3.1.6 Building a successful marketing mix Ryanair P? What is Ryanair’s marketing mix? Do each of the 4Ps for Ryanair complement each other? Has Ryanair built a successful marketing mix? 3.1.6 Building a successful marketing mix 3.1.6 Building a successful marketing mix

3.1.6 Building a successful marketing mix Product The component of the marketing mix that looks at the goods and services that a firm provides Goods are physical or tangible products, you can touch them e.g. a car or a television Services are unphysical or intangible, they cannot be touched e.g. financial consultancy or teaching Firms use (scientific) Research and (technical) Development (R&D) to improve their products

Product portfolio/mix 3.1.6 Building a successful marketing mix Product portfolio/mix A product portfolio is the range of products that a business sells. As a business expands it is likely to offer more products to: Broaden their product range Different target markets for similar products Diversification by selling new products Balance their product range Offer a range of goods or services to support the original product Meet the needs of different customers

How many products can you name within Cadbury’s product range? 30 Second Challenge How many products can you name within Cadbury’s product range? End 3.1.6 Building a successful marketing mix

Can you name 2 methods of product portfolio analysis? 3.1.6 Building a successful marketing mix Challenge Can you name 2 methods of product portfolio analysis? Can you identify which picture goes together and put them in the right order?

Building a business – pricing decisions 3.1.6 Building a successful marketing mix Building a business – pricing decisions There are a variety of pricing methods used by a business when trying to grow: Price skimming This involves setting a premium price at the launch of a product as some consumers are willing to pay a high price for the product to have it immediately Using this method means that a business maximises revenues at the high end of the market, normally those with higher disposable incomes Once the top end of the market has been ‘skimmed’ the business will lower prices Have you ever paid a high price for a product when it first came out? A mobile phone Game station Latest trainers

Building a business – pricing decisions 3.1.6 Building a successful marketing mix Building a business – pricing decisions Price penetration Here, the business sets a low price in order to gain market share. Once this objective has been met the business will raise prices The idea is to build up a customer base and hope for repeat custom once prices have been increased This tends to occur when the business is targeting a mass market Draw a spider diagram to show products that use price penetration.

Building a business – pricing decisions 3.1.6 Building a successful marketing mix Building a business – pricing decisions Competitive pricing Often, a business will have to take into account the prices of other businesses in the market The greater the degree of competition in the market the more important price becomes Has the introduction of price comparison websites increased the use of competitive pricing?

Building a business – pricing decisions 3.1.6 Building a successful marketing mix Building a business – pricing decisions Loss leader This occurs when a business sets price below the cost of the product This can attract customers to a store where they will also buy additional products Some firms sell the core product as a loss leader and make additional sales by selling accessories to the product Why might a supermarket decide to sell a product such as a CD or garden furniture as a loss leader?

Building a business – pricing decisions 3.1.6 Building a successful marketing mix Building a business – pricing decisions Cost-plus This occurs when a business sets a price based on the unit cost of the product by adding a profit mark up This ensures that every unit sold at least covers the cost of the product This takes into account total costs http://www.youtube.com/watch?v=tv1w8pdEWV8&feature=channel Make some additional notes on price as you watch this video clip

3.1.6 Building a successful marketing mix Group Activity For each scenario below identify and justify an appropriate pricing method: Class Kitchens Ltd. make made to measure kitchens, each one is individually designed to meet the exact needs of the customer HiT have just launched the latest advancement in non-stick cookware, with a 20 year guarantee Craft Kitchens have acquired a bulk purchase of branded barbeque accessories at an unbelievably low cost Needle Convenience Stores are stocking Dairy Milk promotional chocolate bars in the lead up to 2013 UEFA Champions League

What is meant by price skimming? (2 marks) Snowslopes Ltd. introduces the latest trends in ski and surfwear each season. This year the ski industry has seen the launch of a new high tech fabric which is ultra light and ultra warm making ski clothing easier to pack and more comfortable. Such technologically advanced fabrics, however, come at a high price. Sophie is pleased with initial sales, supported by a strategy of price skimming. Question Time What is meant by price skimming? (2 marks) Identify two factors that have enabled Snowslopes Ltd. to adopt a strategy of price skimming . (2 marks) How could Snowslopes Ltd. change its pricing methods to help expand sales in the future? Give reasons for your answer. (6 marks) 3.1.6 Building a successful marketing mix

