Marketing 4P's: Product, Price, Place and Promotion

What is promotion in marketing?

A collection of techniques used to inform and persuade potential consumers to buy a product or service that meets their needs.

What are the four purposes of promotion?

1. Inform consumers/raise awareness. 2. Increase sales. 3. Encourage brand loyalty. 4. Enhance reputation/image of the business.

What is the difference between 'above the line' (ATL) and 'below the line' (BTL) promotion?

ATL uses mass media with no direct contact with consumers (TV, radio, newspapers). BTL allows direct contact with potential consumers (direct mail, sales promotions, personal selling).

Give three examples of 'above the line' promotion.

1. Television advertising. 2. Commercial radio. 3. Newspapers and magazines.

Give three examples of 'below the line' promotion.

1. Direct mail. 2. Sales promotions (BOGOF). 3. Personal selling and telesales.

What is sponsorship as a promotional method?

A business pays to associate its name with an event, team, or charity to increase brand awareness and enhance reputation.

What is a sales promotion?

An incentive at the point of sale to encourage immediate purchase (e.g., BOGOF, loyalty points, competitions, 0% finance).

What does BOGOF stand for?

Buy One Get One Free.

Give three examples of sales promotions.

1. BOGOF. 2. Loyalty points (Tesco Clubcard). 3. Buy now pay later (DFS).

What is merchandising?

Any action that encourages consumers to purchase at the point of sale, including presentation, packaging, shelf placement, and pricing.

What is public relations (PR) in promotion?

Free publicity via news media to communicate brand values and manage brand reputation, including crisis management.

What is viral marketing?

Marketing that spreads through social networks like a virus (video clips, flash games, images). People voluntarily pass on the marketing message.

What is drip marketing?

A strategy where information is sent bit by bit over time to consumers, usually via email or social media, to keep them engaged.

What is personal selling?

Direct communication between a salesperson and a customer (face-to-face or via telesales) to persuade them to buy.

What is direct mail?

Physical leaflets or letters sent to a filtered database of potential customers. Can be seen as 'junk mail' if poorly targeted.

What are customer publications?

Magazines published by a business specifically for its customers (e.g., in-flight magazines). Classified as BTL because they directly target existing customers.

What is the AIDA model?

A model describing the stages of consumer response to promotion: Attention, Interest, Desire, Action.

What does 'Place' mean in the marketing mix?

The methods by which a business delivers its goods or service to the right place at the right time. Refers to distribution channels, not business location.

What is a distribution channel?

The method by which a product travels from the producer to the consumer.

What is a wholesaler?

An intermediary that buys in large quantities from producers and 'breaks bulk' by selling smaller quantities to retailers.

What is a retailer?

The final outlet in the distribution chain that sells products directly to consumers (physical or digital storefronts).

What is an agent?

An intermediary who negotiates between buyers and sellers but never takes ownership of the product. Paid by commission.

What is 'breaking bulk'?

The process where wholesalers buy in large volume from manufacturers and break down into smaller units for sale to retailers.

What is a direct channel of distribution (zero-level)?

Producer sells directly to the consumer without intermediaries. Common with e-commerce, mail order, and farmers' markets.

Give one advantage of a direct distribution channel.

Higher profit margins (no middlemen), direct contact with customers, and total control over brand message.

What is a one-level distribution channel?

Producer sells to a retailer, who then sells to the consumer. Standard for fashion, electronics, and high-value goods where 'touch and feel' matters.

What is a two-level distribution channel?

Producer → Wholesaler → Retailer → Consumer. Essential for small retailers that cannot buy directly from large manufacturers.

When is an agent used in distribution?

In complex or international markets where the firm lacks local legal, cultural, or language knowledge. Agents negotiate sales for a commission.

Give two reasons why distribution channels have changed in the past 20 years.

1. Growth of supermarket size and bargaining power. 2. Rise of e-commerce and internet sales (direct to consumer).

What is a regional distribution centre?

A large warehouse sited near motorway links used by large retailers (Sainsbury's, Argos) to make distribution quicker, cheaper, and more effective.

Give two examples of how digital technology has changed distribution.

1. E-books (Kindle) replacing printed books. 2. Music downloads replacing CDs. 3. Theatre/airline tickets sent by email instead of printed.

What factors affect the choice of physical distribution method?

Need for freshness (perishable goods), bulkiness of product, price of product, size/weight, nature of consumer (B2B vs B2C), JIT production requirements.

Why has road transport become the most common physical distribution method in the UK?

It offers flexibility and door-to-door delivery, though environmental concerns and oil prices are encouraging rail/canal alternatives.

What is price in the marketing mix?

The amount paid by customers for a product. It is the only element of the marketing mix that produces revenue.

What is penetration pricing?

Setting a low initial price to achieve high sales volume and gain significant market share quickly. Price is gradually increased once loyalty is established.

Give an example of penetration pricing.

Disney+ priced 50% lower than Netflix at launch, gaining 10 million subscribers in 24 hours.

What is price skimming?

Setting a high initial price to target early adopters with high willingness to pay, recovering R&D costs quickly. Common in pharmaceuticals and high-end electronics.

Give an example of price skimming.

Apple iPhone launches at a premium price ($1100+), then reduces price of older versions as new models emerge.

What is premium (prestige) pricing?

Setting a high price to create an image of quality and status. Price itself becomes part of the marketing message.

Give an example of premium pricing.

Rolex prices based on scarcity and psychological prestige, not cost of materials. If a Rolex cost $50, it would lose its value to consumers.

What is psychological pricing?

Setting a price that sounds less than it really is (e.g., £9.99 instead of £10, £199,950 instead of £200,000).

What is a loss leader?

A product sold below cost to entice customers into a store, where they are expected to buy other profitable items.

