MC9030

Session III

Marketing Mix
Konalingam Kajenthiran
BBAHons (Mkt.) (UOJ), MSc in (Mgt.) (USJ)
Lecturer in Marketing,
Faculty of Management Studies and Commerce,
University of Jaffna.
1-2
What is Marketing
mix?
Definition

The marketing mix is the set of tactical marketing

tools that the firm blends to produce the
response in the target market.
-Kotler (2018)-
 Marketing Mix is the set of
controllable variables that
the firm can use to influence
the buyer’s response

Marketing mix designed to achieve the company’s marketing objectives

by engaging consumers and delivering value to them.
 P
➢ The firm first need to satisfy the needs ( roduct).

P
➢ It must then decide how much it will charge for the offering ( rice)
➢ Finally, it must engage target consumers, communicate about the offering,
P
and persuade consumers of the offer’s merits ( romotion).

P
➢ How it will make the offering available to target consumers ( lace).

The firm must blend each marketing mix tool into a comprehensive integrated
marketing program that communicates and delivers the intended value to
chosen customers.
What is PRODUCT?
 A Product
Is Anything that can be offered to a market for attention,
acquisition, use, or consumption that might satisfy
a want or need.
 Products • Organizations
• Information
• Ideas
• Experiences
Persons • Events
• Properties
Physical Object

Services
Consumers’ needs and wants are fulfilled through market offerings. Places
Levels of Product
Potential Product
1. Core benefit level: Fundamental need or want- “ the benefits the customer is really
buying” Eg: A hotel guest is buying “Rest and sleep”

2. The Generic/Basic/Actual Product: Product Attributes / characteristics/Product

design/packaging/Brand Name/Quality Level Eg: a bed, bathroom, towels,

3. The Expected product: A set of product attributes and conditions buyers normally expect
when they purchase this product- Eg: a clean bed, fresh towels, working lamps, a relative
degree of quiet

3. The Augmented product: Benefits that exceeds buyers expectations (After-sales services,
Warranty, Product Support, Delivery and Credit)Eg: satellite TV, high speed internet access
4. The Potential product- possible augmentations and transformations the product might
undergo in the future

8-13
Product & Service
Classification
Product & Service Classification (Cont…)
Product can be broadly classified on the basis of
(1)Use,
(2) Durability, and
(3)Tangibility.

Let us have a brief idea about the various categories

 (Based on Use)

- Materials and Parts

- Capital items
- Components
- Supplies and
services
Product & Service Classification (Cont…)

Consumer
products
Industrial
products
 Product & Service Classification (Cont…)
Consumer Product
• Consumer products are products and services bought by
final consumers for personal consumption.

• Classified by how consumers go about

buying them
– Convenience products
– Shopping products
– Specialty products
– Unsought products
 Product & Service Classification (Cont…)
Convenience products
• Consumer products and services that the customer usually buys
frequently, immediately, and with a minimum comparison
and buying effort.

• Convenience products are usually low priced, and marketers place them
in many locations to make them readily available when customers need
or want them.
• Newspapers
• Candy
• Laundry detergent, • Fast food
• Magazines,
 Product & Service Classification (Cont…)
Shopping products
• Shopping products are less frequently purchased consumer products and
services that customers compare carefully on suitability, quality, price, and
style.

• When buying shopping products and services, consumers spend much

time and effort in gathering information and making comparisons.
• Furniture
• Clothing
• Home appliances
 Product & Service Classification
Need to continue (Cont…)
Specialty products

with this for • Consumer products and services with unique

characteristics or brand identification for
which a significant group of buyers is willing to make a

group 1 special purchase effort.

•
•
•
Medical services
Designer clothes
High-end electronics
• Gourmet food
 Product & Service Classification (Cont…)
Unsought products
• Consumer products that the consumer either does not know about or knows
about but does not normally think of buying.

• More Most major new innovations are unsought until the consumer becomes
aware of them through advertising
• Life insurance
• Preplanned Funeral services
• Blood donations

• By their vary nature, unsought products require a lot of

promoting, personal selling, and other marketing efforts.
Source: Kotler (2018)
 Product & Service Classification (Cont…)
Industrial products
• Products purchased for further processing or for use in conducting
a business.
• The distinction between a consumer product and an industrial product is based
on the purpose for which the product is purchased.
• Classified by the purpose for which the product is purchased
• Materials and parts
• Capital items
• Supplies and services
Product & Service Classification (Cont…)

Based on Durability, the products can be classified as :

(a) Durable Goods; and
(b) Non-durable Goods.
 Product & Service Classification (Cont…)
Durable Goods
• Durable goods are products which are used for a long period i.e., for months
or years together.

Examples of such goods are refrigerator, car, washing machine etc.

• Such goods generally require more of personal selling efforts

and have high profit margins.

