The Marketing Mix

Marketing Defined Marketing refers to all of the business activities necessary to establish and maintain positive relationships with one’s customers Marketing encompasses each of the steps involved in the delivery of goods and services from producer to consumer Ultimate goal of marketing is to sell the products produced by businesses and to effectively manage a business’s brands Marketing includes research & development, distribution, advertising, promotion and sales

Marketing Mix Most famous phrase in marketing Sometimes known as the ‘four Ps' Marketing mix consists of price, place, product and promotion The concept is simple. Think about another common mix - a cake mix. All cakes contain eggs, milk, flour, and sugar. However, you can alter the final cake by altering the amounts of mix elements contained in it. So for a sweet cake add more sugar! It is the same with the marketing mix. The offer you make to you customer can be altered by varying the mix elements. So for a high profile brand increase the focus on promotion and desensitize the weight given to price.

The Marketing Mix

The Marketing Mix - Price There are many strategies available when pricing a product

The Marketing Mix - Price Premium Pricing Maintaining an artificially high price (above equilibrium) whether competition exists or not in order to encourage favourable perceptions among consumers Predicated on consumer myth that high price equals superior quality and/or strong reputation Also referred to as luxury pricing or prestige pricing

The Marketing Mix - Price Penetration Pricing Maintaining an artificially low price (below equilibrium) on newly-introduced goods or services in order to grow market share (share of overall product sales within given time and jurisdiction) Once objective is achieved, price is returned to market levels Should not be confused with dumping or predatory pricing which refers to pricing goods in foreign markets below cost in order to eliminate domestic competition and establish monopolies

The Marketing Mix - Price Economy Pricing Refers to no frills low-price strategy where production, marketing and distribution costs are kept to a minimum

The Marketing Mix - Price Price Skimming Maintaining an artificially high price (above equilibrium) given lack of competition or due to significant competitive advantage via product differentiation in terms of superior quality or unique product features This pricing strategy is unsustainable as higher selling prices and profit margins tend to attract new competitors into the market, thus leading to price declines as supply gradually increases

The Marketing Mix - Place Place refers to channels of distribution, or the path through which goods are moved from the manufacturer to the consumer (final user) Goods often move through one or several intermediaries along this path, e.g., wholesaler, retailer, importer, agent, etc. A channel of distribution comprises a set of institutions which perform all of the activities utilised to move a product and its title from production to consumption. Bucklin - Theory of Distribution Channel Structure (1966)

The Marketing Mix - Place There are several basic channel decisions that must be made by producers: Do we employ direct or indirect channels, i.e., direct to the consumer or indirect via a wholesaler, retailer or agent? Do we employ single or multiple channels to move our goods to the consumer? Agents are mainly used in international markets. An agent will typically secure an order for a producer and will take a commission. They do not tend to take title to the goods. This means that capital is not tied up in goods. However, a 'stockist agent' will hold consignment stock (i.e. will store the stock, but the title will remain with the producer. This approach is used where goods need to get into a market soon after the order is placed e.g. foodstuffs).

The Marketing Mix - Place

Place - Centralized Marketing Strategy This strategy focuses on the production, marketing and sale of goods and services in one country which are then exported to other countries “Think local, act global” Advantages include brand building, combined synergies and cost savings due to avoidance of duplication

Place - Decentralized Marketing Strategy This strategy takes advantage of local production facilities, distribution centres, advertising agencies, market research firms and/or retail partnerships in foreign countries in order to target specific overseas markets Companies that employ decentralized strategies may leave all advertising, sales and promotional decisions to local sales and marketing representatives “Think global, act local” Advantages include flexibility, cultural sensitivity and shipping cost savings given proximity to foreign markets  

The Marketing Mix - Product Product refers to goods or services that satisfy consumer needs or wants Product may possess unique features related to size, shape, colour, smell, taste, quality, design, material, variety, etc. Marketers may increase depth of existing product line or expand number of product lines

The Marketing Mix - Product Product Life Cycle –Introduction Stage During this stage, product is heavily promoted to create consumer awareness If product has few competitors, price skimming strategy is employed to maximize profits If product has numerous competitors, penetration pricing strategy is employed to maximize market share The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline). In theory it's the same for a product. After a period of development it is introduced or launched into the market; it gains more and more customers as it grows; eventually the market stabilises and the product becomes mature; then after a period of time the product is overtaken by development and the introduction of superior competitors, it goes into decline and is eventually withdrawn. However, most products fail in the introduction phase. Others have very cyclical maturity phases where declines see the product promoted to regain customers.

