The Marketing Mix

Also referred to as the 4Ps

Human Responsibility – 4Ps

Marketing Mix

The balance of product, price promotion and place is the key to products being successful in the market place.

The 4 Ps

• The right

Product

• At the right

Price

• Where

Promotion

is appropriate • And it’s sold in the right

Place

of product it is for the type

• Product • Price • Promotion • Place

The Product

The Product

• An object or a service that is mass produced or manufactured on a large scale with a specific volume of units. A typical example of a mass produced service is the hotel industry. A less obvious but ubiquitous mass produced service is a computer operating system. Typical examples of a mass produced objects are the motor car and the disposable razor.

www.wikipedia.com

The Product

• For a product to be successful it will need to be carefully designed, developed and tested. • Which costs money.

• The product is refined and made ready to be launched to the public.

• A graph of sales can then be plotted over the life of the product, this is called the PRODUCT LIFE CYCLE • X = Time and Y = volume of sales

Product Life Cycle

Can you label each section of a product’s lifecycle?

Maturity Growth Decline Obsolete Introduction Development 1 2 3 4 5

TIME

6

Introduction

• Once a product has been developed by the R&D dept of a firm it is ready to be launched on the market.

• At this point the sales will begin to climb slowly over time, hence the graph rises slowly (slow rate of adoption) • cost of product will be high • sales volume low • no/little competition - competitive manufacturers watch for acceptance/segment growth • There may be losses • demand has to be created by a

marketing strategy

• customers have to be prompted to try the product

Growth

• The sales continue to rise as the public become aware of the product • costs reduced due to economies of scale • sales volume increases significantly, the graph rises rapidly (faster rate of adoption) • profitability • competition begins to increase with a few new players in establishing market • prices controlled to maximize market share

Maturity

• Mature stage • costs are very low as you are well established in market & no need for publicity. • sales volume peaks • increase in competitive offerings • prices tend to drop due to the proliferation of competing products • brand differentiation, feature diversification, as each player seeks to differentiate from competition with "how much product" is offered • very profitable

Decline

• Decline or Stability stage • costs become counter-optimal • sales volume decline or stabilize • prices, profitability diminish • profit becomes more a challenge of production/distribution efficiency than increased sales • consumer demand for spare parts, maintenance and or product servicing

Obsolescence

• Product no longer manufactured and sold • New product has replaced this one • End of the line • Obsolete

Revitalisation

• Before the product reaches death whilst it is in decline • The product can be revitalised

Development Introduction

Revitalisation

Growth Maturity Decline and revitalisation Product life extended

TIME

Frequent Revitalisation

Fast rate of adoption Introduction Growth Maturity Decline and revitalisation Product life extended

TIME

Development

Growth Introduction Development

FAD products

Maturity A Fad product has a very short life cycle and is very quickly adopted onto the market. This quick adoption rate is given by the rapid rise in the graph. Maturity is very short and decline equally rapid.

Decline Death

TIME

Introduction Development

FASHION products

Growth Maturity Decline A Fashion product has a very rapid rate of adoption onto the market. This quick adoption rate is given by the rapid rise in the graph. Maturity and decline can depend on the fashion in question.

Death

TIME

Trends in FADs

FADs come and go very quickly, but with FADs come trends. A trend is plotted by looking at the performance of the FAD products on sale. If you consider, yoyos, utube, myspace, so there is a trend towards using PCs and away from conventional toys Yoyo Utube Myspace Death

TIME

Slow rate of adoption

A product that is adopted slowly has a low growth in sales, tending to have a longer lifecycle. Maturity Introduction Growth Decline Development

TIME

Walkman

Mobile music lifecycles

CD Walkman Ipod MP3 player iPhone 1980 1985 1990 1995 2000 2005

TIME

Product Churning

• Some companies deliberately keep the lives of certain products short • Producing new and improved products at frequent intervals.

• This stimulates purchasers to have the ‘latest’ version of the product.

• Popular in the 1980s with electronics and car industry

Product

• In summary • A product is examined on three levels: – The

core

product is the benefit of the product, for example the convenience of a car – The

actual

product is the tangible, physical product, for example the car – The

augmented

product is the customer service support offered, for example warranty, guarantee and after-sales service

Product

• In summary • The quality of a product depends on factors such as its: – Aesthetics – Performance – Maintenance, ease of servicing – Durability – Range of features – Ease/effectiveness of use – Brand name

Marketing Mix

Product Price Promotion Place

Price

• The price of a product can be a significant determinant in the market success of a product. Pricing is a complex business, and the price will be determined by a number of factors • The objectives of the company • Elastic demand • What the market will bear • Cost of production

Company Objectives

• Price will depend on: • Whether the company is seeking to maintain or expand its market share • Whether it is trying to reach a certain return for a level of investment • Whether it is trying to achieve a steady rate of growth • Whether it is trying to keep up planned levels of output

Elasticity of demand

• Price can be determined by elastic demand • Elastic demand is determined by how much demand changes with a small change in price • If demand remains the same when there is a price change then it is said to be inelastic • If demand changes dramatically when there is a change in price it is said to be elastic.

