The Marketing Mix – product and price Chapter 16 The Marketing Mix – product and price

Learning goals Explain what the marketing mix means and hat its key components are Analyse the importance of the customer and customer relationship marketing Understand and evaluate the importance of product decisions to a successful marketing mix Analyse the stages of a typical product life cycle and evaluate the usefulness of the concept

Explain what the price elasticity of demand measures Understand and analyse different price methods and techniques and evaluate their relevance in different business situations Understand and evaluate the importance of pricing decision to a successful marketing mix

Marketing Mix-Intro Marketing mix: the four key decisions that must be taken in the effective marketing of a product Made up of 4Ps, product design and performance, price, promotion and place (where the product will be sold Product: either new product or adopting an existing product Price: not too low or too high Promotion: tell consumers about the product’s availability and convincing them to buy Place: where the product is distributed.

The role of the customer – the 4 Cs An alternative to the 4Ps Customer solution: what the firm needs to provide to meet the customer's needs and wants Cost to customer: the total cost of the product including extended guarantee, delivery charges and financing cost Communication with customer: provide up to date and easily accessible to way communication links with customers to both promote the product and gain back importance consumer market research information Convenience to customer: easily accessible pre-sales information and demonstrations and convenient locations to buy the product

The role of the customer – the 4 Cs 4 Ps 4 Cs Product Customer solutions Price Cost to customer Promotion Communication with customer Place Convenience to customer Customer relationship marketing: CRM using marketing activities to establish successful customer relationships so that existing customer loyalty can be maintained.

Product Includes consumer and industrial goods and services. Quality, durability, performance and appearance Products is the cellphone brand is iPhone Product positioning: before deciding on which product o develop and launch, it is common for firms to analyse how the new band will relate to the other brands in the market. Includes price, quality, materials used and perceived image.

Uses of the product life cycle Assisting with planning marketing-mix decisions, such as a new product launches and price or promotion changes Identifying how cash flow might depend on the cycle Recognising the need for a balanced product portfolio (when one product declines other grow…) Review table 16.1 on page 296

Price is key part of the marketing mix Price will determine the degree of value added by the business Affect the revenue and profits Affect marketing and affect they psychological image of the product.

Price Elasticity of demand Measures the responsiveness of demand to changes in price

Value of PED Classifications Explanations Zero Perfectly inelastic demand The same amount is demanded, no matter what the price 0-1 Inelastic demand The % change in demand < % change in price. Means the firms can raise rice and not lose much demand and sale revenue 1 Elastic % change in demand = % change in price Between 1 and infinity Elastic demand % change in demand is > % change in price Infinity Perfectly elastic Means that the product is only demanded at one price and when the prices rises demand falls to 0.

Factors that determine price elasticity How necessary the product is How many similar competing products or brands there are The level of consumer loyalty The price of the product as a proportion of consumers’ incomes

Application of price elasticity of demand Allows for more accurate sales forecasts Assisting in pricing decisions The pricing decisions – how do managers determine the appropriate price: Costs of production Competitive conditions in the market Competitors’ price Business and marketing objective Price elasticity of demand Whether is a new or an existing product

Pricing methods: Cost-based pricing: firms assess their costs of producing or supplying each unit, and then add an amount on top of the calculated cost. Market up pricing: adding a fixed mark-up for profit to the unit price of a product. Target pricing: setting a price that will give a required rate of return on a certain level of output/sales Full costing pricing: setting a price by calculating a unit cost for the product (fixed and variable)and then adding a fixed profit margin Competition-based pricing: a firm will base its price upon the price set by tis competitors.

New product pricing strategies Penetration pricing: setting a relatively low price often supported by strong promotion in order to achieve a high volume of sales Market skimming: setting a high price for a new product when a firm has a unique or highly differentiated product with low price elasticity of demand.