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Task 4. Marketing Mix. What is the marketing mix? The marketing mix is probably the most famous marketing term. Its elements are the basic, tactical components of a marketing plan. Also known as the Four P's, the marketing mix elements are price, place, product, and promotion. Read on for more details on the marketing mix. Some commentators will increase the marketing mix to the Five P's, to include people. Others will increase the mix to Seven P's, to include physical evidence(such as uniforms, facilities, or livery) and process (i.e. the whole customer experience e.g. a visit the Disney World). The term was coined by Neil H. Borden in his article The Concept of the Marketing Mix in 1965. From Marketingteacher.com Pricing There are many ways to price a product. Let's have a look at some of them and try to understand the best policy/strategy in various situations. Premium Pricing. Use a high price where there is a uniqueness about the product or service. This approach is used where a substantial competitive advantage exists. Such high prices are charged for luxuries such as Cruises, High Quality Coffee Machines, latest TV’s Penetration Pricing. The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. Used with new magazines, foods etc Economy Pricing. This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc. Price Skimming. Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. Flat Screen TV’s were all over £1,000 when first introduced. Now they are available £300. Psychological Pricing. This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example 99p rather than 1 pound Captive Product Pricing Where products have complements, companies will charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor or games for a game system. Product Bundle Pricing. Here sellers combine several products in the same package. This also serves to move old stock. Videos and CDs are often sold using the bundle approach. Promotional Pricing. Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free). Promotion. Another one of the 4P's is 'promotion'. This includes all of the tools available to the marketer for 'marketing communication'. As with Neil H.Borden's marketing mix, marketing communications has its own 'promotions mix.' Think of it like a cake mix, the basic ingredients are always the same. However if you vary the amounts of one of the ingredients, the final outcome is different. It is the same with promotions. You can 'integrate' different aspects of the promotions mix to deliver a unique campaign. The elements of the promotions mix are: Personal Selling. Sales Promotion. Public Relations. Direct Mail. Trade Fairs and Exhibitions. Advertising. Sponsorship. The elements of the promotions mix are integrated to form a coherent campaign. As with all forms of communication. The message from the marketer follows the 'communications process' as illustrated above. For example, a radio advert is made for a car manufacturer. The car manufacturer (sender) pays for a specific advert with contains a message specific to a target audience (encoding). It is transmitted during a set of commercials from a radio station (Message / media). The message is decoded by a car radio (decoding) and the target consumer interprets the message (receiver). He or she might visit a dealership or seek further information from a web site (Response). The consumer might buy a car or express an interest or dislike (feedback). This information will inform future elements of an integrated promotional campaign. Perhaps a direct mail campaign would push the consumer to the point of purchase. Noise represent the thousand of marketing communications that a consumer is exposed to everyday, all competing for attention. Promotion – THIS INVOLVES COMMUNICATING WITH CUSTOMERS to INFORM and PERSUADE. Aims of promotion – Make customers aware of a new or existing product Persuade customers to buy a product rather than those of a competitor Develop the image of the business (Corporate Identity) One type of promotion is advertising, but others include sales promotion and public relations. Above the line promotion – ‘advertising’ – paid for communications which use media such as TV, magazines, radio, cinema, newspapers, posters, leaflets and the internet. Informative advertising gives out information e.g. car advert which lists features of the car Persuasive advertising – tries to influence consumers and convince them that they ought to buy the product. All main texts discuss the pros and cons of the different media that can be used to advertise. Question – what are the main pros and cons of using national TV adverts? For – AgainstWhen selecting the most appropriate media then the following issues must be considered – Cost – how much £ has the business? Will increased sales justify the expenditure? Need to consider the number of people who will see the advert in relation to expense. Advertising by competitors – businesses will need to use similar methods to their main rivals. The target audience – need to use media suitable to reach the correct potential customers e.g. advertise kids toys on TV on Saturday morning. The image / message that needs to be given – e.g. black and white newspaper advert non good for advertising sports goods e.g. Nike trainers which need colour and perhaps movement. Which media might be used here? Below the line promotion – these do not involve using the media. They directly encourage customers to buy by tempting them on the spot. Tend to have short term effects – Examples – Price reductions Free gifts Extra free incl. BOGOF – Buy One get one free Point of sale displays – placed at the point where the products are sold e.g. bin with buy 5 choc. Bars for £1 Free samples Competitions Public relations – aims to give the company a good image with the public e.g. donating money to charity, sponsoring sports teams or events, getting positive newspaper articles about the business printed. The Advertising Association website is very good – it has student factsheets which include information on costs of the different advertising media. www.adassoc.org.uk – section for students has Student briefings – Advertising Media and Advertising Expenditure ones are very good. You will need to explain the current promotional methods and marketing mix used by the business and then suggest your own promotional strategy based on your research to promote a new or revised product. The strategy should fit in with your ideas for the other 3 p’s. The Promotions Mix. Let us look at the individual components of the promotions mix in more detail. Remember all of the elements are 'integrated' to form a specific communications campaign. 