The Marketing Mix

Marketing Defined• Marketing refers to all of the business activities

necessary to establish and maintain positive relationships with one’s customers

• Marketing encompasses each of the steps involved in the delivery of goods and services from producer to consumer

• Ultimate goal of marketing is to sell the products produced by businesses and to effectively manage a business’s brands

• Marketing includes research & development, distribution, advertising, promotion and sales

Marketing Mix

• Most famous phrase in marketing • Sometimes known as the ‘four Ps' • Marketing mix consists of price,

place, product and promotion

The Marketing Mix

The Marketing Mix - Price

• There are many strategies available when pricing a product

The Marketing Mix - PricePremium Pricing• Maintaining an artificially

high price (above equilibrium) whether competition exists or not in order to encourage favourable perceptions among consumers

• Predicated on consumer myth that high price equals superior quality and/or strong reputation

• Also referred to as luxury pricing or prestige pricing

The Marketing Mix - PricePenetration Pricing• Maintaining an artificially low

price (below equilibrium) on newly-introduced goods or services in order to grow market share (share of overall product sales within given time and jurisdiction)

• Once objective is achieved, price is returned to market levels

• Should not be confused with dumping or predatory pricing which refers to pricing goods in foreign markets below cost in order to eliminate domestic competition and establish monopolies

The Marketing Mix - Price

Economy Pricing

• Refers to no frills low-price strategy where production, marketing and distribution costs are kept to a minimum

The Marketing Mix - PricePrice Skimming• Maintaining an artificially

high price (above equilibrium) given lack of competition or due to significant competitive advantage via product differentiation in terms of superior quality or unique product features

• This pricing strategy is unsustainable as higher selling prices and profit margins tend to attract new competitors into the market, thus leading to price declines as supply gradually increases

The Marketing Mix - Place

• Place refers to channels of distribution, or the path through which goods are moved from the manufacturer to the consumer (final user)

• Goods often move through one or several intermediaries along this path, e.g., wholesaler, retailer, importer, agent, etc.

The Marketing Mix - Place

There are several basic channel decisions that must be made by producers:

1. Do we employ direct or indirect channels, i.e., direct to the consumer or indirect via a wholesaler, retailer or agent?

2. Do we employ single or multiple channels to move our goods to the consumer?

The Marketing Mix - Place

The Marketing Mix - Product

• Product refers to goods or services that satisfy consumer needs or wants

• Product may possess unique features related to size, shape, colour, smell, taste, quality, design, material, variety, etc.

• Marketers may increase depth of existing product line or expand number of product lines

The Marketing Mix - Product

Product Life Cycle –Introduction Stage

• During this stage, product is heavily promoted to create consumer awareness

• If product has few competitors, price skimming strategy is employed to maximize profits

• If product has numerous competitors, penetration pricing strategy is employed to maximize market share

The Marketing Mix - Product

Product Life Cycle – Growth Stage

• During this stage, competitors offering similar products are attracted into the market

• Production become more and more profitable due to economies of scale (cost efficiencies resulting from optimal production levels)

• Companies may also form strategic alliances or joint ventures, or simply acquire one other in order to eliminate competition altogether

The Marketing Mix - Product

Product Life Cycle – Maturity Stage

• During this stage, revenues grow at a decreasing rate and eventually stabilize

• Producers attempt to differentiate products via branding by creating a favourable image of one’s offerings in the minds of consumers

• Intense competition and price wars continue throughout this stage

The Marketing Mix - Product

Product Life Cycle – Decline Stage

• During this stage there is a downturn in the market as more and more innovative products are introduced and/or consumer tastes change

• Intense price-cutting occurs and many products are ultimately withdrawn from the market altogether

The Marketing Mix - Promotion

• Promotion refers to the various aspects of marketing communication with the goal of generating positive customer response. Promotion includes paid advertising, public relations, free publicity, direct marketing, personal selling and sales promotions

Promotion – Paid Advertising

• Advertising refers to paid-for promotion of commercial products using a variety of media sources directed towards particular target markets

• Advertising is designed to create favourable image of company products in the minds of consumers

• Examples of paid advertising includes television commercials, radio spots, newspaper and magazine ads and company websites

Promotion – Public Relations

• Most large firms host public relations departments which attempt to manage the image and reputation of not only the products but also the firm itself within the larger community

Promotion – Publicity• Publicity refers to media promotion of

firms and their products that the company did not pay for directly, e.g., newspaper article or televised news report

• Firms may attract either good or bad publicity within the media depending on the media source’s point of view

Promotion – Direct Marketing

• Direct marketing allows firms to communicate directly with their customers (often against their will) and includes telemarketing, junk mail, email spam, online pop-up ads and outdoor advertising such as billboards

Promotion – Personal Selling

• Personal selling (or point-of-sale merchandising) refers to face-to-face salesmanship such as that seen in retail outlets between salesperson and potential customer

• Ultimate goal of personal selling is to either close the deal, upsell or cross-sell to the customer

Promotion – Sales Promotions

• Sales promotions are designed to increase consumer awareness and sales volumes and may include coupons, special events, free samples, contests and premiums or conditional giveaways such as BOGO offers and customer loyalty cards

The Marketing Mix Summary

Marketing Mix – The Two Cs

• The marketing mix also refers to the two Cs: consumers and competition

The Marketing Mix - Consumers

• Marketers must determine the demographic characteristics (e.g., age, gender, income and education levels, etc.) of their target market, or most typical potential consumers

The Marketing Mix - Consumers

• Marketers must offer significant customer value proposition, which refers to the benefits that consumers derive from the use of certain goods and services

The Marketing Mix - Competition

• Marketers must also be cognizant of their direct (similar product) and indirect (discretionary income) competition

The Marketing Mix - Competition

• Marketers must attempt to gain competitive advantage through (i) lower production costs per unit via economies of scale (ii) lower marketing and distribution costs (iii) product differentiation in terms of price, quality and unique features and (iv) brand equity (awareness, loyalty and insistence)

Activity: Put the following products on the Product Life Cycle (PLC)

• CD• DVD• iPhone• iPad• Cell phone• Cigarettes in

North America• Cigarettes in

the developing world

• MS-DOS• Play Station 3• Fax machine• Kit-Kat and Aero

chocolate bars• PC greenest

shopping bag

Activity: Put the following products on the Product Life Cycle (PLC)

Group Activity

• You will be divided into groups of 4• Each group will be assigned a different

company from www.thetimes100.co.uk/

• You are to list and explain the 4 Ps for each company. In addition, identify competitors and describe the typical consumer (target market) according to: income, age, gender, lifestyle, attitudes and beliefs