The Marketing Mix

What is the marketing mix?

Combination of key activities to sell a product 4 elements:

Must consider all 4 elements in marketing strategy

Price Product Place Promotion

What is a product?

Intangiblefeatures

Tangiblefeatures

Branding

Packaging

Positioning

Product

Product

A product is a good, a service, an idea or any combination of the three which can be offered in an exchange

Not just an item on a shelf in a shop Consists of tangible and intangible features

Ipod: a good Advertising campaign for Apple Ipod: an idea Sales assistant in Myer who sells you the Ipod: a service

total product concept

Total product concept

The product is a combination of tangible & intangible features

Intangibles: ServiceSafetyWarrantyPrestigeConvenienceDelivery

Total product concept

How do consumers choose between similar, mass-produced products?

Intangibles:Reputation Advice Financing WarrantyMaintenance

Product positioning

Product imageHow a customer views the product

compared to competitionSony vs Teac

Nike trainers vs Target-brand trainers

Evoking an image of quality

Branding

names and images used to identify a product and distinguish it from competitors

Brand = logo and/or name

Branding

Powerful marketing toolLeverage for emerging productsExpected level of quality

Packaging

1. Functional – protects and stores product2. Branding – attracts consumer,

communicates information

Customers are prepared to pay for good quality packaging, even if this adds to the cost of the product.

Product life-cycle

Minimal product variation, basic quality

Increased product variation, improved quality

Maximum product variation, excellent quality

Few product variations, drop in quality

Pricing

The next of the 4 Ps

What is price?

Price is the value a product holds in monetary exchange

Businesses use price to: make a profitcreate a brand push a competitor out of market

Price

Plays an important role in influencing consumer choice

Used by consumers to measure quality – price creates perceptions of quality.Mercedes

Product life-cycle - Price

High price to recover costs. Or low to gain market share.

Price softens: gain popularity and sales rise

High price competition

Scarce: rising prices. Saturated: falling prices.

Cost-based methodMarket-based methodCompetition-based method

Methods of pricing

Amount added to cost of producing the product

Profit Margin: % added on top of cost priceFixed Profit Amount: specific $ return added

to cost price.

Cost-based method

Determined by market forces of demand and supply

Impossible to predict what the market price for a new product will be.

Businesses continually alter prices to stay in touch with market forces

Market-based method

Similar mass-produced productsPrices set according to competitors’

products – same, higher or lowerObjective: to gain market shareHigh degree of intangible product

differentiation Xbox, Playstation

Competition-based method

Pricing strategies

1. Price skimming New products Suppliers aim to sell to the

top end of the market Set price at a high level and

reduce over time Only successful with little or

no competition

Xbox first introduced at $999.95 in Feb 07.

Now available for $399

Pricing strategies

2. Penetration pricing Introductory low price

compared to competitors Gain sales quickly and

public/media interest Encourage trial and hope

for repeat purchase

Risks Enter market at a

loss hoping for long term revenues

Customers get used to low price and refuse to buy when price rises

Low price may create perception of low quality

Pricing strategies

3. Loss leader Price set so low that

competitors have to follow for fear of losing significant market share

Attracts customers into a store in the hope they will purchase other full-priced products

Pricing strategies

4. Price points Used when one base product/service

reaches numerous target markets. Base price set, but

additional features offered.

Higher prices charged for extra features Suzuki Swift currently advertised

at $15,990. Optional Extras include tinted windows, metallic paint, auto gearbox, DVD player, rear spoiler, alloy wheels

Place – the next P…

Getting the product to the customer

Price Product Place Promotion

Place

How does a product or service get to customers in the right place and at the right place?

Another word for place: DistributionPhysical distributionDistribution channels

Physical Distribution

Direct: manufacturer consumerManufacturer direct to consumer

Indirect:manufacturer retailer consumer

ormanufacturer wholesaler retailer consumer

Intermediaries involved in distributing products from manufacturer to consumer

Purchase goods from manufacturers to sell on to retailers. Store goods in warehouses. Deliver stock to retailers.

Sell to the end customer. Department stores, supermarkets, discount shops, franchises, convenience stores, market stalls

Physical Distribution

Purchase crate of apples directly from farm…

DIRECTmanufacturer consumer

Physical Distribution

Purchase a bag of apples from Elmer’s Fruit Barn…

INDIRECTmanufacturer retailer consumer

Physical Distribution

Distance between manufacturer and consumer

What are the costs involved?Convenience for customersIs the channel appropriate to the product?

Product life-cycle - Place

Sparse coverage

Good coverage

Wide coverage

Sparse coverage

Product is available through numerous outlets.

Usually used for low margin, high volume products and everyday purchases

Aim: Maximise sales through maximum market exposure

Channels – Intensive distribution

Supermarket

Corner store

Convenience store

Product is available through selected outlets.

This distribution choice provides greater control over the quality of service provided at point of sale.

Mambo clothing – where is it available?

Channels – Selective distribution

Product is only available through a limited number of outlets.

This choice of distribution is vital in the creation of a status or prestige related product.

Bose speakers – only 1 store in Brisbane, limited stock in Myer/David Jones

Ferrari Cars – can you buy a Ferrari in Brisbane?

Channels – Exclusive distribution

Promotion

Getting the word out about your product or service

Price Product Place Promotion

Promotion is the act of communicating with markets about a product or service.

Introduce Create interest Reinvigorate

Advertising Public relations Sales promotion Direct Marketing

Promotion

Product life-cycle - Promotion

Create primary demand & awareness

Develop selective demand

Heavy promotion spending. Focus on intangibles

Minimal promotion

Advertising

Paid non-personal communication about products and services.

Relatively low cost compared to other forms of promotion

Hit and miss, not personal Easy for consumers to ‘switch off’

Advertising - media

Advertising campaigns use media channels to communicate their messages

Examples: TV, radio, newspapers, magazines, billboards, direct mail,

yellow pages, internet, email, mobile phone Choosing a media channel dependant on your target

market

PR is focused on improving relationships between a business and its stakeholders, and improving the business’ image.

Serves 2 purposes: Free marketing tool through the general media –

increase sales, enhance image/reputation, create word-of-mouth.

Damage control – improve business’ image in the wake of negative public opinion, and release correct information to clarify facts.

Public Relations

Sales promotion

Enticing customers to purchase a product or service by offering an added extra.

Free samples, enter competition, special prizes and discounts, coupons, point-of-sale display.

Media channels: Supermarkets, magazines, TV programs

Direct marketing

Uses mail, phone or email to directly contact potential customers.

Mail-order catalogues, internet shopping sites,

Promotional staff - hand out leaflets and engage customers

Telemarketing Mailing lists to reach desired customers Very targeted form of promotion