1. Personal Selling. Personal Selling is an effective way to manage personal customer relationships. The sales person acts on behalf of the organization. They tend to be well trained in the approaches and techniques of personal selling. However sales people are very expensive and should only be used where there is a genuine return on investment. For example salesmen are often used to sell cars or home improvements where the margin is high. 2. Sales Promotion. Sales promotion tend to be thought of as being all promotions apart from advertising, personal selling, and public relations. For example the BOGOF promotion, or Buy One Get One Free. Others include coupons, money-off promotions, competitions, free accessories (such as free blades with a new razor), introductory offers (such as buy digital TV and get free installation), and so on. Each sales promotion should be carefully costed and compared with the next best alternative. 3. Public Relations (PR). Public Relations is defined as 'the deliberate, planned and sustained effort to establish and maintain mutual understanding between an organization and its publics' (Institute of Public Relations). It is relatively cheap, but certainly not cheap. Successful strategies tend to be long-term and plan for all eventualities. All airlines exploit PR; just watch what happens when there is a disaster. The pre-planned PR machine clicks in very quickly with a very effective rehearsed plan. 4. Direct Mail. Direct mail is very highly focussed upon targeting consumers based upon a database. As with all marketing, the potential consumer is 'defined' based upon a series of attributes and similarities. Creative agencies work with marketers to design a highly focussed communication in the form of a mailing. The mail is sent out to the potential consumers and responses are carefully monitored. For example, if you are marketing medical text books, you would use a database of doctors' surgeries as the basis of your mail shot. 5. Trade Fairs and Exhibitions. Such approaches are very good for making new contacts and renewing old ones. Companies will seldom sell much at such events. The purpose is to increase awareness and to encourage trial. They offer the opportunity for companies to meet with both the trade and the consumer. Expo has recently finish in Germany with the next one planned for Japan in 2005, despite a recent decline in interest in such events. 6. Advertising. Advertising is a 'paid for' communication. It is used to develop attitudes, create awareness, and transmit information in order to gain a response from the target market. There are many advertising 'media' such as newspapers (local, national, free, trade), magazines and journals, television (local, national, terrestrial, satellite) cinema, outdoor advertising (such as posters, bus sides). 7. Sponsorship. Sponsorship is where an organization pays to be associated with a particular event, cause or image. Companies will sponsor sports events such as the Olympics or Formula One. The attributes of the event are then associated with the sponsoring organization. The elements of the promotional mix are then integrated to form a unique, but coherent campaign. For many a product is simply the tangible, phsysical entity that they may be buying or selling. You buy a new car and that's the product - simple! Or maybe not. When you buy a car, is the product more complex than you first thought? In order to actively explore the nature of a product further, lets consider it as three different products - the CORE product, the ACTUAL product, and finally the AUGMENTED product. These are known as the 'Three Levels of a Product.' So what is the difference between the three products, or more precisely 'levels?' Product The CORE product is NOT the tangible, physical product. You can't touch it. That's because the core product is the BENEFIT of the product that makes it valuable to you. So with the car example, the benefit is convenience i.e. the ease at which you can go where you like, when you want to. Another core benefit is speed since you can travel around relatively quickly. The ACTUAL product is the tangible, physical product. You can get some use out of it. Again with the car example, it is the vehicle that you test drive, buy and then collect. This section is also sometimes called the tangible. The AUGMENTED product is the non-physical part of the product. It usually consists of lots of added value, for which you may or may not pay a premium. So when you buy a car, part of the augmented product would be the warranty, the customer service support offered by the car's manufacture, and any after-sales service. A product is positioned by stressing its key qualities or characteristics. These can be termed USP’s (Unique selling points)– these will be stressed in advertising – to draw customers away from rivals’ products. Product differentiation is when a product is made to appear different from others in the range or the competitors’ products via logo, adverts, packaging etc. How to create a USP or differentiate a product Quality E.g. BMW Cars Price E.g. Safeway Saver brand Physical chars. E.g. smallest phone, snack size Who uses it? E.g famous sportsperson Benefits from use E.g. cures hangovers fast Image E.g. Haagen Daz – Sexy Ice Cream Service E.g. TLC deal for new Mini Place Clothes- DVD’s- Freshly baked bread- The channel of distribution is the route the product takes on its way to the consumer. – the arrangements whereby the product gets to a position or place where the consumer can buy it. Q1 – How could consumers buy the following products? Home computer- A) Simple distribution channel – Producer --------------- > Consumer Example – local bakery, Dells sells computers direct to customers, various factory shops For – quick, prices cheaper as no on else takes a cut in profits Against – B) Two Stage Distribution ChannelProducer ------------ retailer ---------------- Consumer Example – most large supermarkets and clothes stores For – retailer negotiates discounts for bulk buying so prices could be cheaper, quicker than other methods (later) Against – C) Long Channel of Distribution – Producer --------- wholesaler ----- retailer ----- Consumer This arrangement involves a wholesaler e.g Macro buying in bulk from the producer, who divides the stock into smaller amounts for retailers e.g. corner shops, newsagents to buy. This is called the For – large choice at the wholesalers, retailer needs to store less as wholesaler does this. Against – goods more expensive for the consumer. Why? More time consuming process. Which channel is best? This could depend on a number of points Product – is this perishable, fragile, will it need installing. Cost – beneficial for producer to sell direct to the consumer. Why? When might this not be possible? The market – products sold in large number to everyone can use all the methods above, specialist products may use showrooms or direct sales. Question 2 – which of these methods would be used to sell soft drinks? Question 3 - Could internet sales be used for the gym? Explain your answer.