The Marketing Mix - MrB-business

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Transcript The Marketing Mix - MrB-business

The Marketing Mix
Introducing the Topic
Read the Case Study on Page 290 and
answer the questions on page 291.
The Marketing Mix
The Four P’s
The Four P’s
The four P’s make up the marketing strategy
for an organization, and they need to be
carefully considered when making marketing
decisions, because if all of your marketing
collateral is not consistent it will lead to
confusion in your market place around your
product. I.e. if you promote your product as a
luxury item and yet price it cheap?
The Customer and The Four
This is a new approach to marketing but one
that is important as it reminds the marketer
and the firm that the customer is at the
forefront of there marketing.
 Customer solution
 Cost to customer
 Communication with Customer
 Convenience to customer
Customer Relationship
CRM – Using Marketing activities to establish
successful customer relationships so that
existing customer loyalty can be maintained.
Building relationships with your customers is
crucial as it will mean repeat business and
good Word of mouth, it is far more expensive
to continually search for new customers.
Effectively marketers will build databases on
every customer. (age, income, preferences)
thus targeting directly to you.
The First P…. Product
The product is key in the mix as this is what
the business sells, it needs to meet the needs
of the consumer in terms of quality, durability,
performance and appearance.
it doesn’t matter what you do if your product
isn't quality consumers will not purchase it,
once your product has a bad reputation it is
hard to bring it back.
Products have a physical existence i.e. car
but it also refers to services hairdressers etc.
New Product Development – is also critical
to business while this is formally done by
engineers, managers and scientists it is also
important that the marketing team get
involved as they can provide the information
as to whether the consumer will actually buy
the product.
Product and Brand
The product is important as it is what
the company actually sells, but having
a recognizable Brand will differentiate
your products from your competitors.
the consumers will often choose based
on brand.
Product Positioning
Positioning refers to how the marketer place
s there product in the market in relation to
We use market mapping to work out where a
niche might me in the market and what
consumers currently perceive of the product
in the market. Ie price, quality, materials
used, image etc.
Market Map
In your books draw a market map for Corn
Chips? (use these products Home brand,
Doritos, Corn Tapas, Bluebird Corn Chips
and others)
Product Life Cycle
The pattern of sales recorded by a product
from launch to withdrawal from the market.
Launching a product or updating an existing
one is crucial to getting an edge over your
Businesses often lose sales or market share
because they don’t move with there market
while the competitors do.
Life Cycle Diagram
Product Life Cycle
Introduction – Product introduced to the
market sales are traditionally low as
consumers are slowly made aware of it.
Growth – once the product has gained a
reputation in the market the sales will start to
improve this is the growth stage it doesn’t last
forever. Reasons such as new competitors,
technology and consumer tastes and
preferences changing.
Product Life Cycle
Maturity or saturation – Sales start to fall they wont
decline altogether but they wont increase at a rapid rate
as most consumers already have the product. I.e. sport
team shirts, cell phones, game consoles. Hence the
companies continually update there products too ensure
consumers keep buying.
Product Life Cycle
Decline – Sales are falling at a
rapid rate, this is most likely as a
result of the product becoming
obsolete or new competitors have
entered the market with a better
version. Sometimes in this phase
marketers will try an extension
strategy new packaging,
developing a new market or a
fresh advertising campaign to
prolong the products life. I.e. the
slim version of the PS1,2 and 3
Uses Of the Product Life Cycle
Assisting with the planning of marketing
mix decisions – Marketers need to consider
each stage carefully as it will assist in making
the right decisions about your product, price,
promotion and place. At what stage should
we lower our price? When should we make
alterations to our product? When is
advertising likely to be the most important?
Uses Of the Product Life Cycle
Identifying how cash flow might depend on the
PLC – Cash flow is important to any business to be
able to understand the link between cash and the
PLC is important. In the early stages cash flow is
likely to be low as you are spending money on
promoting your product and sales are slow, as the
product matures your cash flow will improve as
sales will be high and promotional costs down,
during the decline phase cash flow will be dropping.
Uses Of the Product Life Cycle
Identifying the need for a balanced
product portfolio – Making sure as one of
your products decline others are being
developed so that your cash flow remains
Product Life Cycle - Evaluation
This another part of the Marketing Managers
tool kit, when analyzing the success of the
marketing department.
Of course you cant predict the future of
products sales because the business
environment is changing so rapidly,
consumers tastes, economic and technology
The PLC will be used in conjunction with
sales forecasts and management experience.
Marketing Mix
The Second P…..Price
Pricing has a
huge impact on
the sales of a
product, get this
wrong and all
your hard work on
development and
research can be
Price Elasticity of Demand
Measures the responsiveness of demand
following a change in price.
This concept can be illustrated either in a
demand curve or by using a mathematical
The formula is the following
% change in Quantity demanded/% change
in price
For example if the price increased from $4 to
$5 and Demand fell from 300 units per week
to 270 units what is PED?
