Business Marketing Mix

Marketing Mix

Term used to describe all the activities that go into marketing a product or service

Four P's of Marketing Mix

Product, Price, Place, Promotion

Developing new products- costs & benefits

Benefits: diversification for the business, allows the business to expand into new markets, allows the business to expand into existing markets Costs: costs of carrying out market research and analysing findings, costs of producing trial products and costs of waste materials, lack of sales if target market is wrong

Brand Name

Unique name of a product that distinguishes it from other

Brand Loyalty

When consumers keep buying the same brand again and again instead of choosing a competitors brand

Brand Image

An identity given to the product in which distinguishes itself from other brands

Role of packaging

Protect product, make easy for transportation, allow product to be used easily, make product eye catching, carries information about product, promotes brand image

Product Life Cycle

Describes the stages a product will pass through from its introduction through its growth 1.Development: company spending time on research and developing product, no sales 2.Introduction: sales are low, money spent on advertising, very expensive, no profits 3.Growth: sales grow rapidly, new competitors have entered the market, profits made and development costs are covered 4.Maturity: sales are increasing slowly, advertising maintaining sales growth, profit are at its highest 5.Saturation: sales reach stable point at their highest, profits fall 6.Decline: sales become low due to changes in consumer tastes, product is removed from the market

Extending product life cycle

-Introduce new variations of the original product -Sell into new markets -Make small changes in the product's design -Sell through additional different retail outlets -Introduce a new, improved version of the old product

Extension Strategy

A way of keeping a product at the maturity stages of the life cycle and extending the cycle

How stages of the product life cycle influence marketing decisions

Pricing: prices are higher in the growth stage, price is lower in saturation and maturity stages as competitors have released new versions, price discounts might be offered during decline stage to extend its life

Promotion: spending on promotion will be higher in introduction stage, advertising will be reduced in later stages, advertising might be highly spent on if business decides to extend the products life

Channels of Distribution

How a product gets from the producer to the final consumer.

Wholesaler

A business that buys products in bulk from producers and then sells them to retailers

Retailer

Shops and other outlets that sell goods and services to the final consumer.

Middlemen

These are the intermediaries in the channels of distribution, for example, wholesalers and retailers.

Direct selling

The product is sold by the producers directly to the final consumer without the need for any middlemen.

Promotion

Marketing activities used to communicate with customers to inform and persuade them to buy a business's products.

Advertising

Paid for communication with consumers which uses printed and visual media. The aim is to inform and persuade consumers to buy a product.

Informative Advertising

Information about the product is communicated to consumers to create product awareness and attract interest.

Persuasive Advertising

Communication with consumers aimed at getting them to buy a firm's product rather than a competitor's product.

Bellow-the-line promotion

Promotion that is not paid-for communication but uses incentives to encourage consumers to buy.

Sales Promotion

Incentives used to encourage short-term increases in sales or repeat purchases.

Personal Selling

Sales staff communicating directly with the consumer to achieve a sale and form a long-term relationship between the firm and the consumer.

Direct Mail

Also known as "mail shots" or "junk mail", printed materials which are sent directly to the addresses of the customers.

Sponsorship

Payment by a business to have its name or products associated with a particular event.

Marketing Budget

The amount of money made available by a business for its marketing activities during a particular period of time.

E-Commerce

The use of internet and other technologies used by a business to market and sell goods and services to customers.

Why might companies change their pricing strategy?

To try to break into a new market

To try to increase market share

To try to increase profits

To make sure all costs are covered

What are the main methods of pricing?

Cost-plus pricing

Competitive pricing

Penetration pricing

Price skimming

Promotional pricing

Psychological pricing

Dynamic pricing

What is COST-PLUS pricing?

The cost of manufacturing the product PLUS a profit mark-up.

Good for: single product business

Nice and simple : Easy to calculate costs

The business may have few competitors so a fixed profit mark-up can be earned on each product sold

What is COMPETITIVE pricing?

The product is priced IN LINE with your competitors' prices or just BELOW their prices, to try to capture more of the market

Often with products which are difficult to "brand" and make different from competitors, like petrol.

😇 Can keep sales high - not under or over priced

😇 If you get it right eg charging less for petrol than other garages, you'll get more customers and more profit

👺 If you get it wrong, you'll get more customers but you've eaten into your profit margins so much that you're not making any money

👺 Have to constantly research what competitors are charging, which costs time and money

What is PENETRATION pricing?