End 5 Minute Test What is price penetration? 3.1.6 Building a successful marketing mix 5 Minute Test What is price penetration? State one advantage of using price skimming A garden bench costs £20 to make. A business uses cost-plus pricing adding a ten percent profit mark-up. What is the selling price? What is meant by the term loss leader? State two factors that will affect the pricing decision of a business. End

Building a business - Promotion 3.1.6 Building a successful marketing mix Building a business - Promotion Growing businesses employ a number of promotional methods, including: Advertising Sales Promotion Sponsorship Direct Marketing Growing firms will monitor sales revenue during a promotional campaign to see the impact of the promotion.

Promotional activities to enable growth Advertising is communication used to inform potential customers about products and persuade them to buy the products. Advertising takes a variety of forms: Television and Radio Newspapers and Magazines Posters As they grow businesses can afford to pay for more expensive advertising that will reach a wider market This will lead to an increase in the potential customer base and higher sales revenue 3.1.6 Building a successful marketing mix

Promotional activities to enable growth Sales promotion is a short-term method designed to attract customers into purchasing a product. Sales promotion can take a variety of forms, including: Competitions Special offers Free samples As they grow businesses target a wider audience through national sales promotions Sales promotions will create interest in the product and attract new customers, helping the business to grow 3.1.6 Building a successful marketing mix

Promotional activities to enable growth Sponsorship is a method of raising awareness of a business’ brand name in return for financial support of events. Sponsorship can target a variety of areas, including: Cultural Sporting Musical Sponsorship of events can gain nationwide or even global publicity for a business This awareness can enable the business to expand into national or global markets 3.1.6 Building a successful marketing mix

Promotional activities to enable growth Direct marketing is any marketing activity that is aimed directly at the customer. Direct marketing can take a variety of forms, including: Direct mail Electronic mail Door to door selling A business can target and engage customers directly. Specific market segments can be targeted leading to a higher success rate in turning potential customers into sales New technologies have made it easier and cheaper for businesses to communicate with target markets http://www.youtube.com/watch?v=QJpNjF-dk8o&NR=1 Market Planning Promotion Make some additional notes on promotion as you watch this video clip 3.1.6 Building a successful marketing mix

Group Activity On A3 paper draw a box with the term promotion at the centre of the paper Choose one large organisation e.g. Marks and Spencer. Carry out some research into its promotion Develop a spider diagram by drawing lines from the central box detailing the different types of promotion used at your organisation Suggest three reasons why your organisation has been influenced in its use of the promotion? Justify your answer. 3.1.6 Building a successful marketing mix

End 5 Minute Test What is meant by promotion? Name three places where a firm might advertise its products. Outline two benefits of using sponsorship as a form of promotion. Name two forms of direct marketing that a firm might use for promotion. State three factors that will influence the type of promotion used by a growing firm End 3.1.6 Building a successful marketing mix

Promotion at McDonalds 3.1.6 Building a successful marketing mix Promotion at McDonalds One of the methods used by McDonalds is advertising. Advertising is conducted on TV, radio, in cinema, online, using poster sites and in the press, for example in newspapers and magazines. What distinguishes advertising from other marketing communications is that media owners are paid before the advertiser can take space in the medium. Other promotional methods include sales promotions, point of sale display, direct mail, loyalty schemes, door drops etc. The skill in marketing communications is to develop a campaign which uses several of these methods in a way that provides the most effective results. For example, TV advertising makes people aware of a food item and press advertising provides more detail. This may be supported by in-store promotions to get people to try the product and a collectable promotional device to encourage them to keep on buying the item. (Source: www.mcdonalds.co.uk) Identify one advantage to McDonalds of advertising as a promotional technique. (1) Identify one disadvantage to McDonalds of advertising as a promotional technique. (1) Briefly explain how one of the promotional techniques used by McDonalds may encourage repeat purchases. (3) Assess two possible benefits to McDonalds of using a coordinated marketing campaign.(6)

Building a business - Place 3.1.6 Building a successful marketing mix Building a business - Place Getting your product into the right place is crucial. The retailer has to want to stock it! http://www.youtube.com/watch?v=fcEg1rWEqrM Junior Apprentice Episode 5 part 3

