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The Marketing Mix

The Marketing Mix


Product
CHARACTERISTICS

Primary characteristics (Standard)

Core benefits: in common with its competitors

Auxiliary characteristics (Optional)

features and benefits: unique to the product.


LEVELS OF PRODUCT

• The core product benefits;

• The actual product benefits;

• The augmented product benefits.


PRODUCT LIFE CYCLE
 Introduction phase:
- The product’s sales grow slowly

- The profit is small or negative

 The growth stage:

- Sales increases rapidly

- Profits begin to grow, but

- Competition enters the market


 The maturity phase:
- The promotional spend eases off

- Production economies of scale

become established
- Competitors have entered the

market
 The decline phase:

- The product is losing market share


and profitability rapidly.
Analyzing Current SBU’s:
Boston Consulting Group Approach
Relative Market Share
High Low
Market Growth Rate

Stars Question
Question Marks ?
High

Marks
• High growth & share ••High
Highgrowth,
growth,low
lowshare
share
• Profit potential ••Build
Build into Stars orphase
into Stars or phaseout
out
• May need heavy ••Require
Requirecash
cashto
tohold
hold
investment to grow market
marketshare
share
Cash
Cash Cows
Cows Dogs
Dogs
••Low • Low
Lowgrowth
growth&&share
Lowgrowth,
growth,high share ••Low
highshare share
Low

••Established, profit potential


successful • Low profit potential
Established,successful
SBU’s
SBU’s
••Produce
Producecash
cash
Product
 Methods used to
improve/differentiate
the product and increase sales
or target sales more effectively
to gain
a competitive advantage e.g.
 Extension strategies

 Specialised versions

 New editions

 Improvements – real or

otherwise!
 Changed packaging

 Technology, etc.
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The Marketing Mix
 The tools available to a business to gain the
reaction it is seeking from its target market in
relation to its marketing objectives
 7Ps – Price, Product, Promotion, Place, People,
Process, Physical Environment
 Traditional 4Ps extended to encompass growth of
service industry
Price
Setting Initial Product
Prices
Market
Market Skimming
Skimming Market
Market Penetration
Penetration

> Setting a High Price for > Setting a Low Price for
a New Product to Skim a New Product in Order
Maximum Revenues to Attract a Large
from the Target Market. Number of Buyers.
> Results in Fewer, More > Results in a Larger
Profitable Sales. Market Share.
> Intel’s $1,000 Chip > Wal-mart
What is Cost-Plus Pricing
and Why
isAdding
it Popular?
a Standard Markup to the Cost of the Product.

Sellers
SellersAre
AreMore
More Minimizes
Minimizes
Certain
CertainAbout
About Price
Price
Costs
CostsThan
Than Competition
Competition
Demand
Demand

Perceived
Perceived
Fairness
Fairnessto
to
Both
BothBuyers
Buyers
and
andSellers
Sellers
Types of Cost Factors
that
Affect (Overhead)
Pricing
Fixed Costs Variable Costs

Decisions
Costs that don’t
vary with sales or
Costs that do vary
directly with the
production levels. level of production.
Executive Salaries Raw materials
Rent

Total
TotalCosts
Costs
Sum
Sumof
ofthe
theFixed
Fixedand
andVariable
VariableCosts
Costsfor
foraaGiven
Given
Level
Levelof
ofProduction
Production
Product Mix Pricing
Strategies Product
ProductLine
Setting
LinePricing
SettingPrice
Pricing
PriceSteps
Steps
Between
BetweenProduct
ProductLine
LineItems
Items
i.e.
i.e. Lawnmowers
Lawnmowersat at$299
$299&&$399
$399
Optional-Product
Optional-ProductPricing
Pricing
Pricing
PricingOptional
OptionalororAccessory
AccessoryProducts
Products
Sold
SoldWith
WithThe
TheMain
MainProduct
Product
i.e.
i.e.Car
CarOptions
Optionssuch
suchasasaaCD
CDplayer
player
Product
Product Captive-Product
Captive-ProductPricing
Pricing
Pricing
PricingProducts
ProductsThat
ThatMust
MustBe
Mix
Mix Used
Be
UsedAlong
AlongWith
WithThe
TheMain
MainProduct
Product
Pricing
Pricing i.e.
i.e.Razor
RazorBlades,
Blades,Film,
Film,Software
Software
Strategies
Strategies By-Product
By-ProductPricing
Pricing
Pricing
PricingLow-Value
Low-ValueBy-Products
By-ProductsTo To
Get
GetRid
Ridof
ofThem
Them
i.e.
i.e. From
FromChemicals,
Chemicals,Lumber
LumberMills,
Mills,Zoos
Zoos
Product-Bundle
Product-BundlePricing
Pricing
Bundles
BundlesOf OfProducts
ProductsSold
Sold
Together
TogetheratataaReduced
ReducedPrice
Price
i.e.
i.e.Season
SeasonTickets,
Tickets,Computer
ComputerMakers
Makers
Price-Adjustment
Strategies
• Adjusting Prices for
Psychological Pricing Psychological Effect.
• Price Used as a Quality
Indicator.
• Reference Prices i.e.
Clothing.