When the price is set LOWER than competitors' prices, in order to enter a new market

😇 Ensures sales are made and product enters market

👺 Low price may mean low profits (but once consumers are hooked, price could be raised)

Good example : tortellini

What is PRICE SKIMMING?

Where a HIGH price is set for a NEW product

Often it's also a HIGH-QUALITY product

Usually for NEW inventions or NEW developments of old product

People will pay high price for NOVELTY factor

😇 Business may have paid out a lot for R & D - high price helps to recoup these costs

😇 Can help establish the product as a quality item in people's minds

👺 High price may put off some potential customers

Good example: new computer game system with better graphics

What is PROMOTIONAL pricing?

When a product is sold at a very low price for a short time

😇 Useful for getting rid of unwanted stock that will not sell at higher price - it costs money to store stock so you want to get rid of it

😇 Can help renew flagging interest in a business

👺 Sales revenue will be lower

Example: end of summer clothes sales to make way for winter stock

What is PSYCHOLOGICAL pricing?

When the price is set to match consumers' expectations and perceptions of the product

Might involve charging very high price for high-end product so rich people see it as a status symbol

Might involve charging just below a whole number, eg 99p instead of £1 - seems much cheaper

😇 Can give the impression of good value for money - little sales revenue is lost by putting the price just below the price the business wants to sell it for, but it may entice a lot of customers to think it's really good value

👺 Competitors may do the same, which reduces effect

What is DYNAMIC pricing?

Charging DIFFERENT prices to DIFFERENT consumer groups for the SAME product because of DIFFERENT demand levels

Example: airline bastards charging more during school holidays

😇 Can lead to increased revenue

👺 There is a cost attached to the work of constantly changing prices

What is a PRICE-SENSITIVE customer?

One who will buy whichever product is cheaper. Price is the major deciding factor. People on a tight budget will be price-sensitive.

What is a PRICE-INSENSITIVE customer?

One who is indifferent to price changes, eg business customers on expenses. They couldn't care less. More interested in convenience, comfort, etc

What is PRICE ELASTICITY?

A measure of the RESPONSIVENESS of demand to a change in price.

Affected by how many CLOSE SUBSTITUTES there are.

If many similar other products, if price goes up, consumers will respond by buying the substitute product.

If price goes UP by 5%, and this makes sales FALL by 15% = PRICE-ELASTIC demand (price change has a GREAT effect on sales). Here, revenue will FALL 👺

If price goes DOWN by 5%, and this makes sales RISE by 15% = still a PRICE-ELASTIC demand (price change still having a GREAT effect on sales) Here, revenue will RISE 😇

If price goes UP by 15%, and this makes sales FALL by only 5% = PRICE INELASTIC demand (price change has small effect on sales) Here, revenue will RISE 😇

If price goes DOWN by 15%, and this makes sales RISE by only 5% = PRICE INELASTIC demand (price change has small effect on sales) Here, revenue will FALL 👺

If price goes UP by 5%, and this makes sales FALL by 15%, is demand PRICE-ELASTIC or PRICE-INELASTIC?

Will revenue rise or fall?

Demand is PRICE-ELASTIC (price change has a GREAT effect on sales).

Here, revenue will FALL 👺

If price goes UP by 15%, and this makes sales FALL by only 5%, is the demand PRICE-ELASTIC or PRICE INELASTIC?

Will revenue rise or fall?

The demand is PRICE INELASTIC (price change has small effect on sales)

Here, revenue will RISE 😇

If price goes DOWN by 15%, and this makes sales RISE by only 5% , is demand PRICE-ELASTIC OR PRICE-INELASTIC?

Will revenue rise or fall?

PRICE INELASTIC demand (price change has small effect on sales)

Here, revenue will FALL 👺

If price goes DOWN by 5%, and this makes sales RISE by 15% , is demand PRICE-ELASTIC or PRICE-INELASTIC?

Will revenue rise or fall?

Demand is PRICE-ELASTIC (price change having a GREAT effect on sales)

Here, revenue will RISE 😇

How important is getting the price right ?

VERY, VERY, VERY, VEEEEEEEEERY IMPORTANT.