• In case of these goods, seller’s reputation and presale and after-sale

service are important determinants of purchase decision.
 Product & Service Classification (Cont…)
Non-durable Goods
• Non-durable goods are products that are normally consumed in one
go or last for a few uses. Examples of such products are soap, salt,
pickles, sauce etc.

• These items are consumed quickly and we purchase these goods

more often. Such items are generally made available by the producer
through large number of convenient retail outlets.

• Profit margins on such items are usually kept low and heavy
advertising is done to attract people towards their trial and use.
Product & Service Classification (Cont…)

Based on Tangibility, the products can be classified as :

(a) Tangible Goods; and
(b) Intangible Goods.
 Product & Service Classification (Cont…)
Tangible Goods
• Tangible have a physical form, that can be touched and seen.
• Thus, all items like groceries, cars, raw-materials, machinery etc. fall
in the category of tangible goods.

Intangible Goods
• Intangible goods refer to services provided to the individual
consumers or to the organisational buyers (industrial, commercial,
institutional, government etc.).
• Medical treatment, postal, banking and insurance services etc., all fall
in this category.
Characteristics of Service
 Con/…..
Services have unique characteristics :
This characteristics creates distinctive challenges for service marketers in
attracting new customers and keeping existing customers.

Services are intangible means it cannot be seen, tasted felt, heard or smelled before
purchase. i.e. Services not a physical product, it has lack of tangible assets which can’t be
seen touched or smell.

Heterogeneity
It is otherwise called Variability. i.e. the quality of the services on the service provider.
So services can differ from person to person.
 Con/…..
Inseparability
Services are produced and consumed simultaneously. We can separate the
service provider & service.
Perishability
Perishability is used in marketing to describe the way in which service
capacity cannot be stored for sale in the future. This feature of service
creates the opportunity to creative planning.
Ownership
Customer received only the rights to a service process when they purchase
it. There is no more physical transfer of ownership to customer.
Goods Versus Services
Attributes of Goods (Tangible Product) Attributes of Services (Intangible Product)
• Can be resold • Reselling unusual

• Can be inventoried • Difficult to inventory

• Some aspects of quality measurable • Quality difficult to measure

• Selling is distinct from production • Selling is part of service

• Product is transportable • Provider, not product, is often transportable

• Site of facility important for cost • Site of facility important for customer contact

• Often easy to automate • Often difficult to automate

• Revenue generated primarily • Revenue generated primarily

from tangible product from the intangible service
 Product and
Service
Decision

Marketers make product

and service decisions at
three levels:
Consists important decisions in the development and marketing of
individual products and services.
 Developing a product or
service involves defining the
benefits that it will offer.
1. Product and
Service Attributes These benefits are
communicated and delivered
by product attributes such as
quality, features, and style
and design.
 • The most distinctive skill of professional marketers is their ability to build and manage
brands.

A brand is a name, term, sign, symbol, or design or a

2. Branding combination of these that identifies the maker or seller
of a product or service.
“Something that
exists in the minds • Consumers view a brand as an important part of a product, and branding can add value
of consumers”. to a consumer’s purchase.
Everything is branded

Services

Physical goods

Retailers & Distributors

Organizations

Online products

Geographic
locations
Sports, arts & entertainment
People

Ideas Causes
3. Packaging

• Packaging involves designing

and producing the
container or wrapper for a product.

• Traditionally, the primary function of the package was to hold

and protect the product.

• In recent times, however, packaging has become an important

marketing tool as well.
 Continue

• Today
• From attracting, attention to describing the product to
making the sale
- “The 5th P”
- Marketing tool (self services, consumer affluence, i.e.
willing to pay more for convenience, appearance, prestige of
better packs, image, innovation opportunities, Reinforce
positioning, Competitive advantage)
- Positioning
- Customer convenience
- “Green” packaging
- Product safety
4. Labeling and
logos
• It identifies the product or brand.
• The label also describe several things about the
product
• Who made it, where it was made, when it was
made,
• its contents, how it is to be used, and how to use it
safely.
 5. Product Support
Services
• Customer service is another element of product
strategy.
• A company’s offer usually includes some support
services, which can be a minor part or a major
part of the total offering.
• Support services are an important part of the
customer’s overall brand experience.
• Keeping customers happy after the sale is the
key to building lasting relationships.
• A group of products that are
closely related because they
function in a similar manner, are
sold to the same customer
groups, are marketed through the
same type of outlets, or fall
within given price ranges.
• The major product line decision
involves product line length—the
number of items in the product
line.
• The line is too short if the
manager can increase profits by
adding items; the line is too long
if the manager can increase
profits by dropping items.
Product Line Decision (cont…)
 Product Line Decision (cont…)

A company can expand its product line in two ways: by line filling or line
stretching.
• Product line filling- involves adding more items within the present range of the line.
• There are several reasons for product line filling:
• reaching for extra profits, satisfying dealers,
• using excess capacity,
• being the leading full-line company, and
• plugging holes to keep out
competitors.
• However, line filling is overdone if it results in cannibalization (eating up sales of the
company’s own existing products) and customer confusion.
• The company should ensure that new items are noticeably different from existing ones.
Product Line Decision
(line filling cont…)
Product Line
Decision (Cont...)
• Product line stretching -
occurs when a company lengthens its
product line beyond its current range.