Give an example of a loss leader.

Supermarkets reduce prices of essential products (milk, bread, sugar) below cost to attract customers.

What is predatory pricing (destroyer pricing)?

An established business reduces prices (even to a loss) to force a new entrant out of the market. Often seen as anti-competitive and illegal.

What is competitive (going-rate) pricing?

Setting a price based on competitors' prices. Common for homogeneous products like milk and petrol.

What is cost-plus pricing?

Adding a fixed percentage mark-up to the unit cost of producing a good. Formula: Selling price = Cost + (Cost × Mark-up %).

What is contribution (marginal cost) pricing?

Ignoring fixed costs and setting price to cover variable costs plus a contribution towards fixed costs. Used for accepting orders that don't increase overheads.

What is dynamic pricing?

Real-time price adjustments based on supply and demand algorithms. Example: Yandex Go surge pricing during blizzards.

What is value-based pricing?

Setting price based on the value the product delivers to the customer, not production costs. Example: Salesforce priced at $165/month because it helps close huge sales.

What is price discrimination?

Charging different prices to different groups of consumers for the same product or service. Requires ability to separate markets and prevent resale.

Give an example of price discrimination by time.

Train ticket prices: peak charges (morning commute, inelastic demand) vs off-peak charges (elastic demand).

Give an example of price discrimination by group.

Railcards for seniors/students; child admission prices to entertainment complexes.

What is price elasticity of demand (PED)?

A measure of how responsive demand is to a change in price. Formula: (% change in demand) ÷ (% change in price).

What does it mean if PED is between 0 and 1 (inelastic)?

Demand changes less than price. Revenue increases when price rises. Examples: necessities, petrol, electricity.

What does it mean if PED is greater than 1 (elastic)?

Demand changes more than price. Revenue falls when price rises. Examples: products with many substitutes, luxury goods.

What four factors affect price elasticity of demand?

1. Number of substitutes. 2. Necessity vs luxury. 3. Proportion of consumer income. 4. Whether purchase can be postponed.

What is income elasticity of demand (YED)?

A measure of how responsive demand is to a change in consumer income. Formula: (% change in demand) ÷ (% change in income).

What are the four stages of the Product Life Cycle (PLC)?

1. Introduction/Development. 2. Growth. 3. Maturity/Saturation. 4. Decline.

What happens in the introduction stage of PLC?

Slow sales growth after launch. High R&D and promotion costs. Negative cash flow. High risk of product failure.

What marketing mix is typical in the introduction stage?

Informative advertising, restricted distribution (test markets), introductory offers (penetration) or high price (skimming).

What happens in the growth stage of PLC?

Rapid sales increase as word-of-mouth spreads. Goal is to establish consumer loyalty and market share.

What marketing mix is typical in the growth stage?

Product modifications based on feedback. Competitive pricing (lower or maintain). Wider distribution. Shift to persuasive advertising.

What happens in the maturity stage of PLC?

Sales flatten as market saturation is reached. Intense competition and price wars. Product is profitable (cash cow).

What marketing mix is typical in the maturity stage?

Reminder advertising, slight product variations, price reductions, seeking new markets (extension strategies).

What happens in the decline stage of PLC?

Sales fall as product becomes obsolete. Firm decides between withdrawal or 'harvest' strategy.

What marketing mix is typical in the decline stage?

Little marketing spend. Prices drastically reduced to clear stock. Heavy sales promotions.

What is an extension strategy?

A strategy used to lengthen the maturity stage and delay decline of a product.

Give three examples of extension strategies.

1. Entering new geographical markets (exporting). 2. Repackaging or relaunching. 3. Finding new uses for the product (e.g., baking soda for cleaning).

Why is cash flow negative during introduction stage?

High R&D, launch, and promotion costs exceed sales revenue. Positive cash flow typically peaks during maturity stage.

What is the BCG (Boston) Matrix?

A portfolio analysis tool classifying products by relative market share (high/low) and market growth rate (high/low).

What are the four categories in the BCG Matrix?

Stars, Cash Cows, Problem Children (Question Marks), Dogs.

What is a 'Star' in the BCG Matrix?

High market share in a high-growth market. Generates cash but consumes high investment to maintain position. Future Cash Cow.

What is a 'Cash Cow' in the BCG Matrix?

High market share in a low-growth (mature) market. Generates high revenues with low marketing spend. Profits fund other products.

What is a 'Problem Child' (Question Mark) in the BCG Matrix?

Low market share in a high-growth market. Needs heavy investment to become a Star. New products that haven't yet established themselves.

What is a 'Dog' in the BCG Matrix?

Low market share in a low-growth market. No real future. Should be dropped unless essential for product range.

What is the strategic value of the BCG Matrix?

Shows if a business has a balanced portfolio. Ensures sufficient Cash Cows to fund Problem Children and Stars.

Give an example of a Cash Cow.

Coca-Cola Classic: maintains 40%+ market share in mature global market. Funds development of Stars like Coke Zero.

What is a USP (Unique Selling Point)?

A special feature that makes a product distinct from competitors. Must be desirable, unique to the firm, and difficult to replicate.

What is product positioning?

Consumer perception of a product compared to competitors. Can be mapped on a grid (e.g., price vs quality) to identify market gaps.

What is value analysis (design mix)?

Balancing three characteristics: Function (does it work?), Aesthetics (does it look good?), Economic cost (can it be produced profitably?).

What is the difference between tangible and intangible product attributes?

Tangible = measurable features (weight, specs). Intangible = subjective opinions (status, luxury, brand ethos).

What is branding?

A logo, name, or design that makes a product recognisable and differentiates it from competitors. Helps build brand loyalty and allows premium pricing.