Marketing mix:

Definition: Marketing mix is the combination of elements that you will use to market your product.
There are four elements: Product, Place, Price and Promotion. They are called the four Ps of the
marketing mix.

Some people think that the four Ps are old fashionable and propose a new paradigm: The four Cs!
Product becomes customer needs; Place becomes convenience, price is replaced by cost to the
user, promotion becomes communication. It looks like a joke but the Cs is more customer-oriented.

PRODUCT

A good product makes its marketing by itself because it gives benefits to the customer. We can
expect that you have right now a clear idea about the benefits your product can offer.

Suppose now that the competitors products offer the same benefits, same quality, same price. You
have then to differentiate your product with design, features, packaging, services, warranties,
return and so on. In general, differentiation is mainly related to:

-The design: it can be a decisive advantage but it changes with fads. For example, a fun board must
offer a good and fashionable design adapted to young people.

-The packaging: It must provides a better appearance and a convenient use. In food business,
products often differ only by packaging.

-The safety: It does not concern fun board but it matters very much for products used by kids.

-The "green": A friendly product to environment gets an advantage among some segments.

In business to business and for expensive items, the best mean of differentiation are warranties,
return policy, maintenance service, time payments and financial and insurance services linked to
the product.

PRICE

Price means the pricing strategy you will use. You have already fixed, as an hypothesis a customer
price fitted to your customer profile but you will have now to bargain it with the wholesalers and
retailers. Do not be foolish: They know better the market than you and you have to listen their
advices.

Pricing strategies

In fact, you have to choose between three strategies:

-Competitive pricing: If your product is sold at the lowest price regarding all your competitors, you
are practicing competitive pricing. Sometimes, competitive pricing is essential. For instance, when
the products are basically the same, this strategy will usually succeed.

Remember that the success of competitive pricing strategy depends on achieving high volume and
low costs. If your prices are lower than your costs, you are going straight to bankruptcy! To avoid
such a mistake, you have to take notice of the break even ratio that you will find below.

-Cost-plus-profit: It means that you add the profit you need to your cost. It is also called cost-
orientated strategy and is mainly used by the big contractor of public works. The authority may
have access to the costing data and should like to check if the profit added to the cost is not too
high.

In fact, this strategy is only good for a business whom the customers are public collectivities or
government agencies.

-Value pricing: It means that you base your prices on the value you deliver to customers. For
example, when a new technology has a very large success, you can charge high prices to the
customer. This practice is also called skimming. It is easy when you are in the introductory phase of
the product life cycle.

Value pricing is also common in luxury items. Sometimes, the higher the price, the more you sell:
Fashionable clothing or restaurants for snob people. Of course value pricing is limited by the price
elasticity as you have already learnt in Economics.

The diagram below illustrates how you have to determine your price. You could see that a conflict
could arise between your financial objectives ( the expected profit) and your actual costs.

PLACE-DISTRIBUTION

A crucial decision in any marketing mix is to correctly identify the distribution channels. The
question " how to reach the customer" must always be in your mind.

-Definition: The place is where you can expect to find your customer and consequently, where the
sale is realized. Knowing this place, you have to look for a distribution channel in order to reach
your customer.

In fact, instead of "place" it would be better to use the word "distribution" but the MBA lingo uses
"place" to memorize the 4 Ps of the marketing mix!

Channels
It exists today, with the internet, more channels than in the past but basically, you have to consider
three main distribution channels:

-Selling to the customers: Whether you sell by yourself ( as retailer) whether you employ a sales
force, you are in these cases in front of the final customer. There are not intermediaries between
you and him. Unfortunately, except for the retailer business, this situation is far to be the general
case.

-Selling to the retailers: For example, you manufacture the fun boards and you sell them to the
Arizona retailers. This practice could be a bit complicated.

-Selling to the wholesalers: There are maybe four or five sport articles wholesalers in Arizona. You
sell your fun boards to these big men. On turn the wholesalers sell the fun boards to the retailers
which finally sell to their customers.

In the case of Pacific Boat which manufactures its boats in Philippines for customers located in the
USA or in Europe, there is not alternative ways. It must sell through some big import export
corporate's. Pacific boat has not any contact with its final customers but of course it must know
exactly their profile. If the product does not fit to the profile of the final customer, the wholesaler
will not buy it.

