Download The Marketing Mix - EMS Secondary Department

What is the marketing mix?
The Marketing Mix
• Lesson Outcomes:
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•
•
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Identify and explain the elements of the marketing mix
Demonstrate an understanding of the product life cycle
Understand how pricing decisions are made
Understand the significance of price elasticity of
demand
• Appreciate the importance of distribution channels and
the factors that determine the selection of them
• Understand the role of promotion
The Marketing mix
• The marketing mix is all the key activities that are
involved in the marketing (selling) of a business’
products/services.
• This is referred to as the four Ps: Product, Price,
Place, Promotion
• The mix will vary depending on the life of a product
The Marketing
Mix, known as
the 4Ps
The Marketing Mix
• This provides an excellent framework
for developing marketing plans.
• People in the marketing department of a
company need to make many decisions
before launching a product.
What are you going
to sell? You need to
consider the details
of the goods or
services being sold
Where and how can
the customers
obtain the product
or service?
How much are you
going to charge?
What pricing
strategies might
you use?
How will you ensure
that the customers
know about the
product or service?
Objectives of developing the
marketing mix
1. To support brand building
2. To satisfy the needs and aspirations
of targeting group of customers
Product
• The term Product includes:
–
–
–
–
–
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Quality
Packaging
Appearance
Brand
Guarantee/warranty
After-sales service
Variations and product range
Functionality
• Including features
Quality, cool, product
Product Development Stages
1. Generate ideas
2. Further research of
best ideas
3. Decide if the company
will be able to sell
enough
4. Develop prototype
5. Test launch
6. Full launch
Product Life Cycle
1. Research and development
• This is when the company is creating new
products, and testing them to see if people
like them
• The costs are high, and they have no money
coming in
2 - Introduction
•
Introduction – the product is new, no one
knows about it
– The company is spending lots of money on
advertising and to secure distribution
•
They are probably still losing money
3 - Growth
•
Shops are stocking the product, and the
advertising has helped the product to
become better known
– The company is starting to make money
4 - Maturity
•
Maturity – the product is well known, and
sales are high
– The company is making money
5 - Decline
•
Decline – people are starting to lose interest
in the product, and sales are decreasing
– If sales go down too much, they may have to
withdraw the product
Extension strategies
• The maturity stage is a good stage for the company
in terms of generating cash
– The costs of developing the product and establishing it in
the market are paid and maturity tends to be the most
profitable stage
• The longer the company can extend this stage the
better it will be for them
• This can be done using extension strategies
– These are techniques to try to delay the decline stage of
the product life cycle
Examples of extension strategies
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•
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•
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New flavours/formats
Limited editions
New packaging
Promotions
Discounts
Can you name three products that have
had any of the 4P’s changed to extend
there life.
~Activity~
How can the life of the following products be extended?
• Nintendo Wii
• Kit Kat chocolate bar
• Perfume
• A waste paper bin
Place
• This refers to how the product
gets to the consumer:
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Where it is made
Distribution/transportation
Warehousing
Market coverage (where it is sold)
Place
Place includes…
• Where it’s sold, for example:
– Supermarkets
– Newsagents
– Vending machines
– Internet
– Mail order
• Where it’s made
• How it gets there (and how it’s stored)
Place
•
Why is place important in marketing?
•
1.
2.
3.
4.
There are 4 main methods of distribution –
Producer
Consumer
Producer
Retailer Consumer
Producer Wholesaler Retailer Consumer
Producer
Agent
Wholesaler
Retailer
Consumer
Distribution
Indirect
Manufacturer
Direct
Manufacturer
Wholesaler
Retailer
Consumer
Consumer
~Activity~
Which method of distribution would you use for the following
businesses? Give reasons for your choice.
1. A business making quality jeans
2. A small business making hand made pottery
in a craft centre
3. A farmer selling milk
4. A business selling holidays
Place - E-commerce
• Marketing which brings the buyer and seller
together over the internet
• E-commerce is becoming more and more important
as more and more people use the internet. 8-10% of
total retail sales in the UK is online.
• All businesses need to include
e-commerce in their marketing
strategies
There is the opportunity to
sell products to a larger
market and therefore make
more profit
Why do businesses feel they
must use e-commerce?
If their competitors
are using ecommerce, they
might lose customers
if they do not
They can become
more productive
(produce more with
fewer workers) and
can save wage costs
Online sales now 8-10% of
Total retail sales in UK
How can you transport goods from A-B?
•
•
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Road Haulage
Railways
Canal and river
Sea Freight
Air Freight
Pipelines
• Which method is cheapest?
• Which method is fastest?
• Which method is more expensive?
Expensive
product?
Sold to
producer or
consumer?
Purchased
often?
Factors
affecting
channels of
distribution
Technical
product?
Where
competitors
goods are
sold?
Perishable
product?
Selling
abroad?
Location of
customers?
Complete Exam question 2 (a-e),
pg 197
Price starter
•
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•
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•
How much would you pay for this?
•
How much would you pay for this?
Price starter
• £24.99
• £59.99
Price
• The process of setting a monetary value for
a good/service.
• A business can adopt pricing strategies for
several reasons:
• To try to break into a new market
• To try to increase its market share
• To try to increase its profits
• To make sure all its cost are covered and a
particular profit is earned
So, what are pricing strategies?
