Would changing the name of the store bring in more customers?
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Now check your answer with the comments in the Feedback to activities at the end of
this topic.
Even if your marketing mix is perfectly balanced, there could still be a
mismatch between customers’ requirements and the organisation’s
objectives. You may simply be unwilling or unable to meet those
requirements. For example, if you design houses or clothes in a certain style,
you may not wish to adopt another style. If the change would also mean
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incurring the cost of new equipment or relocating, you may not have the
resources to do so.
Coordinating the marketing mix can’t be done in a vacuum. Let’s now look
in more detail at factors that influence how you go about refining and
adjusting your marketing mix.
Marketing mix and your resource
capability
When developing your marketing mix you must also consider what
constraints you will be working under. What are the limiting factors?
The actions of your competition and suppliers are not under your control. If
a competitor lowers his price you may react to his action but you have little
or no control over what they do. Likewise if your supplier changes his raw
materials or delivery times you may be able to negotiate new terms but in
the long run your organisation is affected in some way.
Activity 9
What are some other examples about your competitor’s product that you can’t control?
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Did you include that their product maybe:

technically better

cheaper for the quality

sold in more places

promoted better?
Now, what about the things the marketer can control?
This essentially means the 4Ps.
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Products
First, marketers must be constantly on the alert to make sure customers still
want their products. Technology, tastes, fashions and preferences change
quickly and no one wants to be caught with a lot of product or a range of
services customers don’t buy any more. On the other hand you must be in a
position to adequately supply your product to your customer. Sometimes this
is like walking a tightrope!
Activity 10
Describe some of the new products or services released by your organisation (or an
organisation you’re familiar with) over the past two years. Explain why they were
released.
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To what extent were the new products (or services) influenced by forces
which the marketer can’t control?
Be prepared for change all the time. Products and services must be
reviewed, modified or deleted if necessary. New products or services must
be constantly developed to add to or replace old ones.
Updating products and services is the name of the game. (Or else move to
another geographic region where your old ones are still acceptable!) Your
business is one thing over which you do have some control.
The other three Ps
Your ability to control the other Ps — price, place, promotion — is limited
only by:

your resources and skills

your ethics

the law.
In practice, price and place are not very flexible. On the other hand,
promotion is much more flexible.
When you develop your marketing mix remember to match it to the
organisation’s resources and its capabilities. You also control such resources
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as labour, budgets and capital equipment. Make sure you have examined
these areas adequately.
The marketer has to ensure the raw materials from which the product is
made are available in the right quality and quantity. If the organisation is
selling a service, the marketer has to make sure that all the components of
the service, such as people and equipment, are available.
Wait a minute (you may say), surely checking that raw materials and such
things are available is not the job of the marketer? Isn’t that what people
called purchasing officers and production managers are there for?’
Marketing is about the whole story not just part of it.
Case study
The cotton gauze crisis
Joanne is the product-marketing manager for a range of cotton gauze
products made by a large multi-national health care company. One
morning her boss, Russell, calls her in to his office.
‘I have been reviewing the stock figures on our 10cm gauze product,’ he
says. ‘We are completely out of stock. Why is that?’
‘I rang the production manager yesterday,’ Joanne responds. ‘He says the
number 2 machine is out of action due to a breakdown and will not be
back on-line for a week.’
‘Well, we have several hundred cartons of this product on back order.
Our hospital customers need this gauze so they can conduct operations on
their patients. Can the number 1 machine be switched over to this product
for a while?’
‘I asked the production manager that,’ Joanne replies. ‘He told me that
number 1 could not make the product efficiently and that it was flat out
making another size anyway.’
‘Alright. Can you think of a solution?’
What would you do in this situation? There’s no need to write your answer
down. Just think about what you would do as a marketer faced with this
problem.
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Implementing and measuring the
marketing mix
How do we implement an action? Let’s start by looking briefly at planning.
Why is planning important?
Most managers are fully engaged in solving problems on a day-to-day basis.
Problems may assume great urgency, especially if a customer relationship is
at risk or someone higher up in the organisation is taking an interest in the
situation. Time to think about the future and prepare for it is limited.
Everyone has a different perception of what the business should be trying to
do. For example, a production manager may think that they should be trying
to make things cheaply. The finance people might believe they should be
making the maximum possible profit all the time. The sales force may want
to sell everything as cheaply as possible. As the marketer you have to supply
the right product at the right price and make a profit as well.
If no attempt is made to reconcile all these differing viewpoints the result is
no common direction. Expect chaos as each goes in their own direction. One
way to coordinate these conflicting interests is to have an agreed marketing
plan—which you might be responsible for writing and gaining everyone’s
agreement on (or at least the marketing mix component).
Note, however, that most companies do not have plans for their marketing
activities over a five or 10 year period. Some large companies might.
Developing the plan
Dr W Edwards Deming made famous what is now referred to as ‘total
quality management’ (TQM) principles. The concept of TQM is based on
the principle of the need for continuous improvement. Deming helped to
develop a cyclical model that includes all the stages of TQM. This cycle is
‘Plan, Do, Check, Act.
We should plan the process, implement the plan, check it (evaluate it) and
act upon any necessary changes as soon as possible.
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Plan
We first need to look at some strategies in order to structure them into some
form of a plan.
Market strategies
The formulation of strategies comes to the heart of this course — working
out the correct marketing mix to achieve our aims in the selected target
market.
As we look at the target market, we remind ourselves about the key factors
such as:

