marketing mix

what is the marketing mix?

The Marketing Mix is the combination of all the factors that influence the customer’s buying decision. It describes the range of marketing activities that a firm tries to use to meet the expectations of customers.

product

This is the good or service that is being provided for sale.

price

This is the amount charged by a business for its products.

• penetration pricing: A firm sets a low price to make it appear price competitive and therefore increase sales. As consumers build up trust in the product, the firm will raise the price back towards market price.

• cost-plus pricing: This is where the firm will calculate the average cost of producing a product then add on a mark-up.

• skimming: This is where a firm sets a high price due to a lack of competition or because of the R+D costs. It is often used by a firm if they have a new or improved product and therefore have a short-term monopoly.

• value-based pricing: is about setting a price to capture the value that a potential customer receives. This is a customer focused pricing strategy but the drawback is that the business must ensure that costs are recovered in setting the final price or it will incur losses.

factors a business may consider when setting a price

Price Elasticity of Demand

 The stage of the product life cycle that the product is at

 Whether the product has a USP which may allow the business to charge a

premium price

 The brand strength of the product. A strong brand reputation makes it more

likely that they can charge a premium price.

 The state of the economy

advantages and disadvantages of reducing price

put other businesses under pressure

 Cutting prices is likely to be very popular with consumers and may increase

market share significantly.

 If demand for the product is likely to be price elastic cutting prices should

mean that total revenue is actually increased.

It may begin a price war with competitors

 Reduce profit margins

 Consumers then expect prices to be kept low all the time which affects long-

term profitability

 May affect brand image negatively as consumers equate price with quality.

promotion

marketing activities aimed at making customers aware of products and gaining their attention. The aim is to persuade customers to buy the product.

advertising

• Increased awareness of the product therefore higher sales

• Increases the chances of turning the product into a brand name therefore gain a competitive edge

• Provides the opportunity to inform and persuade potential customers

• Allows a business to target

• expensive

• may not be seen/ignored

sales promotion

This is a short-term incentive used to encourage a consumer to purchase a product.

• Customers should gain greater satisfaction/utility either through

getting something extra or paying less therefore better value for

money resulting in higher sales

• It should allow more people to try the product and as a result give

the business the chance to gain more loyal customers

• Higher costs of providing the sales promotion

  therefore this will have an impact on short

  term profit

• Customers may expect the offers to continue

  in the long term and they may stop buying

  when they are withdrawn

• They may damage the brand image

joint ventures

This is where two or more businesses collaborate to promote a product/service.

• increase their advertising audience, enabling them to reach more customers with their marketing message.

• In addition, companies might combine assets and resources such as employees, databases, and market research and products lines.

• Joint venture marketing agreements also do not carry large risk because both companies share in the success or failure of the marketing campaign and therefore, both organisations will work hard to ensure the venture succeeds.

reasons to use social media to promote a product

 Increased customer awareness of the business

 Increased market share, sales and profits

 Improved reputation

 Free publicity

 24/7 exposure of the business

 Target a wider audience

 Allow the business to carry out important market research

 Improved communication with customers

factors to consider when deciding on promotional budget

 The current cash flow position of the company

 The amount spent by competitors

 The potential size of the market/return expected from promotion

 The importance of making the trademark known in a market

 Type of promotion chosen determines expenditure needed

 The state of the economy

 The stage in the product life cycle

importance of promotional strategy to a business

 Ensuring adequate product differentiation aimed at increasing brand

awareness and market share.

 Developing brand loyalty aimed at increasing sales and staff motivation.

 Increasing profitability.

 Costs of engaging in a promotional strategy due to the expense incurred with

no guarantee of success.

Place is about how a business gets its products to the customers. This involves the channel of distribution a product follows and how a product is made available to the customer.  Retailers. Distributors / Sales Agents. Direct (e.g. via e-commerce). Wholesalers.

a business chooses its channel based on the following:

 The cost of the distribution channel

 The level of control over the channel

 The geographical area covered by the channel

 The reliability of the channel

 Adaptability. The business needs to be prepared to adapt to technical

developments

 Consumer habits and social trends

 Having a balance of distribution channels

people

When a service is provided a great deal of the utility gained comes from the staff that you have dealt with. Consumers are more likely to be loyal to a firm if the employees of the firm deal with their purchase in a pleasant, friendly and professional manner.

processes

These are the systems employed by the firm to make sure that the services are successfully provided to their customers. This includes purchasing methods, delivery and after sales service.

physical environment

The way that a business is physically set out can influence the experience enjoyed by the customer. The website of the firm also influences the success of the business. The physical environment refers to the design and layout of the premises in which the product is sold. This is seen as being important in determining whether or not a sale is made. Examples of relevant factors include: car parking, restaurant facilities.