Marketing Mix

Factors to consider when designing a product

• Cost of production

• Production Feasibility

• Target Market

• Product function

• Environmental considerations

• Legal Requirementsi

Cost of production

The business needs to ensure that the cost of producting their product will not be too costly to produce so that it will be commercially viable

This could include eexpensive raw materials a lengthly production process and needing too much skilled labour

Production feasibility

The business needs to ensure that it is actually possible to producde the product 

Target market 

When designing and creating a new product the business needs to ensure that the product is functional and has attractive features to the target market 

It will also need to fit in with the brand and their currrent product range 

Product function

The business must ensure that their product does exactly what it is expected to and that it functions properly

Legal requirements

All products must satisfy all consumer laws such as the “The Sale of Goods and Supply of |Services Act 1980”

Stages of production

1. Introduction

2. Growth

3. Maturity

4. Saturation

5. Decline

Introduction

The product is launched into the market place sales may be low bceause customers don’t yet fully know about the product or fully trust it

The marketing costs will be very high in order to inform the customers of the product - profits at this stage will be extremely low with the aim being to create product awareness

There will be a heavey drain on cashflow. Cashflow implications recepts are lower than payments so the business should ensure that they have enough cash to pay their expenses as they fall due

Growth

Customer awareness of the product increases abd sales grow rapidly, Profits will start to increase as the aim is to maximise the market share cashflow for the business will improve

Cashflow implications sales increase and usually payments leading to a net cash surplus for the business

Maturity 

Sales of the product are at their peak and the product is commonplace at the market profts are maximised and market share is defended - cashlow is excellent at this stage

• Cashflow implications: The business should begin to research the new products so that overall sales can continue to grow in the future as payments on research and development increase and slow down the net chas surplus will decline

Saturation

Sales begin to level off and profits re steady Th =e market will have been fully exploited and planning needs to take place in order to ensure that a decline does not take place and the business is able to extend the product lifestyle

• Cashflow implications: Sales level off and payments on advertising may be more than receipts leading to a net cash deficit

• The business may have to borrow and take out a ban overdraft

Decline

At this stage there are many competitors in the market and the new products coming in the market will cause a decline in sales. Profits will decline and the business may cut prices to ensure they sell off stock they may even make a loss at this stage

• cashflow implications: The product has outlived market demand for it a business will stop spending on advertising to minimise costs and the business will focus on other products

Methods of increasing product life style 

• Change the price 

• Adjust the product 

• New promotions 

• Adjust the place

Change the price

If businesses can lower prices for a product it can potentially attract more customers so that sales can stay high

Adjust the product

Add new features to the product or alter the design or colours slightly to try and help increase the populairty of the product a business could akso create line extensions of the product

New promotions

The business could run a anew advertising campaig or implement new sales promotion techniques to try and increase sales

Adjust the place

Change the channel of distribution used to get the product to the consumers and make it more accessible for the consumers to purchase

Packaging a product factors 

• Protection 

• Provide information 

• Stand out 

Protection

Packaging protects the product from being damaged when it is being handled stored or being moved to different stores it also keeps the product fresh and preserves the quality until it used

Provide information

The packaging of a product provides useful information to consumers about the product and what it is made of or what the ingredients are

This is often a legal requirement

Stand out

A products packaging can set it apart from all the other products that competitors produce because of the shape design of the packaging which is often patented

Branding 

branding is very important and beneficial to a business as it can help to seperate them from their competitors 

There are many benefits for a business for developing a strong brand name 

Good branding benefits

• Brand loyalty

• Easier to introduce new products

• Marketing

• Higher prices

Brand loyalty

A strong brand will develop loyal customer base who will contine to buy the products even when the prices increase - Brand loyalty can develop if the brand is consistent with their provision of high quality products 

Easier to introduce new products

With a strong brand name it is easier to introduce new products as there will already be trust from the customers so they will accept their new products

Marketing

It is easier and cheaper for a business to advertise products if they have a good brand name because they can advertise the brand and it will cover all their products that they produce

They dont need to advertise their individual products

Higher prices

A good strong brand with a good reputation is able to charge higher prices 

Customers are willing to pay a slightly higher price becayse they know and trust the brand as it has proven itself in the past

Own brand products

products that are sold by retailers under the retailers own name and logo to compete afainst products that already exist in the marketplace for example supermarkets such as Tesco have their own brand

Why sell own brand products

• Lower prices

• Repeat customers

• High Profit Margin

• Requires little advertsing

Lower prices

These products can be sold for a lower price which attracts customers to their stores

Repeat customers

It can bring back customers to your store and earn customer loyalty

Higher profit margin

Own brand products dont require paying a producer so the business is able to make higher profits on their own brand products

Requires little advertising

The brand will be advertised so each product doesnt need their own advertising campaign

Pricing strategies 

• Penetration Pricing 

• Premium pricing 

• Cost plus pricing 

• Price skimming 

• Predatory pricing 

• price discrimination 

• Loss leader

• Bundle

Penetration marketing

This is when competitors will charge lower prices for tbeir products compared to competition when first trying to penetrate the market and gain market share

They would charge lower prices than competitors to attract consumers

Premium pricing

A business sets a high price for their product above the price of the competitors in order to reflect higher quality - a business with a good brand image will be able to do this

Cost plus pricing

When the business adds a percentage to the cost of of producing the product to get the selling price - this is a very simple pricing straetgy and ensures the business makes a profit on the good they sale

Price skimming

A business while charge a high price initially when they launch a product because they want to recoup the cost of producing aand developing the product

Then over time the business will slowly reduce the price of product to increase sales and customers 

Predatory pricing

This is when a business that dominates the markets lower their prices in order to eliminate any new competitors that will not be able to survive the market if they sell their products at a lower price after the competitors have left the market they will sell at a higher price again

Discriminatory prices

This is when businesses sell goods at different prices to groups of different people based on the time of year day week location pf business pr age of children and not due to the different costs of production

Loss leader

Selling a product below cost price so that it will attract consumers into the shop and buy other products that they sell there

Bundle

Charging a lower price when items are bought together rather than singly

Factors to consider when choosing cost

• Cost of production

• competitors prices

• Consumers demand

• Legal regulations

Cost of production

The business needs to ensure that they charge a price that is above their cost in order to make a profit sometimes businesses will need to charge higher prices for their products as they will not be able to avail of economies of scale like larger businesses

competitors prices

the business would need to price their products in and around the same price as their competitors in the market place

they may charge a premium price from their competitors if they are trying to give off an impression to consumers that they’re superior to competitors

Consumer demand

The income levels of their target market should influence the price the business charge the consumer spending habits on similar products should give a good indication of what price to charge

Legal requirements

The government may have minimum or maximum prices on products and services that a business must take into consideration they also have to consider the different taxes the government can impose such as VAT and other indirect taxes such as customs and excise duty

Advertising

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