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Market Planning Unit 4.2 The Marketing Mix Marketing Mix (8 P’s!) • • • • • • • • Product Price Place Promotion People Process Physical evidence Packaging Product • Can be a physical good (e.g. a car) or intangible service (e.g. a hair cut) • Products fulfil the needs of the consumer • What differentiates one product from another are the collective and relative customer benefits of purchasing that product. – E.g. the brand image, packaging, functions and after sales care Categories of products • Producer products – these are products sold to other business as supplies to further the production process e.g. raw materials such as steel • Consumer products – these are products sold to the end user – Convenience products – fast moving consumer goods such as food – Consumer durables – Long lasting goods such as furniture – Speciality products – Expensive products such as diamonds Product Line and Product Mix • Product Line – collection of related products e.g. different types of cars from the same company • Product Mix – the variety of products sold by a company. This is when a company sells more than one type of product such as Apple (laptops, desktops, ipods, ipads, iphones etc. Price • If a product is over priced then demand would be less as consumers will feel they are being ‘ripped off’ • If the price is too low then the product may be seen as inferior quality • Economists define the ‘correct’ price as the equilibrium price where buyers and sellers agree on an appropriate price • Buyers want value for money and sellers want a price that exceeds their costs of production to earn sufficient profit Pricing decision depends on: • Demand – The higher the demand the higher the price tends to be • Supply – the lower the supply the higher the price, e.g. oil and also diamonds • Business Objectives – Non profit making businesses will see price in a different way to profit making businesses • Competition – The more competition the more sensitive consumers are to price as there are many substitutes to choose from • Costs of production – The higher the cost of production the higher the price tends to be • Corporate Image – Prestigious businesses can charge a higher price due to their image Place • This is how the product is distributed to the consumer • Channels of distribution which are the intermediaries used to get a firm’s products to consumers • More detail on this in the next unit Promotion • Refers to the strategies used to attract customers • Above the line – promotional activities that use mass media e.g. television and radio • Below the line – Promotional tactics such as packaging and direct mail • More detail on this in the next unit People (customer relations management – CRM) • The attitudes and aptitudes of employees will determine the experience and quality of service • Happy customers are more likely to stay loyal to the business and use word-of-mouth promotion • Good after sales service can gain customer a competitive advantage • Customer relations manager (CRM) involves setting standards for good customer service • CRM promotes customer lifetime value – the profitability that can be gained during the lifetime of a positive relationship with customers rather than the profits made from a single transaction with the customer • It can be argued that it is cheaper to keep existing customers than to find new ones! Process • Process refers to the methods and procedures used to give clients the best possible customer experience • Process can help to build customer loyalty • Customers are constantly in search of improved convenience • It is inconvenient for customers to wait a long time for items to be delivered to them! Physical evidence • This is the image portrayed by a business (or perceived by customers) • Businesses that offer services have to give more attention to this than those who sell products only Packaging • This refers to the way in which a product is presented to the customer • It’s a form of product differentiation • Packaging is important when a product’s design, functions or features cannot be easily differentiated from others on the market Packaging is important in the marketing mix because: • Can have a profound impact on the customer perceptions of the product or brand • Acts as a form of differentiation • Protects the product against damage during transportation • Labelling can be used to provide information • Can make the distribution of products easier • Encourage impulse buying • Can be used for advertising the product Limitations of packaging • Cost • Environmentalists will argue that marketing creates excess packaging, at the cost to the environment – e.g. plastic bags! • Some argue that packaging is part of promotion and should not be a separate part of the marketing mix • Packaging does affect costs, prices, customer perceptions and consumer demand Limitations of the marketing mix • Cost – Does the business have the resources to carry out its plans effectively? E.g. small business may not be able to run a TV advert • Competition – If one firm starts a advertising campaign it can force others to do the same to maintain market share • New Technology – e.g. the use of social networking sites allowing businesses to use ‘viral’ campaigns