Marketing Mix

• The marketing mix is the combination of product, price, promotion and place
that a business uses to develop successful goods or services. A business hopes
that the right combination will appeal to their customers, enabling them to
achieve their business objective which is usually to make a profit. Each part of
the mix is equally important.
• The most appealing product in the world is unlikely to be successful if it is not
promoted to its customers correctly, or if it is not made available to its
customers in the right place. Similarly, a business may develop a wonderful
promotion, but have a product that fails to meet the needs of the customers
the promotion is aimed at.
• Students must be able to recognize, analyze and evaluate the marketing mix for
any business presented to them in a case study- as it is central to understanding
a business. They must be able to recognize where there are inconsistencies- e.g.
a high quality product advertised at a low price in a down market publication.
Product
• The product is the service or goods offered by a business. A successful
product will meet the needs of the customers- it should offer the right
combination of features, design and function to appeal to the
customers that the business is aiming for (target market). A business
may use market research to find out more precisely what the
customers are looking for in the product. Customers are essentially
looking for the benefits to them of purchasing a particular product.
These benefits may be tangible- like a car that gets them from A to B,
or intangible- something that enhances their status and feeling of self
esteem. Many businesses will have a range of products to meet more
than one need of their target market or meet the needs of several
target markets.
In developing the right product, you have to answer
the following questions:
• What does the client want from the service or product?
• How will the customer use it?
• Where will the client use it?
• What features must the product have to meet the client’s needs?
• Are there any necessary features that you missed out?
• Are you creating features that are not needed by the client?
• What’s the name of the product?
• Does it have a catchy name?
• What are the sizes or colors available?
• How is the product different from the products of your competitors?
• What does the product look like?
Price
• Price is the amount that a business receives for the product. In
economics, price is determined by the interaction of supply and
demand, but to a business it is more complicated than that. Price
must cover the cost of producing the goods, including direct (e.g. the
raw materials and production costs) and indirect (all the other costs
associated with running the business e.g. Head Office, managers
salaries etc) costs. It must also be low enough to attract sufficient
customers which may mean that it must be comparable with
competitors.
Important questions that you should ask yourself
when you are setting the product price:

• How much did it cost you to produce the product?

• What is the customers’ perceived product value?
• Do you think that the slight price decrease could significantly increase
your market share?
• Can the current price of the product keep up with the price of the
product’s competitors?
Promotion
• Promotion is any activity aimed to raising consumer’s awareness of
the product that is likely to encourage sales. A common mistake is to
see it as just advertising- the ‘promotional mix’ includes many other
activities such as money off coupons, sponsorship and direct selling.
Essentially, it is about providing information about the product to
consumers. An important aim of promotion can be to differentiate
the product from others that are similar. The more that a business
can persuade consumers that their product is unique, the more likely
they are to pay a higher price for it, and remain loyal to it. A
successfully differentiated product can be regarded as a ‘brand’.
In creating an effective product promotion strategy,
you need to answer the following questions:

• How can you send marketing messages to your potential buyers?

• When is the best time to promote your product?
• Will you reach your potential audience and buyers through television
ads?
• Is it best to use the social media in promoting the product?
• What is the promotion strategy of your competitors?
Place
• Place is about how the product gets to the customer. This includes
the place that a consumer actually buys the product- retailer,
internet, mail order, and the distribution channel, i.e. how the
product gets to there. It is a vital part of the mix, without the product
being available to customers in the right quantity and place, the
product will fail. Remember that many businesses sell to other
businesses, and this will require a different distribution system to a
business selling directly to the end customer.
Here are some of the questions that you should answer in
developing your distribution strategy:

• Where do your clients look for your service or product?