• Increasing the number of products

within an existing product range with
similar products that have additional or
different features.
 An organization with several product lines has a product mix.
A product mix (or product portfolio) consists of all the product lines
and items that a particular seller offers for sale.

For example apple inc. divides its overall product mix into five major
lines: Mobile phones, Smart watches, Home appliances, computers
and TV
The set of all product lines and items that a particular seller offers for sale.
 Product Mix Dimensions

A Company’s Product Mix has Four Important Dimensions

Width The number of different product lines the company carries, i.e. Baby Care, Food items, Health care,
Cleaning

Length The total number of items company carries within its product lines

Dividing the total length by the number of lines

Average Length

Depth The number of versions offered of each product in the line

Consistency How closely related the various product lines are in end use, production requirements,
distribution channels or some other way
Task:
Briefly explain product mix dimensions using a company of your choice.
Service Marketing
• Any activity or benefit that one party can offer to
another that is essentially intangible and does not
result in the ownership of anything tangible

• Services have grown dramatically in recent years.

• E.g. accounting, banking, cleaning, consultancy, education,
insurance, expertise, medical treatment, etc.
 Service Marketing Triangle
Achieving excellence in services marketing: Three aspects of Marketing In Service
Industries

Company

Internal External
Marketing – Marketing – pricing,
training, motivating Distributing, promoting
employees Services

Employees Interactive Customers

Marketing- employees
skills
In serving the clients
Additional 3Ps for Services
 People
▪ Interactions between customers and sales contact personnel strongly influence
customer perceptions of service quality
▪ The right customer-contact employees performing tasks well
• Job design
• Recruiting
• Training
• Motivation

▪The right customers for firm’s mission

Contribute positively to experience of
other customers
Possess—or can be trained to have—
needed skills (co-production)
Can shape customer roles and manage
customer behavior
 Process
▪ Process is the delivery and operating systems of procedures, mechanisms and
flow of activities which services are consumed

▪ Process involves choices of method and sequence in service creation and

delivery

▪ Badly designed processes waste time, create poor experiences, and

disappoint customers
 Physical Environment
▪ Design servicescape and provide tangible evidence of service
performances

▪ Create and maintain physical appearances

• Buildings/landscaping
• Interior design/furnishings
• Vehicles/equipment
• Staff grooming/clothing
• Sounds and smells
• Other tangibles

▪ Manage physical cues carefully can have profound impact on customer

impressions
Products and Services

Pure
Intangible
Pure
Tangible

Pure tangible Hybrid Service

good offer Dominated offerings
 Marketing Mix: Pricing
•After product, pricing plays a key role in the
marketing mix.

•Only “P” in Marketing Mix generate revenue

•Setting the right price is one of the marketer’s

most difficult tasks.
 Marketing Mix: Pricing cont…

•Pricing as a Trigger for First impressions

•Most flexible element in the mix

•Pricing as a Key to Sales Promotions

 The amount of money charged for a product
or service.

OR

the sum of the values that customers

exchange for the benefits of having or using the
product or service.
 Objectives of Pricing cont…
Survival
- The foremost Pricing Objective of any firm is to set the price that is optimum
and help the product or service to survive in the market.

- Each firm faces the danger of getting ruled out from the market because of the
intense competition, a mature market or change in
customer’s tastes and preferences.

- The New Firms entering into the market adopts this type of pricing objective.
Objectives of - Many firms try to maximize their current profits by
estimating the Demand and Supply of goods
Pricing (cont…) and services in the market.
- Many substitutes available to fulfill that demand.
Maximizing the
- Higher the demand higher will be the price
current profits: charged.
Eg: Seasonal supply and demand of goods and
services
 Objectives of Pricing cont…

Capturing huge market share

- Many firms charge low prices for their offerings to capture
greater market share.

- The reason for keeping the price low is to have an increased sales
resulting from the Economies of Scale.
 Objectives of Pricing cont…

Market Skimming
- High price for the product and services offered by the firms
which are innovative, and uses modern technology.

- The prices are comparatively kept high due to the high cost of
production incurred because of modern technology.

- Eg: Mobile phones, Electronic Gadgets, etc.

 Objectives of Pricing cont…
Product–Quality Leadership
- Many firms keep the price of their goods and services in accordance
with the Quality Perceived by the customers.

