Download 3.4 Market Mix - AIS-iGCSE

Thought for the day:
“The aim of marketing is to
know and understand the
customer so well the product or
service fits him and sells itself.”
Druker
• L/O:
Identify and explain the elements of the marketing mix
Show knowledge and awareness of the four main elements of
the marketing mix [product, price, place and promotion]
• A company needs to consider the marketing
mix in order to meet their consumers' needs
effectively.
• Elements of the marketing mix
• The marketing mix is the combination of
product, price, place and promotion for any
business venture.
Marketing mix·
• The marketing mix is
probably the most
famous marketing term.
Its elements are the
basic, tactical
components of a
marketing plan.
• No one element of the marketing mix is more
important than another – each element
ideally supports the others.
• Firms modify each element in the marketing
mix to establish an overall brand image and
unique selling point that makes their products
stand out from the competition.
Marketing mix·
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Product·
Place·
Price·
Promotion
• Demonstrate an understanding of the product life cycle
• Knowledge and understanding of the importance of packaging
• Awareness of the concept of a brand name in influencing sales
• Knowledge of the stages of a product life cycle
• Draw and interpret a product life cycle diagram
• Understanding of the significance of the four main stages of the
product life cycle
• Show awareness of extension strategies
What is a product?
• A business can adjust the features, appearance and packaging of a
product to create competitive advantage.
• Brands use packaging and logos to create a brand image
• A product is a good or a service that is sold to customers or other
businesses. Customers buy a product to meet a need.
• This means the firm must concentrate on making products that best meet
customer requirements.
• Pg 143 ‘Stages in creating a product’
• A business needs to choose the function, appearance and cost most likely
to make a product appeal to the target market and stand out from the
competition. This is called product differentiation.
How product differentiation is created:
• Establishing a strong brand image (personality) for a good or
service.
• Making clear the unique selling point (USP) of a good or
service, for example, by using the tag line quality items for
less than a pound for a chain of discount shops.
• Offering a better location, features, functions, design,
appearance or selling price than rival products.
• Having a brand image helps products to stand out in a
competitive market
How product differentiation is created:
• Firms face a dilemma if they choose to launch a premium
brand. Improving the quality or appearance of a product adds
to the cost of making it. In turn, this means that the business
must charge higher prices if they are to make a profit.
• An alternative marketing strategy is to produce a budget
brand. If a mobile phone has limited functions and a standard
design then it can be manufactured cheaply. The low
production costs allow for discount pricing.
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-pg 143
Define branding
What is the benefit?
How does packaging help market and sell a
product?
The Product Life-Cycle
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These are:
Introduction (launch)
Growth
Maturity
Saturation
Decline
•
Pg 144
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In the launch and growth stages sales rise. In the maturity stage, revenues flatten out.
Getting a product known beyond the launch stage usually requires costly promotion activity.
At some point sales begin to decline and the business has to decide whether to withdraw the
item or use an extension strategy to bolster sales. Extension strategies include updating
packaging, adding extra features or lowering price.
The Product Life-Cycle
• Activity 25.2
• pg 145
Boston Matrix
• Star products have a high market
share in a fast growing market.
• Cash Cows have a high market share in
a slow growing market.
• Question marks or problem children
products have a low market share in
fast growing markets.
• Dogs are products with a low market
share in slow growing markets.
Firms with just a few items in their
product portfolio – or who have all
their products at the same stage in the
product life cycle – are in the
dangerous position of having ‘all their
eggs in one basket’. Such firms may
prioritise broadening their product
range.
Not on syllabus, but
useful
• QUIZ:
http://www.bbc.co.uk/schools/gcsebitesize/b
usiness/marketing/brandingandpackaging/qui
z/q23590578/
ACTIVITY TASK
• Describe the packaging of your
product
• Describe your chocolate bar and
the product life cycle
• Advantage of developing/having
a brand (brand
awareness/development/loyalty)
•L/O Apply the elements of
the marketing mix to given
situations.
PRICE
Understand how pricing decisions are made
• Understand the main methods of pricing: cost plus, competitive,
psychological, penetration, price skimming
• Show awareness of the implications of the methods
PRICE
• A business must take many factors into account before deciding on the price of a product.
Pricing strategies
• Remember there is a big difference between costs and price. Costs are the expenses of a
firm. Price is the amount customers are charged for items.
• Firms think very carefully about the price to charge for their products.
PRICE
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There are a number of factors to take into account when reaching a pricing decision:
Customers. Price affects sales. Lowering the price of a product increases customer demand.
However, too low a price may lead customers to think you are selling a low quality ‘budget
product’.