Step 1 Calculate the % Change in Price = $1/4
= 25%
Step 2 Calculate the % Change in Demand =
30/300 = 10%
Step 3 Use PED formula = 10/25 = 0.4
What does that mean? That demand
changes by 0.4% for every 1% change in
Basically consumers do not respond greatly
to a change in price. So if you drop the price
your revenue will drop also and not increase.
Factors that determine
How Necessary the product is – if the
consumers see the product as a need price
changes wont effect there consumption i.e.
How Much Competition exists – the more
people in the market the greater amount of
choice meaning if the price increases in one
brand consumers will quickly move i.e. Milk
Factors that determine
Customer Loyalty – if the product has a very good
brand image i.e. Coke, McDonald's etc then
regardless of price changes consumers will still
NOTE: all businesses try to create brand loyalty
through compelling marketing campaigns.
 Consumers Income – A cheap product that takes
up small amounts of consumers incomes then price
changes wont make a difference ie matches
PED - Evaluation
PED has three main limitations.
It assumes that nothing else has changed, so if you
drop your price it will increase sales. but there may
be other factors that contributed to the increase in
The calculation becomes outdated quickly as the
business environment is forever changing and
consumers behavior is changing rapidly.
It is hard to calculate, where do you get the data
from? Is the data old?
How do Businesses determine Price?
Costs of Production – for a business to
make a profit they must cover all costs,
including all variable and fixed costs.
Competitive Conditions in the market –
can you dictate the market price because you
have a monopoly, or do you need to match
the market price of your competitors.
Competitors Prices – you generally need to
set your price similar to your competitors in
order to compete unless your USP is
Objectives – if your objective is to be a
premium product you will set your pricing
New or Existing product – has a market
price been established or can you create a
new price point.
Price Methods
Cost Based Pricing
Mark Up Pricing – this method is very
common when selling to retailers. You take
the cost of the price and add a certain mark
up to it. I.e. 45%. Often it will depend on the
popularity of the product/service and or the
amount of competition within the market.
Target Pricing – setting a price based on
meeting a certain target of sales, that will give
a desired return to the owners.
Cost Based Pricing
Full Cost (Absorption) – Setting a price
based on the full cost fixed and variable and
then adding a fixed profit margin. Depending
on your range of products this method can be
difficult to use ie how can you allocate all
fixed costs?
Contribution Cost (Marginal) – Setting a
price based on the variable costs of the
product in order to make a contribution to the
fixed costs and profit.
Competition Based Pricing
Businesses will base its price on that of the
competition. This is to ensure that the
consumer cannot make a decision based
solely on price. Also companies may not want
to enter a price war, petrol stations are an
example of this.
Also there is a danger of deliberate price
undercutting, to eliminate smaller
Competition based Pricing
Perceived value pricing – this is common in
markets where the good is considered
luxurious and off good value. Such as Ferrari
cars or Rolex watches, because of the
perceived value customers are willing to
purchase at a higher price.
Price Discrimination – this is where you can
charge different prices to different consumer
groups. I.e. Bus company's – different groups
different pricing i.e. students, elderly etc
New Product Pricing
Penetration Pricing – Setting a low price in
order to enter the market and generate large
sales quickly. Often supported by promotion.
Market Skimming – Setting a high price for a
new product because of the products
uniqueness or differentiation from similar
products. Eg Pharmaceutical firms.
How to make the right
It can be difficult for marketers to decide on a
price for the product as there are many
factors to consider when pricing your product,
how many competitors that are in the market,
what the consumers are willing to pay, what
your product stands for etc.
Pricing Decisions
Different types of Markets – the easier it is
to join an industry the more competitive
market conditions are likely to be.
Perfect Competition – when all businesses
are price takers, they all must charge the
same price.
Monopoly – Single sellers that are price
makers, its difficult for others to enter the
market due to barriers to entry.
Price wars to gain market share – normally
not the best strategy as eventually smaller
firms could get forced out of the market, and
mean a loss of profit. Eg Milk prices in
Non Price Competition – Promotions and
advertisements around the benefits of the
company's product or service.
Collusion – Not common as it is considered
illegal. This is where firms collude with each
other to keep the price at a certain level to
ensure profits.
Loss Leaders – selling a product/service at a
low price sometimes below cost to ensure
other products are purchased within your
Psychological pricing – pricing a product so
the consumer doesn’t think its two expensive.
Ie instead of $1000 we will see a price off
$999.95. also refers to product value and
image if consumers think a product is quality
and expects to pay a high price then
suppliers will set the price high regardless of
Because of the complexity of pricing a
product you cant just set one strategy for all
as it depends on the market conditions for
each product. Marketers have a responsibility
to there organization to ensure they know
what the consumers expect to pay for there
product (market price).
Marketing is all about consistency of image
and branding, so when considering how to
price a product you need to ensure it fits with
the overall objective of the organization. So
no confusion is had in the market place over
your image. Low pricing on a good that is
perceived of high value would be damaging
to the brand.