market size

profitability

market growth

level of competition

resources of your company.
The figure below depicts the process of developing the plan.
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Activity 11
How does planning the marketing mix fit into the overall planning done by an
organisation?
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
Now check your answer with the comments in the Feedback to activities at the end of
this topic.
Activity 12
Consider the marketing implications of each of the following significant trends now
evident in Australia:

more young adults continuing to post-secondary education

much improved communications technology

Australians are having families later in life.
Name a product that might be helped, and another product that might be threatened by
each trend.
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
You should have had little difficulty in naming products that are affected by those trends.
For example if Australians are having families later in life, this opens up all kinds of
lifestyle opportunities for younger professional people without children. How will it affect
the childcare industry?
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Legal constraints
There are a number of legal aspects in marketing that particularly relates to
the marketing mix. You don’t need to be a ‘legal eagle’ but you do need to
be aware of the main laws and why they were passed and how they could
affect your organisation.
The legislation can be divided into two main areas, those that regulate
competition and those that protect consumers. One of the best-known laws
would be the Trade Practices Act 1974. This is a Commonwealth law so it
covers all States and Territories. It prohibits unfair competition.
A regulatory body that you should also be aware of is the Australian
Competition and Consumer Commission (ACCC). It was established in
1995 by merger between The Trade Practices Commission and the Prices
Surveillance Authority. As an independent Authority it administers the
Trade Practices Act 1974 and the Prices Surveillance Act 1983. It is the
only national agency that handles matters of competition and the only
agency with the responsibility for enforcing the Trade Practices Act.
You may wish to look up the ACCC’s website, which is quite informative.
The web address is http://www.accc.gov.au
Lets look at some specific areas.
Pricing
Pricing is a matter subject to some degree of regulation in Australia,
especially at a federal level. The piece of legislation most relevant to us is
the Trade Practices Act 1974.
Price discrimination
Prices must not be arranged so as to discriminate for or against any buyer or
buyers if such discrimination could result in hindrance to competition.
This was to prevent large quantity discounts being received by supermarkets
and then used to drive small grocery stores from the market. Such discounts
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do still exist provided they aren’t so large as to damage competition. If they
can be justified on the basis of cost savings to manufacturers, they are not
illegal.
Price fixing
Collusion between suppliers to fix or agree on prices for goods or services is
illegal.
Instances of collusion still occur in some industries but are conducted in
such a way as to be difficult to identify and prove.
Resale price maintenance
Any attempt by a supplier to force a distributor or retailer to maintain a
certain price for a product or service is forbidden.
This practice used to be widespread. The inclusion of a ban on the practice
resulted from a well-publicised incident in which a retailer was discounting
a certain brand of refrigerator to a level the manufacturer thought
unreasonable. The maker threatened to suspend supply of the product and
persuaded other refrigerator producers to do the same.
Deceptive pricing
The Act requires that price reductions and specials advertised are genuine
and that such price-reduced goods are indeed available.
To suggest that goods are being offered at a special price when they are not
is an offence.
Some unscrupulous people have tried to evade these provisions by a method
called ‘bait and switch’. This involves advertising an attractive special price
on a certain product and advising the customer on their arrival that the last
of the product has just been sold. A more expensive item is then offered
instead.
Promotions
A few important words to you on the words you cannot say to others in your
promotional campaigns.
Briefly, in your promotions you must not do several things.
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Do not make false or misleading claims
A certain company, makers of a brand of aspirin, used to claim that their
product ‘cured headaches two times faster’.
When challenged on this by a rival manufacturer, the company was forced to
admit that this was two times faster than if no headache pills at all were
taken. It was subsequently required to withdraw the advertisements.
Do not make false statements about the quality, age,
grade, price or warranty of goods
One retail operation was prosecuted and fined for claiming ‘50 per cent
reductions’ on merchandise. These reductions were obtained by doubling the
normal price and then returning it to the normal level.
Do not state that endorsements have been made when
they have not
A firm selling a weight reduction system claimed it had ‘hundreds of letters
from satisfied customers’. When challenged to produce them, it could only
show seven, of which six were found to have been written by agents for the
product.
Do not execute television commercials in such a way
as to mislead
Although it is common practice to follow such a course, a large
manufacturer of laundry detergent was fined for one of their advertisements
comparing its ‘whitening power’ to that of an opposition laundry product.
The advertiser’s detergent did seem to give a whiter wash, until it was
revealed that the garment claimed to be washed in the opposition’s product
had simply been rinsed in plain water.
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Activity 13
Remember ‘the shop in the centre of town where you buy your lunch’ Activity? Something
is clearly wrong with their marketing. What corrective action would you suggest?
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
Now check your answer with the comments in the Feedback to activities at the end of
this topic.
Activity 14
1
Ask a marketing person in your organisation what they do. Then contact a marketer
outside your firm and ask them the same question. Summarise their answers below.
Your organisation ______________________________________________________
___________________________________________________________________
___________________________________________________________________
Another organisation ____________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
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2
Compare both sets of answers and note the similarities and difference. See what results
you get!
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
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Feedback to activities
Activity 1
Product relates to the job of the marketer in ensuring the right ingredients go
into the cake in the right proportions so that when the cake is ready it is just
as the customer wants it. This includes packaging.
Activity 2
Did you think of things like competition, supply and demand, product
quality, costs, and the need to make a profit? The most important factor, of
course, is to ensure that it is a price the consumer is willing to pay. After all,
what’s the good of having a cake made perfectly to specification if the
customer decides not to buy it because of the price?
Activity 3
Organisations use the following ways to advertise their products and
services

