4.5(the seven Ps of the marketing mix)*

Big chapter must be important so check book

Seven Ps

Product, Price, Promotion, Place, People, Process and Physical evidence

Bring together marketing ideas and concepts in a simple manner Assists in business strategy formulation Allows to vary marketing activities based on customer needs

Misses out addressing issues related to business productivity

Marketing mix

Key elements of a marketing strategy that ensure the successful marketing of a product

Product

Good or service that is offered to the market with the aim of satisfying customer needs

Price

What consumers pay to acquire a product

Promotion

Ways of convincing consumers why they need a product, and they should buy it

Place

Where the product is sold and how it will be delivered to the market

People

Human capital in terms of skills, attitudes and abilities necessary in the production of goods or services

Processes

Procedures and policies pertaining to how an organization’s product is provided and delivered

Physical evidence

Tangible or visible touch points that are observable to customers in a business

Product life cycle

Course a product passes through from its development to its decline in the market

Stages of life cycle!!!!!

See graph page 278

Extension strategies

Plans by firms to stop sales from falling by lengthening the products life cycle(example coke been alive long time)

Product portfolio

includes all the products or services provided by an organization

Boston Consulting Group matrix

An analysis method of a firm’s product portfolio regarding its market share and market growth

Focuses on current market position of firm’s products, little advice for future planning It can be time consuming exercise for business to classify their products based on this matrix High market share does not mean high profits. For example, sales revenue could be gained by using promotional pricing

Stars

Products with high market growth and high market share

Successful products generate high income.

However, need high level of investment to sustain their rapid growth.

Cash cows(best)

Products that have low market growth and high market share. Business invest less, sales are high and profitable.

Problem children or question marks

Products with high market growth and low market share. They are a concern since they require high amounts of investment to increase their share in the market. Careful thinking is needed to know if they should be developed to stars or eliminated

Dogs

Products with low market share and low market growth. Operate in markets that are not growing or declining and generate little income. Often needs to be replaced

(BCG matrix strategies)Holding strategy

Focus on products with high market share, to ensure they keep their position. Some investment is needed

(BCG matrix strategies)Building strategy

Focuses on question marks into stars. Money from cash cows could be invested in promoting or distributing these products to increase market share

(BCG matrix strategies)Harvesting strategy

Focus is on milking the benefits of products with positive cash flow. These products provide necessary finance that can be reinvested to other portfolio products.

(BCG matrix strategies)Divesting strategy

Where poor performing dogs are phased out or sold off. The resources freed up are used effectively to boost performance of other products in portfolio

Brand

Name, symbol, sign or design that differentiates a product from competitors

Branding

Process of distinguishing one’s firm product from another

Brand awareness

Ability of consumers to recognize the existence and availability of firms good or service

Brand loyalty

When consumers become committed to a firm’s brand and are willing to make repeat purchases

Brand value

How much brand is worth in terms of reputation, potential income and market value

Cost- plus pricing

refers to adding a mark up to the average cost of producing product

Simple and quick Good way to ensure that business covers its cost and makes a profit

Fails to consider market need or customer value Competitors prices not considered can lead to loss of sales if price is higher

Price skimming

Setting a high price when introducing a new product to the market, when the competition is low

Penetration pricing

Setting a low initial price for a goal of attracting customers quickly and gaining a high market share 

Prices are low, leading to high sales volume and market share High sales volume can lead to decreases in cost of production

High sales volume does not mean high profits, especially with low price Customer pay think the product is low quality Penetration pricing only works with elastic market, but when firms will increase price again, they may lose customers

Promotional pricing

Temporary reducing the price of a good or service to attract customers

The loss leader

Charging low price for a product, usually below average cost. Aim is to attract customers. Example large supermarket using this to attract customer than then may buy other profitable goods.

More customers may mean more overall profit Can be used as a tool to encourage customers to switch brands

Can be accused of undercutting competition by using unfair prices

Predatory pricing

Firm deliberately sets a very low price for a good or service with aim of driving out competitors

Can get dominant position Drive out competition Reducing new entrants

Anti-competitive behavior is illegal Works in short term

Premium pricing

Firm sets a high price for a high-quality product

As customers are convince of high quality they will not try to buy it for less. Leaves firm with focusing on improving the quality or features without the worry about consumer purchases. If managed to sell profit margins can be maximized Can increase brand value. Product becomes exclusive, loyal customers continue to buy the product. Good WOM providing free advertising example showing off

Consumers who find price too high won’t buy it High marketing cost Does not work with all products

Dynamic pricing

When firms charge different prices based on who is buying on when selling example airline prices when high demand maybe New year

Potential of high sales and profit Can beat competition by adjusting to customer preferences Helps with stock management, prices can be lowered on overstocked goods

Potential of high sales and profit Can beat competition by adjusting to customer preferences Helps with stock management, prices can be lowered on overstocked goods

Competitive pricing

When firm sets price relative to competition price

Can prevent losing customers and market share to competitors Online shoppers depend on pricing before making purchase Low-risk strategy as competition are usually well known players, their pricing probably good

Not sustainable in long term, others competitors may change price focusing on different segments If focused only on competing may miss out other aspects like covering costs Brand will not stand out

Contribution pricing

Calculating variable cost of production of product, after which the product’s price is set. Contribution is difference between variable cost and sell price. So only the price of good is considered

Enables the firm to know how much profit it will earn for every unit sold beyond the point the firm breaks even Cheap to use Useful strategy for a special order

Price may not be competitive Hard to calculate specific cost of a good, hence may be inaccurate price

Price elasticity of demand

(percentage change in quantity demanded)/(percentage change in price) 0-1 inelastic 1 is unit elastic and 1+ elastic

Price discrimination

Charging different prices for different groups of consumers for same product

Can be beneficial for consumers or producers

Businesses need to be certain about elasticity the demand.

Promotion

Main goal is obtaining new customers or to retain existing ones. By communicating with the consumers.

Above-the-line promotion

Paid form of communication that uses independent mass media to promote product

Advertising

Passing on information about a product to a particular target audience.

·         Informative: Provide information about a products features, price etc. Used for awareness, used by companies then introducing new product.

·         Persuasive: Aims to convince customers to buy one firms product instead of competitor’s product.

·         Reassuring: Focus on existing customers, to remind them they made the right choice and should continue to purchase it

Below-the-lime promotion

Form of communication that gives business direct control over its promotional activities. Does not depend on independent media

Direct marketing

Ensures that the product is aimed directly at the consumers. Such as direct mail.

Personal selling

Involves the sale of a firm product through personal contact. Such as car dealerships. Used for more expensive goods

Public relations

Promotional activities aimed at enhancing the image of the business and its products. Includes use of publicity or sponsorship

Sales promotions

short-term incentives to increase or boost sales

·         Money-off coupons

·         Point of sale displays

·         Free offers or free gifts

·         Competitions

·         “BOGOF”

Through-the-line promotion

Form of promotion that uses an integrated approach of combining both above and below promotion

360 degree marketing

Combing both below and above

Digital marketing

Using consumers data online to target their products to that customer

Social media marketing

Marketing approach that uses social networking websites o market a firms product

Place

How the product reaches the intended user.

Zero intermediary channel

Where product is sold directly to the customer

low cost, fast, ideal for perishable products

Promotion done by producer, storage and delivery costs

One intermediary channel

Use of one intermediary to sell product

Promotion by retailer, cost of holding stock by retailer

Retailers do mark up, producer may not be aware of promotional strategies by retailers

Two intermediary channels

Example wholesalers and retailers

Wholesalers incur the storge cost, appropriate over long distances

Two profit mark ups, promotion