Competitors. A business takes into account the price charged by rival organisations,
particularly in competitive markets. Competitive pricing occurs when a firm decides its own
price based on that charged by rivals. Setting a price above that charged by the market
leader can only work if your product has better features and appearance.
Costs. A business can make a profit only if the price charged eventually covers the costs of
making an item. One way to try to ensure a profit is to use cost plus pricing. For example,
adding a 50% mark up to a sandwich that costs £2 to make means setting the price at £3. The
drawback of cost plus pricing is that it may not be competitive.
There are times when businesses are willing to set price below unit cost. They use this loss
leader strategy to gain sales and market share.
Pricing new products
• Half price sales are an example of penetration pricing
• A business can choose between two pricing tactics when
launching a new product:
• Penetration pricing means setting a relatively low price to
boost sales. It is often used when a new product is launched,
or if the firm’s main objective is growth.
• Price skimming means setting a relatively high price to boost
profits. It is often used by well-known businesses launching
new, high quality, premium products.
Some different pricing strategies
Pg 148 - 149
ACTIVITY TASK
• decide on the pricing strategies for your
product
• Justify your decisions by mentioning your aims
and objectives, your research and target
audience
PRICE
• Quiz:
• http://www.bbc.co.uk/schools/gcsebitesize/b
usiness/marketing/productprice/quiz/q50352
165/
• (Uses pounds – UK)
• Understand how pricing decisions are made
• • Understand the main methods of pricing:
cost plus, competitive,
• psychological, penetration, price skimming
• • Show awareness of the implications of the
methods
• -pg 148
PLACE
Appreciate the importance of distribution channels and the
factors that determine the selection of them
• Knowledge and understanding of a distribution channel
• Recommend and justify an appropriate channel in a given
situation
Place
• As part of its marketing strategy, a company
needs to decide where best to distribute a
product.
• What is place?
• Place is the point where products are made
available to customers. A business has to
decide on the most cost-effective way to make
their products easily available to customers.
Channel of distribution
Wholesaler vs retailer
-pg 152
Look at the different types of channel of
distribution
Note benefits & issues
-pg 152 - 154
Typical marketing channels for consumer
product
Channel of distribution
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This involves selecting the best channel of distribution. Potential methods include
using:
Retailers. Persuading shops to stock products means customers can buy items
locally. However, using a middle man means lower profit margins for the producer.
Producers can opt to distribute using a wholesaler who buys in bulk and resells
smaller quantities to retailers or consumers. This again means lower profit margins
for the manufacturer.
Telesales and mail order. Direct communication allows a business to get products
to customers without using a high street retailer. This is an example of direct
selling.
Internet selling or e-commerce. Online selling is an increasingly popular method of
distribution and allows small firms a low cost method of marketing their products
overseas. A business website can be both a method of distribution and promotion.
Developing new or improved channels of distribution can increase sales and allow
a firm to grow.
• QUIZ:
http://www.bbc.co.uk/schools/gcsebitesize/b
usiness/marketing/productplace/quiz/q70135
071/
ACTIVITY TASK
• Explain which distribution channel is suitable
for your product, and why
•L/O Apply the elements of
the marketing mix to given
situations.
Promotion
L/O: Understand the role of promotion
• Understand the aims of promotion
• Identify, explain and give examples of different forms of
promotions
• Understand how promotions influence sales
• Justify an appropriate method of promotion in a given situation
Promotion
• There is much more to promotion than
advertising. Businesses use various methods
to gain publicity.
Customer awareness
• Promotion refers to the methods used by a
business to make customers aware of its
product. Advertising is just one of the means a
business can use to create publicity.
• Why do businesses promtote their products?
• -pg 157
How do business promote their products?
•Businesses create an overall promotional mix by putting together a combination of
the following strategies:
•Promotional material on a high street in Shanghai
•Advertising, where a business pays for messages about itself in mass media such as
television or newspapers. Advertising is non-personal and is also called above-the-line
promotion.
•Sales promotions, which encourage customers to buy now rather than later. For
example, point of sale displays, 2-for-1 offers, free gifts, samples, coupons or
competitions.
•Personal selling using face-to-face communication, eg employing a sales person or
agent to make direct contact with customers.
•Direct marketing takes place when firms make contact with individual consumers
using tactics such as ‘junk’ mail shots and weekly ‘special offer’ emails.
Methods
• List the difference between ‘above’ and ‘Below’ the
line.
• -pg 158 – 162
• QUIZ:
http://www.bbc.co.uk/schools/gcsebitesize/business
/marketing/productlifecycle/quiz/q44385749/
ACTIVITY TASK
• Decide the Promotion Mix for your product.
• Make sure you justify your promotional
decisions.