- Generally, the luxury goods create their high quality, taste, and status
image in the minds of customers for which they are willing to pay high
prices.

- Luxury cars such as BMW, Mercedes, Jaguar, etc. create the high quality
with high-status image among the customers.
 Major Pricing Strategy

Pricing strategy means

“The amount in money which something is offered
sale”
Customer perceptions of the product’s value set the
ceiling for its price.
If customers perceive that the product’s price is greater than its value, they will not buy the product.

Likewise, product costs set the floor for a product’s price. If the company prices the product below its
costs, the company’s profits will suffer.

pricing strategy should reflect your product’s positioning in the market and the resulting price should cover the
cost per item and the profit margin.
Considerations in Setting Price
• Customer Value-Based Pricing
• Cost-Based Pricing
• Competitor-Based Pricing
 • Buyers’ perceptions of value as the
Major key to pricing.

Pricing • Value-based pricing means that the

marketer cannot design a product
Strategy and marketing program and then
set the price.
cont…
Effective customer-oriented pricing
• Price is considered along with all
involves understanding how much value other marketing mix variables before
customers place on the benefits they
received from the product and setting a the marketing program is set.
price that captures that value
Value based pricing Vs Cost based pricing
 Customer Value Based Pricing
(cont…)
• It refers to offering the right
combination of quality and good
Major Pricing service at a fair price – fair in terms
Strategy cont… of the relation between price and
delivered customer value.

• Customer value includes Quality,

Reliability, Durability, Services
Customer Value Based Pricing (cont…)
 Value Added (perceived
Example:
value)Pricing
Customer/Value Attaching value added $90,000
Based Pricing features and services to 7,000 extra durable
differentiate a company’s 6,000 reliability
offer and charging higher 5,000 service
2,000 warranty
prices. $110,000

Good Value Pricing

Offering just the right combination of quality and good service at a fair price.
 Major Pricing Strategy cont…
Cost – Based Pricing
Cost-based pricing involves setting prices based on the
costs of producing, distributing, and selling the
product plus a fair rate of return for the company’s
effort and risk.

A company’s cost may be an important element in its

pricing strategy.
General Pricing Approaches:
Cost-plus pricing or Markup Pricing

• Adding standard markup to the cost of the product

Break-even pricing or target return pricing

• The firm sets a Price at which it will break even or make the target return on the costs
of making and marketing a product.
• A cost based pricing method Neglect demand and competition

desired return * invested capital

= unit cost +
expected unit sales
Task:
Target return pricing

Example:
Unit cost Rs. 16
Total investment Rs. 01 million (1000000)
Expected sales 50 000 units
Wants to set a price to earn a 20 percent ROI
 Major Pricing Strategy cont…
Competition–Based Pricing
• Competition-based pricing involves setting prices based on
competitors’ strategies, costs, prices, and market offerings.

• Consumers will base their judgments of a product’s value on

the prices that competitors charge for similar products.
Competition-Based Pricing
 use competitors’ price as reference Going Rate Pricing
⚫ Firm benchmarks on competitive price

 Sealed-Bid Pricing
⚫ Sealed bid pricing is the process of offering to buy or sell products at prices designated in sealed bids.
... The highest bidder gets the lot. On the supplier side, contractors often bid on different jobs and the
lowest bidder is awarded the job.
 External factors
Internal factors
•Nature of the market and
•Marketing objectives Pricing demand
•Marketing strategy decisions •Competition
•Costs
•Other environmental factors
•Organizational
(economy, resellers,
considerations
government)
 New Product Pricing Strategy
Market-Skimming Pricing Setting a high initial
prices to skim maximum revenues layer.

Market-Penetration Pricing set a low initial

price to penetrate the market quickly to attract a large
number of buyers quickly and win a large market
share quickly
Set of interdependent organizations
involved in the process of making a
product or service available for
use or consumption by the
consumer or business user.

91
 Place / Distribution
Channel

Availability of the product at Placement decisions include:

the right place, at the Placement, Distribution
channels, Logistics, Inventory,
right time and in the right Order processing, Market
quantity is crucial in coverage and selection of
placement decisions. channel members.
 Why Should
93
Intermediaries be used

Lack of Situations where

Lack of
financial direct marketing
necessary skills
resources is not feasible

Improve
distribution
efficiency
Types of Consumer Marketing Channels
Building good Customer relationship
calls for more than just developing a good product,
pricing it attractively and making it available to target
customers.

Companies must also engage consumers and

communicate their value propositions to customers.
Marketing Communications
Marketing Promotions/Communications are
the means by which a firm attempts to
inform, persuade, and remind
consumer – directly or indirectly –
about the products and brands they sell.
Promotional Mix

Advertising

Sales Promotions

Public Relations

Personal Selling

Direct Marketing