As you can see, the choice of your distribution channel heavily depends on your product and place
in the productive process. If you are in coal mining, do not expect to sell some coal buckets to the
final consumer!

Pramotion:

It is the communication link between sellers and buyers for the purpose of influencing, informing, or
persuading a potential buyer's purchasing decision.

Example:

Big bazaar 4p

Product:

Big Bazaar offers a wide range of products which range from apparels, food, farm products,
furniture, child care, toys, etc of various brands like Levis, Allen Solly, Pepsi, Coca- Cola, HUL,
ITC, P&G, LG, Samsung, Nokia, HP etc.

Big Bazaar also promotes a number of in house brands like:

  DJ & C
 Tasty Treat

Pricing:

The pricing objective at Big Bazaar is to get “Maximum Market Share”. Pricing at Big Bazaar is
based on the following techniques:

 Value Pricing (EDLP – Every Day Low pricing): Big Bazaar promises consumers the
lowest available price without coupon clipping, waiting for discount promotions, or
comparison shopping.
 Promotional Pricing: Big Bazaar offers financing at low interest rate. The concept of
psychological discounting (Rs. 99, Rs. 49, etc.) is also used to attract customers. Big Bazaar
also caters on Special Event Pricing (Close to Diwali, Gudi Padva, and Durga Pooja).
 Differentiated Pricing: Differentiated pricing i.e. difference in rate based on peak and non-
peak hours or days of shopping is also a pricing technique used in Indian retail, which is
aggressively used by Big Bazaar.

e.g. Wednesday Bazaar

 Bundling: It refers to selling combo-packs and offering discount to customers. The combo-
packs add value to customer and lead to increased sales. Big Bazaar lays a lot of importance
on bundling.

e.g. 3 Good Day family packs at Rs 60(Price of 1 pack = Rs 22)

5kg oil + 5kg rice + 5kg sugar for Rs 599

Place:

The Big Bazaar stores are operational across three formats — hypermarkets spread over 40,000-
45,000 sq ft, the Express format over 15,000-20,000 sq ft and the Super Centers set up over 1 lakh sq
ft. Currently Big Bazaar operates in over 34 cities and towns across India with 116 stores. Apart from
the Metros these stores are also doing well in the tier II cities. These stores are normally located in
high traffic areas. Big Bazaar aims at starting stores in developing areas to take an early advantage
before the real estate value booms. Mr. Biyani is planning to invest around Rs 350 crore over the
next one year expansion of Big Bazaar. In order to gain a competitive advantage Big Bazaar has also
launched a website www.futurebazaar.com, which helps customers to orders products online which
will be delivered to their doorstep. This helps in saving a lot of time of its customers.

Promotion:

The various promotion schemes used at Big Bazaar include:

 “Saal ke sabse saste 3 din”

 Hafte ka sabse sasta din “Wednesday bazaar”
 Exchange Offers “Junk swap offer”
 Future card(3% discount)
 Shakti card
 Advertisement (print ad, TV ad, radio)
 Brand endorsement by M.S Dhoni and Asin

Big Bazaar has come up with 3 catchy lines written on hoardings taking on biggies like Westside,
Shoppers stop and Lifestyle. They are:

 “Keep West- aSide. Make a smart choice!”

 “Shoppers! Stop. Make a smart choice!”
 “Change your Lifestyle. Make a smart choice!”

4. Each party is free to accept or reject the exchange offer.

5. Each party believes it is appropriate or desirable to deal with the other party.

Whether exchange actually takes place depends upon whether the two parties can

agree on terms that will leave them both better off (or at least not worse off) than
before. Exchange is a value-creating process because it normally leaves both parties

better off.

Note that exchange is a process rather than an event. Two parties are engaged in

exchange if they are negotiating—trying to arrive at mutually agreeable terms. When an

agreement is reached, we say that a transaction takes place. A transaction involves at least

two things of value, agreed-upon conditions, a time of agreement, and a place of agreement.

Usually a legal system exists to support and enforce compliance among transactors.

However, transactions do not require money as one of the traded values. A barter

transaction, for example, involves trading goods or services for other goods or services.