What the market will bear

• Price can be affected by the type of product being sold • Radically new products are harder to determine a price for than products that are developments on existing offerings.

• When this is the case market research needs to be carried out in order to determine what the highest price can be charged to ensure a targeted level of sales.

designer v traditional

Radically New Traditional

Costs

• Price will always be affected by costs • Material Costs – which are variable, raw materials etc • Production Costs – fixed, machines, tools, buildings • Distribution costs – variable, transportation • Higher volume of sales will mean lower production costs and likewise lower volume of sales will lead to higher production costs. This is known as economy of scale.

Henry Ford’s production line

Pinball machine production line

Costs

• • Working out the final price can be calculated by a

cost plus

strategy.

• This involves estimating the average cost of producing and marketing the product and adding a mark up for profit.

contribution pricing

is similar, but takes account of the variation of production costs for different levels of sales

Price

• A company may choose to not to use any of the above to determine the price.

• It could set it’s price to compete with a rival company.

• It could also set its selling price by using a market research strategy to determined perceived value.

• Such a strategy will usually be accompanied by a promotional strategy and emphasise quality and value of the product.

Price and the Product Life Cycle

• The strategy adopted to determine a product’s price will change throughout its lifecycle • Early in a product’s life the price maybe high however the price will reduce by improvements in the production process and economies of larger scale production.

Price and the product life cycle

During the introduction phase of a product’s life a pricing strategy could be to price the product low to stimulate interest. This is known as MARKET PENETRATION. Alternatively you might price the product at a high level to reach a smaller target market and create an image of exclusiveness and quality. This is know as MARKET SKIMMING Growth Maturity Decline Product sales dying 1 2 3 4 5

TIME

6

Price and the product life cycle

During the growth stage the aim of a company will be to keep prices steady in order to encourage new and repeat purchasers. However during this phase of a product's life the competition will be known and it is possible that either the price of the product will be reduced to make the product more competitive or new features will be added to the basic product to give it added value Maturity Decline Product sales dying 1 2 3 4 5

TIME

6

Price and the product life cycle

During the maturity stage the aim Maturity Decline 1 2 3 4 5 Product sales dying

TIME

6

Price and the product life cycle

In the decline phase of a product life cycle decisions will have to be made about how long the decline can be sustained. The strategies may not involve price changes but the company will look for ways in which to cut the costs that they incur in producing, distributing and marketing the product 1 2 3 4 5

TIME

6

Trigger and Incremental Products

• Another aspect of product development is the distinction between trigger and incremental products a company will sell.

• Trigger products will be marketed on their own merit but incremental products are sold on the goodwill created by the trigger product.

Trigger Products

• TRIGGER products are key products in a company’s product range which will prompt a potential customer to make a purchase.

• Examples are computer hardware and the operating software. • Tesco’s TRIGGER products are its range of groceries.

Incremental Products

• INCREMENTAL products are not worth buying on their own, they are add ons to the purchase of a trigger product.

• Examples are computer printer and the word processing software. • Tesco’s incremental products are its services like photography, insurance and the like.

Innovators

Consumers

Early adopters Early majority Late majority Laggards

TIME

Categories of purchaser

• Innovators are those consumers most likely to take a risk and buy radically new innovations • Early adopters are slightly more cautious than innovators but are the targets of a company’s marketing strategy • Early Majority wait to see a product become established before taking the risk.

• Late majority wait until they see the price drop, or for special offers which will enable them to purchase.

• Laggards purchase at the end of a product’s life from cultural or financial reasons. They may just feel compelled to buy the product for social reasons.

Price – a summary

• Demand • Costs (need to cover all costs incurred) • Government taxes • Competition • Stage in the life cycle (price increases in growth and falls decline)

Price – a summary

• Methods of pricing include: – Penetration pricing – price set artificially low to gain market share; once achieved, the price is increased – Price skimming – if product has competitive edge, a high price can be set; this will fall with increased supply – Psychological pricing – charging £1.99 rather than £2.00

– Predatory pricing – undercutting competitors, creating price wars

Marketing Mix

Product Price Promotion Place

Promotion

• If a company’s products are to succeed people need to know about them.

• Promotion is about

image creation

both for the company and for specific products and about creating

loyalty to brands

and products in various ways including the use of monetary incentives.

