4.

5 
4’s  
The 4 p’s of Marketing

Product

A product is the physical good or service produced by an

organisation to meet the needs and wants of their consumers.

Customer expectations can be primarily categorised in the following

ways:

● Quality
● Durability
● Performance
● Appearance

Consumer goods are categorised as consumer durables and single use

goods

Manufactured products that can be reused and expected to have a long

product life

The product life cycle

Product life cycle

The pattern of sales recorded by a product from launch to

withdrawal from the market – see handout on marketing mix

Product life cycle

Introduction ​– Slow sales growth after development and testing.

Exceptions tend to be movie releases or product with a high publicity and
anticipation of the release date

Growth​ – This is dependant on the marketing effectiveness. Increasing

competition, technological advances, change in consumer tastes and
market saturation. The time span of this fast growth will therefore vary
from weeks, months or years.

Maturity/Saturation​ – Sales stop growing, but may not decline either,

Coca Cola have been like this for years. Saturation exists primarily when
everyone who wanted the product has one. When this happens, with
mobile phones for example, market innovation becomes even more
important to increase market share.

Product life cycle

Extension strategies – Based on the marketing mix; Product, Price,

Promotion and Place.

● Product – Redesign and repackaging

● Price – Discount the price
● Promotion – New advertising campaign
● Place – Launch the product in a new market
Activity 4.5.1 – Chocolate wars led to meltdown. Use p399 to answer
the evaluate question

The product life cycle

Product life cycle and investment, profit and cash flow

Profit

Profit and Cash Flow follow similar patterns in the product life
cycle.

The Boston Matrix

A model used by businesses to analyse the portfolio of products it

sells by using market share and market growth.
The Boston Matrix

● Dogs – A position of low market share and low market growth

● Of little benefit to the business, the growth is low offering little

potential. The low market share position is also pessimistic given
that growth is unlikely to help

Question marks – A position of high market growth and low market share

➢ Uncertainty around the future of the product. Quick decisions are

necessary and redevelopment/innovation is required if the product
proves popular.

➢ Generally needs financing in order to be profitable in the long term.

The attraction is the high market growth, if the financing is
available the potential rewards tend to be significant.

The Boston Matrix

Cash Cow– Low market growth, high market share

➢ An established product in a mature market. Will generally generate a lot

of cash. Consumer awareness will be high reducing the cost and need for
promotions.

➢ Businesses will be keen to maintain a cash cow with a high market share
in order to fund other projects, especially if the maintenance of consumer
awareness will require little funding.

Stars – High market growth, high market share

➢ High performer in a growing market, so the company will prioritise

maintenance of its market position. Promotional costs will be high to
ensure relevancy and strengthen brand image.

➢ Will eventually become a cash cow as the market begins to saturate and
growth slows down.
The Boston Matrix

The Boston Matrix and Strategic analysis

➢ Analysis of a company’s entire portfolio allows them to identify what

parts of the business need corrective action in order to move around the
matrix.

1. Building ​– Supporting dog products with additional advertising or

distribution to transition them to cash cows

2.​ Holding ​– Continue a stars holding in the market through innovation and
development in the product to maintain growth in the market

3. ​Milking –​ Utilising the profits from the cash cow to finance other
products that need development.

4. ​Divesting​ – Cutting investment on dog products. Staff will be negatively

affected and the evaluation will be important as to whether to
implications of the dogs would be outweighed by gains elsewhere.

The Boston Matrix

Evaluating the Boston Matrix

Advantages

1. Useful when analysing the performance and current position of

existing products

2. It’s a helpful tool when planning action to be taken with existing

products

3. Useful when planning the introduction of a new product

4. By segmenting each product within the business, the overall

company can plan its long term future.

5. Categorised products can be aligned to work effectively together, a

cash cow may be used to support Stars or funding a Question
mark to becoming a Star.
The Boston Matrix

Evaluating the Boston Matrix

Disadvantages

1. On its own the Boston matrix will not help in predicting what will
happen next with any products. Decision makers need to further analyse
the impacts that competitors, technology and the economy will have on
the positioning of the product.

