The marketing mix
The marketing mix is made up of the 4 Ps — Product, Price, Place and Promotion.
Product
Why is developing products important?
- To stand out against competition (a USP — having a unique selling point)
- Spreading the risk
- Aids in business growth by growing into new/existing markets
- To increase profit
Risks of developing products
- Time consuming to conduct market research
- The product might fail if demand is low
- Company reputation could be risked
- Costs a lot to develop a new product plus prototypes
Why is brand image important?
- Can increase added value
- Can help consumers recognise and differentiate the business from competitors
- Can help build a loyal customer base
What is the role of packaging?
- Keep the product fresh
- Protect the product
- Help differentiate the product from competitors by showing brand image
- Helps attract new customers
- Provides legal information (such as ingredients)
- To make transportation convenient
Product lifecycle
The product lifecycle traces the stages a product passes through over time.
Extension strategies are used to prolong the life of a product:
- Change or add features to the product
- Change the place that the product is sold at
- Change the promotional method
- Change the price of the product
Price
Methods of pricing
- Skimming — the price is first set high and is lowered as demand falls and time goes by. E.g. luxury brands.
- Penetration — the price is first set low to test demand and attract customers quickly (market share gains). The price may increase later on. E.g. when new innovative products are introduced into a market.
- Promotional — when the price of a product is coupled with deals over a set period of time to attract customers. E.g. discounts on the purchase of a second item.
- Competitive — pricing a product similar to other competitors or lower in order to remain competitive.
- Cost-plus — setting the price of a product based on the cost of production plus the profit the business wants to make (profit margin).
- Psychological — setting the price of a product to make it look attractive. E.g. $19.95 instead of $20.00.
Price elasticity
- Elastic pricing — goods/service where demand changes in response to price. E.g. luxury bags.
- Inelastic pricing — goods/service where demand is not very affected by change in price. E.g. rice.
Place
Distribution channels are the flow of products from manufacturer to consumer.
Manufacturer → consumer
| Advantages | Disadvantages |
|---|---|
| Profit is all kept by manufacturer | Storage of goods has inventory costs |
| Face to face interaction with consumer | Advertising must be done by manufacturer |
Manufacturer → wholesaler → consumer
| Advantages | Disadvantages |
|---|---|
| Wholesaler pays for storage costs | Middleman added so the manufacturer loses some control over the marketing mix |
| Wholesaler does the advertising | Some profit taken away by wholesaler |
Manufacturer → wholesaler → retailer → consumer
| Advantages | Disadvantages |
|---|---|
| Retailer does the advertising | Another middleman added so more of the marketing mix is not controlled |
| Wholesaler/retailer pays for storage costs | More profit taken away |
| Retailer is located more conveniently to customers | No face to face contact with customer |
| Some retailers sell competitor products at the same time |
Promotion
There are 4 types of promotion — methods to increase business exposure.
- Advertising — using methods such as TV adverts, billboards and social media to show off the business's products. This increases brand awareness, attracting customers.
- Public relations — promotion of the business through involvement in positive events such as charities to build reputation.
- Sales promotion — using deals to attract customers over a set duration of time (similar to promotional pricing). E.g. offering free products to customers after a set amount is spent.
- Personal selling — building a relationship with customers to push them into purchasing. This occurs through one to one interactions with a customer.
E-commerce
Opportunities and threats of integrating e-commerce into a business.
For the business
| Opportunities | Threats |
|---|---|
| Access to a global/larger market | Customers can easily access competitor sites to compare prices |
| Costs of running it are low | No face to face contact with the customer |
| Can list a large range of products that may not be able to be displayed in a retail store | Not everyone has access to the internet |
| A good website can cause a customer to purchase more than intended | Reliance on 3rd party delivery services may damage reputation |
| It is expensive to hire specialist web designers |
For the consumers
| Opportunities | Threats |
|---|---|
| There is no need to go to the destination to purchase the goods | Delivery costs may be expensive |
| Access to international businesses | There is no chance to inspect the product before purchase |
| As there are many options, goods may be priced more competitively (cheaper) | Delivery may take a long time |