Channels of distribution 3.1.6 Building a successful marketing mix There are a variety of channels of distribution used by retailers to gain access to potential customers. These include: Wholesalers Retailers Telesales Mail order Internet selling http://www.youtube.com/watch?v=E4WHymuiJE4&feature=channel Market Planning - Place

Channels of distribution 3.1.6 Building a successful marketing mix Wholesalers A wholesaler is a business that provides a link between the manufacturer of goods and the retailer. They buy large quantities of goods and sell these on to retailers in smaller amounts. They gain a discount for bulk buying. Growing firms can benefit from higher output. Manufacturers can benefit from the high amount of output they are able to sell to wholesalers, leading to increased capacity utilisation, reducing unit costs and increasing profit Retailers can benefit as unit costs fall if they buy in bulk off a wholesaler

Channels of distribution 3.1.6 Building a successful marketing mix Retailers A retailer is a business that buys from a manufacturer or wholesaler and sells on to the general public. Large retailers can hold a great deal of power over their suppliers, reducing the price a business might receive for its goods. If a firm sell its products to larger retailers it is likely to benefit from a nationwide profile, leading to growth.

Channels of distribution Telesales This is a method of direct marketing, usually over the telephone, but also through other face to face media such as web conferencing. As firms grow they often make use of call centres to ‘cold call’ telephones nationwide. Although this can lead to a poor reputation it can also increase sales revenue. Growing firms make use of telesales for the breadth of coverage it achieves in contacting potential customers. 3.1.6 Building a successful marketing mix

Channels of distribution Mail order Consumers use catalogues from home and then order the items that they wish to buy. The firm do not have the expense of a store but do have to pay for warehouse facilities and the cost of the catalogues. The modern version of this is the online catalogue. Associated costs include technology, storage and distribution of the goods. It is more likely that larger firms will use mail order due to the expense of the system. 3.1.6 Building a successful marketing mix

Channels of distribution 3.1.6 Building a successful marketing mix Internet selling This has seen rapid development over the last decade. Firms have found it easier to grow through the internet as it is relatively cheap to set up and run. An internet site can target the whole globe. Distribution centres are very important for selling goods. Manufacturers are starting to bypass the ‘middle men’ such as wholesalers and are selling direct to consumers.

Next Plc What distribution channels are used by Next? 3.1.6 Building a successful marketing mix What distribution channels are used by Next? What is Next’s product portfolio? Who are Next’s target market? Why does Next choose to offer its customers a range of places to buy its goods? What other businesses can you think of that use more than one channel of distribution?

Channels of distribution at Snowslopes Ltd. 3.1.6 Building a successful marketing mix Snowslopes Ltd has looked at a variety of ways to distribute its product range. It aims to expand its business and Sophie, the Marketing Director, has identified three channels of distribution that the business might use: Mail order Telesales Internet selling She is unsure whether she should use only one channel, or a combination. Question Time What is meant by ‘channels of distribution’? (2 marks) Explain two disadvantages to Snowslopes Ltd of not using retailing as a channel of distribution. (5 marks) Discuss what combination of the channels of distribution should be used in order to meet the objective of expansion that has been set by the business. (6 marks)

Selecting channels of distribution Different scenarios have already been mentioned, but it is important to recognise the changing nature of distribution. New technology is removing layers. Producers can now sell directly to the consumer through the internet. Consumer Producer Consumer Retailer Producer Consumer Retailer Wholesaler Producer 3.1.6 Building a successful marketing mix

Selecting channels of distribution In pairs add an example to each box to show the different channels of distribution chosen by firms operating within the food industry. 3.1.6 Building a successful marketing mix

Exam technique - the 4 Ps http://www.youtube.com/watch?v=R4DmxqH6fh0&feature=related Market Planning the marketing mix exam technique 3.1.6 Building a successful marketing mix

End 5 Minute Test What is meant by place? 3.1.6 Building a successful marketing mix What is meant by place? State 1 advantage and 1 disadvantage of using wholesalers to distribute products Draw a channel of distribution that involves four channels? Outline two reasons why internet selling is beneficial to a growing firm? State 1 advantage and 1 disadvantage of using telesales to help the expansion of a business End