2. The Boston matrix has been criticised for over simplifying complex
analysis being used to determine a product’s success.

3. It works on the assumption that higher rates of profits are directly related
to higher volumes of sales.

➢ A product sale will result in higher volumes of sales but may be a

reduction in the overall profit margins of the product.

Activity 4.5.3 – ’Cash Cow at the dairy​’.

The Boston Matrix

Colgate – Palmolive Company

Colgate – Palmolive Company is an American worldwide consumer products
company that had a sales revenue of $16bn in 2015 and employed 37,000
people worldwide. One of its leading products is toothpaste and some of its
leading toothpaste brands are Colgate, Cibaca, Dentagard, Klynos and
Profiden.
Branding

➢ Branding​ – Where a business creates an identity for its good or

service through its marketing characteristics.

➢ Branding is done through design, packaging, name, trademark and

advertising. It quite often distinguishes a product from its
competition and reinforces its USP.

➢ Brand awareness​ – How recognisable a business’s good or service

is in the minds of consumers in the target market.

● Attracts consumers when they are making buying decisions

● Can be used to sell associated new goods and services
● Develop long term sales through brand loyalty.

Branding

➢ Brand loyalty​ – The extent to which the consumer will continue to

buy an organisations good or service over time.

➢ Brand loyalty is key to maintaining sales in the long run and

protecting a firm's product from its competition.

➢ Brand value/Equity​ – The extra amount consumers will pay above

the average market price for a business’s product because of its
brand.

➢ Sportswear companies in particular benefit from brand value of their

products through sponsorship or association with leading teams or
individuals.

➢ Its primary uses are therefor in generating extra profits or

revenue for the company.
Branding

The importance of branding

➢ Instant recognition of the company and its product through logos

and images

➢ Differentiation of company products from its rivals, particularly

important with homogenous products like gasoline

➢ Aids employee motivation – Employees become loyal and

committed to the company brand

➢ Brand recognition generates referrals from customers particularly

from social media

➢ Customers develop an expectation of standards from the company

The brand equity developed from branding is increased beyond the value of the physical
assets of the company.
Packaging
The importance of packaging

Protection ​– Self explanatory. The product needs to protected from production to delivery to
display in the retailer. Packaging can range from milk, to fragile items to fruit and veg in their
requirements.

Attracting customers​ – Often the swaying point for indecisive or impulse buyers on a product
or service. Companies often invest heavily in market research to get their packaging as
influential as possible.

Promotion and information​ – Increasingly in society consumers

are more interested in the information of a product whether its diet, animal involvement or
ethical employment practices.

Packaging

The importance of packaging

Differentiation and brand support ​– The consumer will identify with a particular logo or colour
which will make the purchasing decision less conscious. A company decision to change this
may not permanently affect sales but it may cause short term falls until consumer recognition is
restored.

The evaluation​ – packaging has to be considered as only a part of the

product/promotion aspect of the product. On its own it’s not enough but
without it a product is destined to underachieve.

Growing consumer awareness makes packaging more important for

consumer persuasion and loyalty.

This ethical view makes the need for efficiency in packaging a high
priority for companies with an ethically minded target audience.

Price

Introduction

Determines the degree of value on a product after the business has

sourced its components

Price determines the demand for the product and consequently the
level of income and volume of sales generated
Determines the marketing objective for the product or company and
in turn develops the psychological image and identity of the product

Price
Factors determining the price decision

● Costs of production

● Competitive environment of the market

● Competitors prices

● Marketing objectives

● Price elasticity of demand – elasticity?

● Whether it is a new or an existing product

Pricing Strategies & HO

Cost based pricing

➢ The process of adding a fixed markup for profit to the unit price of
a product
E.g.