print advertisements (newspapers, magazines)

broadcast advertisements (radio, television)

outdoor advertisements (billboards)

internet (banner advertisements)

transit advertisements (taxi, bus)
Activity 4
Some suggestions you may have made include:
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
Price. You may lower/increase prices to reflect the price change in
the cost of ingredients.

Place. By changing ingredients your product may be more exclusive
and you may only make it available through certain outlets.
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Alternatively a lower price may allow you to distribute the product
direct to the end user.

Promotion. Changing ingredients would call for some major
promotional activity to retain current customers.
Activity 5
How did you go?
Some of the things you might have mentioned are:

sales enquiries — if no-one thinks your product or service is what they
want, they won’t ask you about it

sales figures — if they don’t want your product or service, they won’t
buy it

market research — you went out and asked customers exactly what they
wanted

sales force reports — your salespeople told you what customers were
saying about your products or services

customer comment records — you wrote down comments customers
made directly to you about your products or services.
Activity 6
Suggest some ways in which Telstra may segment its market?
Did you start by breaking up the market into consumers and businesses?
Let’s look at the consumer market.
Some segments you could have suggested are:

geographically, such as urban and rural

demographically, perhaps by ethnic background

behaviour towards the product (eg, usage rates).
In the business market, you may have looked at:

customer location

type of customers (size, industry, structure)