The Marketing Mix - Product Product Life Cycle – Growth Stage During this stage, competitors offering similar products are attracted into the market Production become more and more profitable due to economies of scale (cost efficiencies resulting from optimal production levels) Companies may also form strategic alliances or joint ventures, or simply acquire one other in order to eliminate competition altogether

The Marketing Mix - Product Product Life Cycle – Maturity Stage During this stage, revenues grow at a decreasing rate and eventually stabilize Producers attempt to differentiate products via branding by creating a favourable image of one’s offerings in the minds of consumers Intense competition and price wars continue throughout this stage Maturity Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilise. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media.

The Marketing Mix - Product Product Life Cycle – Decline Stage During this stage there is a downturn in the market as more and more innovative products are introduced and/or consumer tastes change Intense price-cutting occurs and many products are ultimately withdrawn from the market altogether Maturity Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilise. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media.

The Marketing Mix - Promotion Promotion refers to the various aspects of marketing communication with the goal of generating positive customer response. Promotion includes paid advertising, public relations, free publicity, direct marketing, personal selling and sales promotions

Promotion – Paid Advertising Advertising refers to paid-for promotion of commercial products using a variety of media sources directed towards particular target markets Advertising is designed to create favourable image of company products in the minds of consumers Examples of paid advertising includes television commercials, radio spots, newspaper and magazine ads and company websites

Promotion – Public Relations Most large firms host public relations departments which attempt to manage the image and reputation of not only the products but also the firm itself within the larger community

Promotion – Publicity Publicity refers to media promotion of firms and their products that the company did not pay for directly, e.g., newspaper article or televised news report Firms may attract either good or bad publicity within the media depending on the media source’s point of view

Promotion – Direct Marketing Direct marketing allows firms to communicate directly with their customers (often against their will) and includes telemarketing, junk mail, email spam, online pop-up ads and outdoor advertising such as billboards

Promotion – Personal Selling Personal selling (or point-of-sale merchandising) refers to face-to-face salesmanship such as that seen in retail outlets between salesperson and potential customer Ultimate goal of personal selling is to either close the deal, upsell or cross-sell to the customer

Promotion – Sales Promotions Sales promotions are designed to increase consumer awareness and sales volumes and may include coupons, special events, free samples, contests and premiums or conditional giveaways such as BOGO offers and customer loyalty cards

The Marketing Mix Summary

Marketing Mix – The Two Cs The marketing mix also refers to the two Cs: consumers and competition

The Marketing Mix - Consumers Marketers must determine the demographic characteristics (e.g., age, gender, income and education levels, etc.) of their target market, or most typical potential consumers

The Marketing Mix - Consumers Marketers must offer significant customer value proposition, which refers to the benefits that consumers derive from the use of certain goods and services

The Marketing Mix - Competition Marketers must also be cognizant of their direct (similar product) and indirect (discretionary income) competition

The Marketing Mix - Competition Marketers must attempt to gain competitive advantage through (i) lower production costs per unit via economies of scale (ii) lower marketing and distribution costs (iii) product differentiation in terms of price, quality and unique features and (iv) brand equity (awareness, loyalty and insistence)

Activity: Put the following products on the Product Life Cycle (PLC) CD DVD iPhone iPad Cell phone Cigarettes in North America Cigarettes in the developing world

Activity: Put the following products on the Product Life Cycle (PLC) MS-DOS Play Station 3 Fax machine Kit-Kat and Aero chocolate bars PC greenest shopping bag

Group Activity You will be divided into groups of 4 Each group will be assigned a different company from www.thetimes100.co.uk/ You are to list and explain the 4 Ps for each company. In addition, identify competitors and describe the typical consumer (target market) according to: income, age, gender, lifestyle, attitudes and beliefs