➢ Cost of bought materials - £40

➢ Desired level of mark up – 50% - £20
➢ Selling price - £60

Pricing Strategies & HO

Market based pricing strategies

➢ Penetration pricing​ – Setting a relatively low price often supported

by strong promotion in order to achieve a high volume of sales

Typically used for mass target audiences where the prices can be slowly increased once sales
are established and business is benefiting from economies of scale.

➢ Market skimming​ – Setting a high initial price for a product whereby the initial demand
will be quite high. Often used when price elasticity of demand is low.
 ● In other words, used for products where people are less influenced by prices – the latest
car, TV or smartphone.

Pricing Strategies & HO

Market based pricing strategies
● Penetration pricing & Market skimming

Pricing Strategies & HO

Market based pricing strategies

➢ Psychological pricing ​– Setting a price that attracts a consumer

through their perception of value i.e. £1.99 instead of £2.

➢ The second aspect is the price level of the product, what’s your
immediate reaction to a cheap product or an expensive one?

➢ Loss leaders​ – The pricing of a product at a low price (sometimes a loss) to encourage
consumers to buy other products with a higher markup. E.g selling a printer for £30 at a
loss to the store, then selling the ink cartridges needed for £25 each at a much bigger
profit margin.

Pricing Strategies & HO

Market based pricing strategies

➢ Price discrimination​ – When a business sells the same product to

different consumers for different prices

➢ Travel is a primary example. Airline tickets sell for different prices,

bus or train tickets discount children or the elderly. Similar cases
exist in events where children, students and adults all pay varying
prices.

➢ Promotional pricing ​– When one business sets especially low

prices to gain a market share or sell off excess stock.

➢ Spring and summer sales, Holland & Barrett buy 1 item get the
other for 1p. Buy 2 get the 3rd free examples. Where does the store
benefit from these strategies?

Price Leadership

● When one business sets a price for its products and other firms in
the market set the same or similar prices.

● When a company has the highest market share, the normally benefit
from economies of scale and cheaper unit costs.

● They then reduce prices to a point where smaller companies cannot

afford to compete. (Predatory pricing)

● Predatory/Destroyer pricing ​- Deliberately undercutting

competitors prices in order to try to force them out of the market.

● In theory this practice is illegal, in practice, larger companies claim

● innocence and justify their behaviour as a loss leader strategy

instead.

● Short run, consumers gain. Long run creates a monopoly!

 Promotion
Introduction

● The methods used by a business to create awareness, attract customers and persuade
them to buy its products.

● The ‘promotion mix’ is an ever increasing area of business consideration with each form
of promotion competing for a sizable proportion of the budget.

Promotional objectives

➢ Increasing sales by raising consumer awareness of the business or

product

➢ Reminding consumers of existing products and their USP’s

➢ Encourage further purchases from existing consumers while attracting

new ones

➢ Highlight the superiority of their own products in comparison to that of

competitors

➢ Create or reinforce the brand image of the product

➢ Correct misleading reports on a product or business and reassuring

consumers

➢ Encourage retailers to stock products and actively promote them for

further sales

Methods of Promotion
 ➢ Above the line production ​– Where the business uses mass media
to promote brands to their target market

Example of the media used include: TV, Internet, Newspapers,

Magazines, Trade journals, Billboards

1. Informative advertising: ​Used primarily for the introduction of a

new product or where there has been significant changes. Less
about the brand image and much more factual

2​. Persuasive advertising​: The creation of a brand identity as

opposed to distinct information. More common in populated
markets where the difference between products has little variance.

Methods of Promotion
Above the line production ​– Which media is best to use?

➢ Costs involved

➢ The demographic profile of the target audience

➢ The type of product and message that needs to be communicated

➢ The overall marketing mix

➢ Legal and societal constraints

Methods of Promotion
Below the line production​ – Where the company uses techniques
that allow it to reach its target market in a more direct and specific
way than using mass media.