Pricing Strategies
Penetration Pricing
Launch your product at a low price, gain market
share, and then raise your price
Dynamic Pricing
Different people are charged different amounts for the
same thing e.g. train tickets
Skimming
charge a very high price when the product is first
launched so “rich early adopters” buy the product e.g.
iPhone
Psychological Pricing When companies charge, for example, £9.99 so they
can say “less than £10”
Promotional Pricing
When a product is sold at a very low price for a short
time. For example, buy one get one free, 20% extra
free etc.
Cost Plus Pricing
Estimating how much will be produced, adding up the
costs of production and the adding a percentage
mark up for profit
Competitive Pricing
Setting a price in line with or just below your
competitors
~Activity~
Study the following situations and name the pricing strategy that is
being described:
1.
2.
3.
4.
5.
A new hardback is published at £20. Two months later it is sold as a
paper back for £10.
Skimming
A Hairdressers in Al Rayyan offers haircuts to OAPs at half price every
other day. Dynamic Pricing
A bicycle manufacture introduces a new model at a low price in order to
attract sales. Penetration Pricing
Competitor Pricing
A chemist shop in Al Saad researches the price of particular brands of
toothpaste in all the local outlets and then charges the same price.
A florist in The Pearl sets her prices to cover her total costs plus a little
profit. Cost Plus
Elasticity of demand
• Elasticity of demand is a measure of how much the
quantity demanded of a product responds to a change in
price.
• Elasticity of demand can be shown in the following
% change in quantity demanded
formula:
• Elasticity of demand=
%change in price
• Elastic demand is represented by figures which are higher
than 1.
• Inelastic demand is represented by figures of less than -1.
Elastic demand
• If quantity demanded is very responsive to
price changes, then a small change in price
will lead to relatively large change in quantity
demanded.
• In this case we say that demand is ELASTIC!
• For example, if the price of a standard
washing powder rose by two or three pence,
then customers could easily switch to a
cheaper substitute.
Inelastic demand
• Where quantity demanded is relatively
unresponsive to price change, demand is
inelastic.
• An example of this is Petrol. Even though the
price is relatively high, people are prepared to
buy Petrol to fuel their cars.
Activity
1.
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Which of the goods listed below are likely to have the most
elastic demand resulting from a rise in price? Explain your
answers.
The iPhone
Swan Vetas matches
The Daily Mail newspaper
A container of Saxo table salt
A packet of cereal
Activity
13.3 pg 173
Promotion
• Promotion gives the consumer information
about the rest of the marketing mix.
• It is how you create awareness of your brand.
• Promotion does not necessarily lead to
increase profits.
What is a brand?
Companies with strong brands
• Can charge customers higher prices
• Can persuade shops to stock their products
• Are more likely to get people ‘trying’ their
products for the first time
• Have customer loyalty (so they will repeat
purchase)
• Have customer trust
• Enable companies to enter new markets (e.g.
Sony)
Every companies build brands by
consistently getting the four Ps right
If the product is great, the price is
fair, the promotion is attentiongrabbing and it’s sold in the right
places… the whole brand benefits
Also, by launching/promoting a new
product, they are also promoting the
whole brand
What are the different methods of
advertising?
(Think of the different media)
Advertising
• Advertising is when the brand owner pays to
display messages about their brand, and
includes the following media:
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Television
Cinema
Posters
Transport (e.g. bus sides)
Radio
Newspapers/magazines
Internet
Text messages
Direct mail
Leaflets
Etc.
Each has it
advantages and
disadvantages
Advertising – Letting customers
know about your product or service
Can be informative or persuasive
TV Advertising
VW are trying to make the Golf a generic brand
A generic brand is a brand that defines a
whole market.
Sometimes people don’t even
know that it is not actually the
real name e.g. Hoover, Cellotape
Can you think of any other
generic brands?
Radio advertising
Sponsorship
• When a company sponsors a thing, team or an
individual
• The company (sponsor) hopes to gain a
positive image from the thing/team/person/
event they sponsor
Sales promotion
• These are tactics used by firms to increase
sales:
– Price reductions
– Free gifts
– Point of sale
– Competitions
– Free samples
– BOGOF
– After-sale service
Definitions
• Point of sale – this is when you
advertise a product where it is sold
– For example, posters advertising new
films in Blockbusters
Definitions
• After-sale service – this is when
companies still have contact with
customers even after they have
bought the product
– For example, if you buy a car and it
goes wrong, an example of good
after-sales service would be that
company providing a courtesy car
What are the advantages of sales
promotion?
Public relations
• Companies try to influence what the journalists
write/say
• They want newspapers, television programs, magazines,
radio stations etc. to say good things about their
products
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Press releases
PR Events
Freebies
Increasingly environmental policies in aims and
objectives
~Activity~
In pairs decide which promotional method would you use for the
following products and explain your answer.
– A new flavoured chocolate bar
– A new pair of NIKE trainers
– A new Dell computer
– A sun holiday
– A restaurant
– A new movie in the cinema
Marketing mix decision rely heavily
on the budget allocated to the
marketing department.
What is a budget?
How has technology influenced
promotion?
Complete Exam question 1 (a-d),
pg 189