• Temporarily Reducing Prices


Promotional Pricing to Increase Short-Run Sales.
• i.e. Loss Leaders, for
Special-Events, Cash Rebates
Price
 Pricing Strategy
 Importance of:
 knowing the market
 elasticity
 keeping an eye
on rivals

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Price Elasticity of
Demand
Price
A. Inelastic Demand -
Demand Hardly Changes With
a Small Change in Price.
P2
P1

Q2 Q 1
Quantity Demanded per Period
B. Elastic Demand -
Demand Changes Greatly With
a Small Change in Price.
Price

P’2
P’1

Q2 Q1
Quantity Demanded per Period
Promotion
The Promotion Mix

 The promotion mix is the specific blend of advertising,


sales promotion, public relations, personal selling, and
direct-marketing tools that the company uses to
persuasively communicate customer value and build
customer relationships.
 Major Promotion Tools
– Advertising
– Sales promotion
– Public relations
– Personal selling
– Direct marketing

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The Promotion Mix

Major Promotion Tools: Advertising


 Advertising is any paid form of non-personal
presentation and promotion of ideas, goods, or services
by an identified sponsor.
– Broadcast
– Print
– Internet
– Outdoor

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The Promotion Mix
Major Promotion Tools: Sales promotion
 Sales promotion is the short-term incentives to encourage the
purchase or sale of a product or service.
– Discounts
– Coupons
– Displays
– Demonstrations
– Samples
– Cash refund
– Price packs
– Premium

14-24
The Promotion Mix
Major Promotion Tools: Public relations
 Public relations involves building good relations with
the company’s various publics by obtaining favorable
publicity, building up a good corporate image, and
handling or heading off unfavorable rumors, stories, and
events.
– Publicity - Press releases
– Sponsorships
– Special events
– Web pages

14-25
The Promotion Mix
Major Promotion Tools: Personal selling
 Personal selling is the personal presentation by the
firm’s sales force for the purpose of making sales and
building customer relationships.
Sales presentations
Trade shows
Incentive programs

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The Promotion Mix
Major Promotion Tools: Direct marketing
 Direct marketing involves making direct connections
with carefully targeted individual consumers to both
obtain an immediate response and cultivate lasting
customer relationships – by using direct mail, telephone,
direct-response television, e-mail, and the Internet to
communicate directly with specific consumers.
Catalog
Telemarketing
Kiosks
Direct mail

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Promotion

 Strategies
to make the consumer
aware of the
existence of a product

or service
 NOT just advertising
Promotion Mix Strategies
 Push strategy involves pushing the product

to the consumers by inducing channel


members to carry the product and promote it
to final consumers.
Used by B2B companies

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Promotion Mix Strategies
 Pull strategy is when the producer directs its

marketing activities toward the final


consumers to induce them to buy the product
and create demand from channel members.
 Used by B2C companies

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Place
Place

 The means by which products and services


get from producer
to consumer and where they can be
accessed by the consumer
 The more places to buy the product and the
easier it is made to buy it, the better for the
business (and the consumer?)
Number of Channel Levels
Channel Level - Each Layer of Marketing Intermediaries that Perform
Some Work in Bringing the Product and its Ownership Closer to the
Final Buyer.
0-level channel – Direct
Producer
Producer Consumer
Consumer

1-level channel
Producer
Producer Retailer
Retailer → Consumer
Consumer

2-level channel

Producer → Wholesaler
Producer Wholesaler Retailer
Retailer → Consumer
Consumer

3-level channel

Producer → Wholesaler
Producer Wholesaler→ Jobber
Jobber → Retailer
Retailer → Consumer
Consumer

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People
 SWOT is an acronym for strengths,
weaknesses, opportunities, and threats

 A SWOT analysis is a method of studying


organizational resources and capabilities to
assess the firm’s strengths and weaknesses
and scanning its environment to identify
opportunities and threats

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 SWOT
2-38
Analysis
People
 People represent the business
 The image they present can be important
 First contact often human – what is the lasting image they
provide to the customer?
 Extent of training and knowledge
of the product/service concerned
 Mission statement – how relevant?
 Do staff represent the desired culture
of the business?
Process
Process
 How do people consume services?
 What processes do they have to go through to acquire
the services?
 Where do they find the availability
of the service?
 Contact
 Reminders
 Registration
 Subscription
 Form filling
 Degree of technology
Physical Environment
Physical Environment
 The ambience, mood or physical presentation of the
environment
 Smart/shabby?
 Trendy/retro/modern/old fashioned?
 Light/dark/bright/subdued?
 Romantic/chic/loud?
 Clean/dirty/unkempt/neat?
 Music?
 Smell?
The Marketing Mix

 Blend of the mix depends upon:


 Marketing objectives
 Type of product
 Target market
 Market structure
 Rivals’ behaviour
 Global issues – culture/religion, etc.
 Marketing position
 Product portfolio
 Product lifecycle

 Boston Matrix