Promotion

Sales Promotion

• In store promotions known as

push strategies

• Newspaper adverts or coupons to encourage purchasers to seek out the product, known as

pull strategies

Advertising

• • A radically new product will need to be launched on to the market in such a way that potential purchasers understand what the product does, as well as selling the idea that it is worth buying Dyson Adverts

Advertising

• The Dyson vacuum cleaner did this very well.

• A new concept was advertised on TV and in newspapers.

• The product was made colourful in order that potential purchasers saw a design element to it.

Advertising

• Newspapers and Magazines • TV • Hoardings • Leaflets • Posters • TV channels • Internet (viral)

Publicity

• Unlike advertising • Newspaper articles • PR Public Relations • Image • Company doesn’t control what others write

Personal Selling

• Door to door • Cultivate contacts • Salesperson can persuade potential customer to buy • Sales force

Exhibitions and Trade fairs

• Trade fairs useful for influencing ‘those in the trade’ • Home Exhibition • Boat Show

Promotion - summary

• Promotion – Decisions have to be made on how best to promote the product and bring it to the attention of potential customers. – The intention is to win new customers or persuade them to change brand loyalty.

Promotion - summary

• Methods include – Short-term promotions such as Buy One Get One Free (BOGOF), competitions and coupons – Exhibitions and trade fairs – Publicity campaigns – Personal selling/sales representatives – Can be expensive and risky, careful budgeting required.

– The acronym

AIDA

is used with promotion and advertising: draw

attention,

create

interest

, generate

desire

, invite

action.

Promotion - summary

• Advertising – Advertising is used to bring a product to the attention of potential customers. – When deciding on the appropriate way to advertise a product you should consider • overall costs, • the target market or audience • and the most appropriate medium.

Promotion - summary

Medium

Television Radio

Advantages

Very high, mass market coverage; low cost per exposure; can generate powerful emotive response; can include images; sounds and special effects

Limitations Cost issues

Quick, fleeting exposure; target markets selected by scheduling, for example between 4opm and 6pm for children Expensive: key viewing times very expensive Very good local impact; high geographic selectivity; national radio effective for consumers on the move (for example in a car) Audio only; fleeting exposure; fairly low attention, background ‘noise’ Relatively low cost for local radio. Higher rates for national commercial stations

Promotion - summary

Newspapers and magazines Direct mail Very good local markets, national or geographic selected coverage; broad acceptability; high believability; prestige; magazines often very high quality images Very high audience selection; can be personalised with mail-merge systems Very short life; generally poor image quality in newspapers; no guarantees of positioning of advert High cost in national and prestigious magazines; right hand page often more expensive than left (readability) Often discarded as junk mail; poor image Relatively high cost per exposure Billboards Flexibility; high repeat exposure; local targeting; positioned in high traffic areas to catch mobile consumers; some are electronic with several adverts repeating Little audience selectivity; image only; easily vandalised Generally low cost; key sites (for example outside airports) can be very expensive

Promotion - summary

Online High selectivity; instant; can be powerful, moving images and sound; can be as long as viewer wishes; can be interactive; direct access to supplier; increasingly popular Small by rapidly growing audience; relatively low impact; anxiety over invasion of personal space; linked to spam and spyware Low cost; purchases can be made directly for the advert

Marketing Mix

Product Price Promotion Place

Place

• Place refers to how the product is distributed to the target market • “In the right place at the right time” – Geographical Placement – Physical Placement – Direct Marketing

Place

• Geographical Placement – Local – Regional – National – International • Companies sometimes launch products in one location to see how they will sell

Place

• Physical Placement – Right place right time – JIT (just in Time) • JIT – Costs in transport not storage – Diverse destinations – Missing launch dates impact on publicity – Efficient

Place

• Direct marketing – Door to door – Mail order – Company owned stores (SONY)

Place - summary

• Place – Or placement refers to the location where a customer can purchase a product. It is sometimes known as the distribution channel. It can include any physical store or shop as well as TV shopping channels and the internet

Place - summary

• There are four main channels of distribution: – Manufacturer-Consumer e.g. mail order, farm shops – Manufacturer-Retailer-Consumer e.g. high-street stores – Manufacturer-Wholesaler-Consumer e.g. furniture – Manufacturer-Wholesaler-Retailer-Consumer e.g. medium-size convenience stores (large supermarkets often cut out the wholesaler) • Functions of distribution channels include:

contacting

prospective buyers;

matching

the offer to the buyer’s needs;

negotiating

agreement on price and terns; and

storing

and

transporting

the products.

Marketing Mix

SAQ Task

Task

• Use a product of your choice and explain how each stage of the product life cycle is catered for in the design process.