type of buying situation.
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Activity 7
We are one of the world’s top manufacturers of men and women’s
cosmetics. Our products are well-recognised as prestigious brand products.
They are highly-priced but because of their prestigious image, consumers
aspire to buy them.
I’ll talk about how important co-ordinating the marketing mix is for us by
focusing on one particular product—our most famous women’s fragrance.
Product
Its very name evokes an exotic (but not frightening) world that we feel the
consumer fantasises about and feels part of when they wear our perfume.
Women see our product as something special. If a woman uses it, she feels
special. If she uses it every day, she always feels special. She feels like the
models in our advertisements. She feels beautiful—refined, self-assured, a
woman of the world yet fresh, feminine and alluring. We try to satisfy the
dreams and interests of both the younger woman as well as the older
woman.
The design, fragrance, colour and packaging of our products give one the
impression of luxury, prestige, subtlety and sophistication. For example, the
bottle design is rounded (feminine) and quite unique and the cardboard
packaging is of high-quality paper—with rich creamy colours.
Pricing
To retain this image, our prices must be maintained. No discounts are
offered. Instead, when customers purchase our products, we offer a special
gift. These gifts consist of samples of our other products. It’s our way of
trailing new products and promoting products that the customer may not
have tried (we call this brand extension). These gifts increase our customers’
feeling of ‘specialness’.
Place (distribution)
Distribution is important in maintaining our image. We restrict our
distribution to stores that can stock our entire product line. This limited
distribution enhances the image of our products. Our product line is
available only from major stores (as only they have the floor space to stock
our entire line)—in an environment that enhances the image of our product.
This limited distribution makes it possible (affordable) to train specialist
sales people.
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Promotional mix
Let’s now look at how we approach the personal selling component of the
promotional mix. The sales representatives who sell our products at these
selected stores are our employees—not employees of the store. They’re
knowledgeable about our company’s products and trained to provide advice
and apply cosmetics. They consumer again feels special when they are
attended to by someone from the company itself.
We advertise only in women’s magazines that have an image of
sophistication. Our models are portrayed in situations of luxury. Their
clothes and jewellery are tasteful and expensive and in advertisement with a
male escort, he is handsome. He stays in the background—ready to attend to
the woman when she beckons. Where we advertise and our advertisements
themselves add to our image of being sophisticated, exclusive and special.
Now let’s look at publicity of our company. Our promotional activities also
include the support of a number of philanthropic causes—we financially
support the activities of non-government organisations dedicated to
women’s health, the environment, education, and the arts. In this way we are
building a reputation for being caring while we are also appealing to women
of a variety of interests—eg, women with a social conscience, women
interested in the arts as well as mothers with school-aged children. They
won’t mind paying high prices to a caring company.
Activity 8
(a) Relatively few young females patronise the shop at lunchtime.
This could be a matter of price if a cheaper alternative has become
available; if not, perhaps the product has become a little tired.
(b) Very few people come for breakfast.
Assuming that there is in fact a demand for this product, its promotion
has probably been inadequate.
(c) A recent offer to supply food to offices for lunch meetings aroused little
interest.
No doubt this was priced and promoted well, so possibly the product
itself, at least in that place, was not attractive.
(d) Would changing the name of the store bring in more customers?
It depends on how customers see and feel about the new image. For
example, if it implied higher prices this might send ordinary customers
away; but it might also attract people seeking style, and wanting to be
seen at a stylish place. A lot of promotion would be needed to convince
customers that the name change meant a new product with better
benefits.
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Activity 11
Interdepartmental coordination among all the functional units of a company
is of paramount importance if an optimum result is to be achieved. Planning
the marketing mix should be consistent with the planning done by all the
other functional units to achieve proper coordination. All planning done by
functional unit managers should be compatible with the business objectives.
Activity 13
Remember ‘the shop in the centre of town where you buy your lunch’?
Something is clearly wrong with their marketing. What corrective action
would you suggest?
As we have seen, a ‘marketing problem’ is a very vague term. It’s like
saying that you don’t feel well. It lends itself to knee-jerk reactions which
are almost certain to fail.
It looks as though the owners are panicking, and searching for quick
solutions like name changing and offering new services. Yet the difficulty
may lie at any stage of their marketing plan — if they have one. So it may be
a matter of reviewing each element of their plan and its implementation to
see where the problem lies.
In other words, you cannot answer the question and suggest corrective
action until you know what customers want, and what’s wrong with what’s
being offered.
Activity 14
The marketers from both organisations are probably doing essentially the
same thing — managing the marketing mix.
The differences between them will depend partly on the nature of their
product and where it stands in the market. For example a new product in an
established market may require heavy promotion and discounted prices to
begin with. On the other hand a new product in a new market (such as the
first mobile phones) may be able to charge a high price initially, provided
that the distribution is good.
Other differences between them will relate to organisational and personal
judgement and style, and the resources available to them. For example, one
may do more market research than the other because an outside factor such
as a change in legislation has opened up new opportunities.
In the end, both marketers are doing the best they can to match customer
satisfaction with organisational objectives as closely as possible.
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