• What kind of stores do potential clients go to? Do they shop in a mall,
in a regular brick and mortar store, in the supermarket, or online?
• How do you access the different distribution channels?
• How is your distribution strategy different from your competitors?
• Do you need a strong sales force?
• Do you need to attend trade fairs?
• Do you need to sell in an online store?
 Marketing Mix: Key Issues
Product Life Cycle
• All products go through a series of stages- from its original development to its
eventual end. Some products have a short life, like some films, or model of
mobile phone, whilst others have much longer lives, such as coca cola and
Heinz Beans. Businesses use the concept of the product life cycle to analyze
where their particular products will maximize profits. The 4 stages of the life
cycle are introduction, growth, maturity and decline.
• Business will expect high costs and low returns in the early stages. For a
successful product, sales will continue to grow up to the maturity stage, until
it becomes outdated and sales start to decline. At this point, the business
may adopt an extension strategy like more promotion or new features. The
business might stop any investment in the product, allowing- it to continue
while it’s still profitable, and instead focus on developing a new product.
Boston Matrix
• The product life cycle
allows a business to
analyze the position of
particular products, while
the Boston Matrix allows a
business to analyze its
whole product range. It
categorizes products
according to whether they
are in a market that has
high or low market growth,
and whether it has a high
or low share of that
market.
• A product with a high share of a growing market is a star. These
products should be invested in, in order to maintain their position.
Eventually the market will stop growing and if it maintains its market
share, the product will become a cash cow. This is a product with a high
share of a low growing market. It will require less investment and
should generate profit to invest in the stars or ‘problem children’. The
problem child has a low market share of a high growth market. A
business may feel that with investment in promotion it can become a
star, or it may decide to withdraw from that particular market. The
fourth and last category is the dog. This has a low share of a low growth
market. A business may continue with the product if it is profitable, but
will not invest in it. A business will want to have products in all of the
categories (apart from dogs), to have a balanced portfolio.
Cost Plus Pricing
• This is where a business sets its prices by calculating the cost of the
product, and adding a mark up to it. The cost of the product must
include the direct or variable cost of producing the product (raw
materials, labour costs) added to the indirect or fixed costs of
producing the product (cost of the factory, Head Office). The mark up,
which is the business’s profit on the product, will be a percentage of
the total costs and will depend on the degree of competition and how
much the market will bear. A problem with cost plus pricing is that is
difficult to accurately calculate all costs, and it does not allow for the
fact that a reduction or increase in price may be more profitable,
depending on the price elasticity of demand.
Competitive Pricing
• Competitive pricing is where a business sets its prices according to the
competition. This more likely where there are several competing firms.
If a business charges more than the competition, unless it is able to
persuade customers that it is better than its rivals, it is unlikely to be
successful at charging a higher price. Undercutting a leading brand
could lead to a damaging price war that only the bigger businesses will
survive or result in insufficient profit. This leads to businesses tending to
charge the ‘going rate’ unless they are offering something different e.g.
a local service or higher quality.
• There are several other pricing strategies within competitive pricing
that you should be aware of. These include penetration pricing-
where a business charges a low price at launch to buy a large market
share; price skimming- where a high price is charged at the launch of
a new product (usually high tech) to reflect its scarcity and because
some people will buy it whatever the price; and loss leaders, where
businesses charge below the cost to attract customers in the short
term.
Above the Line Promotion
• This is where mass media is used to promote the business, and so
includes what we generally consider to be advertising. The media is
external to the business and includes TV, newspapers, magazines,
radio, cinema and the internet on which the business pays to run its
advertisement. It is usually aimed at a wide audience but can still be
targeted on the specific target market by using specialist magazines
and placing the advertising during particular programs.
Advertisements can also be targeted on a locality- using local radio
and newspapers. It is less important than it once was, as it has
become easier to target specific markets. It has been said that half of
all advertising is wasted- the problem is knowing which half!
Below the Line Promotion
• This is all other forms of promotion, not involving the use of external
media. It aims to communicate with customers more directly, and is
more within the business’s control. Examples of it include direct
marketing (this can be personalized letters, email, leaflet drops, phone
calls, door to door, sales representatives and pop ups), sponsorship (a
premier league or local football team, sporting event and summer fetes),
sales promotions (money off coupons, discounts etc.), public relations
(for example writing press releases or blogs to create a positive public
image that will be reported in the mass media), viral marketing and
competitions. Below the line promotion is growing in importance as new
technology allows more accurate targeting of customers.
Distribution Channels
• Distribution channels are how the product gets from its manufacturer to the end
consumer. Traditionally, a product goes from the manufacturer to a wholesaler who
sells it to a retailer who then sells it to the consumer. This means that the
manufacturer does not have to distribute their product to many outlets, but can sell it
in bulk to the wholesaler who ‘breaks the bulk’ and distributes the product, with many
other manufacturers products, to the retailer who specializes in selling to consumers.
This is particularly suitable for smaller manufacturers and retailers.
• A more direct route is for the manufacturer to sell their product direct to the retailer
who acts as their own wholesaler and breaks the bulk by distributing to their own
stores. An even more direct route is for the manufacturer to sell directly to the
consumer. Arguably this is becoming easier with internet shopping. In many cases,
Amazon acts as the wholesaler and retailer while never actually holding the product.
Each stage in the channel takes a percentage of any profit in return for the service they
have provided.
 Service Marketing Mix – 7 P’s of
Marketing
• The service marketing mix is also known as an extended marketing mix
and is an integral part of a service blueprint design. The service
marketing mix consists of 7 P’s as compared to the 4 P’s of a product
marketing mix. Simply said, the service marketing mix assumes the
service as a product itself. However it adds 3 more P’s which are
required for optimum service delivery.
• The product marketing mix consists of the 4 P’s which
are Product, Pricing, Promotions and Placement. The extended service
marketing mix places 3 further P’s which include People, Process
and Physical evidence. All of these factors are necessary for optimum
service delivery.
Here on we start
towards the
extended service
marketing mix.
People
• People is one of the elements of service marketing mix. People define a
service. If you have an IT company, your software engineers define you.
If you have a restaurant, your chef and service staff defines you. If you
are into banking, employees in your branch and their behavior towards
customers defines you. In case of service marketing, people can make
or break an organization.
• Thus many companies nowadays are involved into specially getting
their staff trained in interpersonal skills and customer service with a
focus towards customer satisfaction. In fact many companies have to
undergo accreditation to show that their staff is better than the rest.
Definitely a USP in case of services.
Process
• Service process is the way in which a service is delivered to the end
customer. Lets take the example of two very good companies -
Mcdonalds and Fedex. Both the companies thrive on their quick service
and the reason they can do that is their confidence on their processes.
• On top of it, the demand of these services is such that they have to
deliver optimally without a loss in quality. Thus the process of a service
company in delivering its product is of utmost importance. It is also a
critical component in the service blueprint, wherein before establishing
the service, the company defines exactly what should be the process of
the service product reaching the end customer.
Physical Evidence
• The last element in the service marketing mix is a very important element.
As said before, services are intangible in nature. However, to create a better
customer experience tangible elements are also delivered with the service.
Take an example of a restaurant which has only chairs and tables and good
food, or a restaurant which has ambient lighting, nice music along with good
seating arrangement and this also serves good food. Which one will you
prefer? The one with the nice ambience. That’s physical evidence.
• Several times, physical evidence is used as a differentiator in service
marketing. Imagine a private hospital and a government hospital. A private
hospital will have plush offices and well dressed staff. Same cannot be said
for a government hospital. Thus physical evidence acts as a differentiator.
 Case Study

McDonald’s Marketing Mix (4Ps) Analysis

 Case Study

Nivea: Marketing Excellence

NIVEA