➢ Methods used include: Price promotions, Personal selling,

➢ Sponsorship, Point of sale material, Public relations and Trade shows.

➢ The idea of below the line production is to incentivise through

 special offers directed towards specific consumers or retailers to
achieve short term sales increases and purchases by consumers.

Methods of Promotion
Sales promotions

➢ Price deals​ – a temporary reduction in price.

■
➢ Loyalty reward programmes​ – Reward points, air miles or credits for
purchases and redeem them for rewards

➢ Money off coupons​ – redeems when consumers buy certain products or a

certain amount of products

➢ Point of sale displays​ – ‘Aisle interrupter’ or a ‘dump bin’

➢ BOGOF​ – Buy One Get One Free

➢ Games and competitions ​i.e. in cereal boxes, McD’s monopoly etc

➢ Public relations​ – The use of media to interact and entice the public

➢ Sponsorship ​– The association of a product with a team or event

➢ See p.418 for the breakdown of limitations to each strategy.

➢ Activity 4.5.8 – Global advertising spending US$503bn in 2013

The Promotion Mix

The combination of promotional techniques that a firm uses to

communicate the benefits of its products to its customers.

There are 8 stages on the decision of the promotional mix:

1. Decide on the image of the product

2. Develop a profile of the target market

3. Decide on the messages to communicate

4. Set an appropriate budget

5. Decide on how the messages should be communicated

 6. Establish how the success of the promotional mix is the be assessed
i.e. the success of the operation

7. Undertake the promotional plan and the mix of element to it

8. Measure its success against the criterion in step 6.

How the promotional mix may vary over the life cycle of a product

The Promotion Mix

The impact if changing technology on promotional strategies

➢ Internet marketing ​– Advertising and marketing activities that use

the internet, email and mobile communications to encourage direct
sales via electronic commerce – see textbook p. 420 & 421

The Promotion Mix

The impact if changing technology on promotional strategies

➢ Viral marketing – The use of social media sites or text messages to

increase brand awareness or the volume of sales.

➢ E.g. a YouTube video produced that shows the release of a new

product such as a new music single

➢ The benefits of viral marketing is the wide market audience it

appeals and reaches to at a comparatively low cost to the company

➢ A difficulty of the method is the difficulty there is in controlling the

outcome of the campaign whether it be positive or negative

The Promotion Mix

The impact if changing technology on promotional strategies

➢ Social media marketing – Promotion through Facebook, Snapchat, Instagram, Twitter

etc.

➢ The use of cookies within social media and the internet allows the
 promotion campaign to be very targeted towards the desired market
of the product

➢ The downside of this method is the reception it receives from the

wider public who can react negatively to the volume of advertising
on their social media

The Promotion Mix

The impact if changing technology on promotional strategies

➢ Guerrilla marketing​ – Unconventional promotional methods to

generate consumer awareness

➢ It’s about taking the consumers by surprise to release a new product

that generates a windfall of attention e.g football freestyling in a
street, a celebrity tennis match in a city square, a flash mob etc.

➢ The ability to go viral can generate a large audience quickly and

cheaply

➢ The message of the method may become lost on the audience or bad
execution of the event may cause the promotion to backfire.

Place
‘Place’ decisions in the marketing mix

➢ Place decisions are centred around how product should pass from
manufacturer to the final consumer.

➢ Channel of distribution ​– The chain of intermediaries a product

passes through from producer to final consumer

➢ Deciding on an appropriate channel strategy:

1. Should the product be sold directly to customers?

2. Should the product be sold through retailers?

3. How many intermediaries should be in the channel?

4. Where should the product be made available?

Place
‘Place’ decisions in the marketing mix

➢ Channel of distribution – ​The chain of intermediaries a product passes through

from producer to final consumer

➢ Deciding on an appropriate channel strategy:

1. Should electronic methods be used?

2. How much are stocking costs? In retail or warehouses?

3. How much control does the business want over the marketing
mix?

4. How will the distribution channel support the other components

of the business?