Marketing mix and strategy

Marketing mix

The collective term for the four major marketing decisions that a firm faces when trying to build a plan, or strategy for how its product will be marketed.

Factors of the design mix

• Aesthetics

• Function

• Economic manufacture

Aesthetics

The word used to describe the look, taste, texture or feel of an item

Function

Relates to whether the product does what it is intended to do and the extent to which it surpasses expectations of quality and performance

Economic manufacture

Considers the ease and the economy with which the item can actually be made on the scale required

Benefits of a good design

• Can add value

• Provides a point of differentiation

• Can reduce manufacturing costs, boosting profit margins

• Improves brand image, therefore brand loyalty

Changes in the design mix to reflect social trends

• Environmental concerns

  • Design for waste minimisation or reuse, designers are trying to minimise parts of a product that can’t be reused

• Recycling

  • Even those parts of a product that cant be reused may be able to be recycled for another use

Ethical sourcing

Media coverage has began to examine the sources of products, which encourages designers to ensure their products are ethically sourced

Promotion

Methods by the business to communicate information and persuade consumers to buy a product

Types of promotion

• Long term methods

• Short term methods

Long term methods

• Persuasive advertising

• Public relations

Short term methods

• Buy one get one free (BOGOF)

• Seasonal price cutting promotions

Public relations

Attempts by the business to create publicity that’s reported as news, such as a party for the intro of a new product

Types of branding

• Individual brand

• Brand family

• Corporate brand

Individual brand

These are single product brands, such as Marmite or Penguin. The manufacturer of these products make no attempt to push their company name, instead focusing on the singular brand

Brand family

A brand name used a range of related products, with Cadbury being a prime example.

Corporate brand

Using the company name as the brand, in the way that Nestle does, convinces consumers that all products across the range share similar benefits or drawbacks

Ways to build a brand

• Advertising

• USP

• Sponsorship

• Digital media

Advertising

This works best as a way of reinforcing the messages the company wants to send about its brand.

USP

This works best as a way of reinforcing the messages the company wants to send about its brand.

Sponsorship

This is a way of brand building by association. Sponsoring an event, a sports team or even a TV programme can help to create attachments in consumers minds that build the brands personality, e.g Redbull and extreme sports

Types of pricing strategy for new products

• Price skimming

• Penetration

Price skimming

Involves launching a brand new product at a high price while the product is unique

Advantages:

• High prices help create a desirable image for the product

• Early adopters will pay high for the exclusivity for the product

• High prices generate rapid profits- helping recover the costs of innovation quickly

Disadvantages:

• Will deter some customers as the price is seen as a rip off

• Early buyers may be frustrated when the price starts to fall

• Image may suffer when price begins to fall

Price penetration

Involves launching a product at a very low price to entice customers to try it

Advantages:

• Low prices encourage lower-risk product sampling

• Low prices boost sales volumes, lowering production costs

• High volumes persuade retailers to buy the product, boosting distribution

• Encourages customers to develop the habit of buying the product

Disadvantages:

• Product’s image may be cast as cheap

• Upmarket retailers may be unwilling to stock the product

• Likely to create price sensitivity among customers, higher elasticity

Early adopters

People who use/buy a product as soon as it comes out

Pricing strategies for existing products

• Cost plus

• Predatory

• Competitive

• Physcological

Cost plus

Deciding price by adding a desired percentage onto total costs per unit

Benefits:

• Should guarentee a profit is made on each unit sold

Drawback:

• Ignoring a market may mean an unrealistic price is generated

It is appropriate when the firm is a market leader with no competition

Predatory

A strategy that sets price low enough to force a competitor out of business.

• Often only on a local basis when competitors are smaller, local firms

Benefit:

• Once a rival has been pushed out, prices can be pushed up, increasing margins

Drawback:

• If it can be proven to specificially drive competitors out of business, predatory pricing is illegal

Competitive

Charging a price at the market average, or at a discount to the average price in the market.

Benefit:

• This should ensure customers are not put off buying the product.

Drawback:

• Firms that use a competitive pricing strategy have little control over the price they charge, thus the revenue they generate.

Psychological

Less of a strategy, and more of a tactic used to make fine tuned decisions on the price to charge, prices are set just below major psychological levels, such as £9.99 instead of £10

Advantage:

• Helps nudge customers into making a purchase by making them believe they are not spending £10 or £100

Disadvantage

• May have little effect on many planned services, and maybe even mildly annoy customers

Factors determining the most appropriate pricing strategy

The level of differentiation

• The more different, the more control over prices

PED

• Inelastic means more control, elastic likely means competitive pricing

Level of competition

• The more competition, the lower chance for a firm moving away from competitive pricing

Strength of brand

• Strong brands differentiate products, reducing price elasticity, this adds up the ability to take control over their own pricing, possibly cost plus

Stage of product life cycle

• If intro, then use intro methods

Costs and the need of making a profit

• Pricing below unit costs will lead to a loss making, which is unsustainable in the long term

Changes in pricing to reflect social trends

Online sales

• Pricing online may be more sensitive than on the high street, because online consumers will find it easier to compare prices.

• Pricing may be lower because there are lower fixed costs than a physical business

Price comparison sites appear to encourage firms to price competitively so their products and services show up as the best value

Distribution channel

The route a product takes from producer to consumer

Intermediaries

Businesses between the producer and consumer in a distribution channel, such as retailers

Traditional physical channel

Many producers sell their products to wholesalers who act as suppliers to smaller retailers. This channel pushes selling prices up as wholesalers and retailers will both add a markup, however allows smaller firms to achieve a wide distribution across many outlets

Direct to retailer

Larger producers can ignore wholesalers and sell their products in bulk to major retail chains, avoiding wholesaler markup but exposing them to tough negotiations with retail chains on price and credit terms.

Be your own retailer

Producers that want to exert complete control over how their products are sold can set up their own retail outlets. For example, Apple stores are designed to showcase their phones in the best way, but this retailing method is more costly because of this

Direct online

Producers can set up their own websites - Often at a significant cost - to allow producers to buy products directly from them, meaning the producer keeps the full price paid, but can lose customers due to being uncomfortable buying online

Online retail

For smaller producers unable to afford the expense of building slick e-commerce, existing sites like eBay allow you to reach a wide audience, without the same investment, but the disadvantage is the ebay fee.

Changes in distribution to reflect social trends

Online:

• Direct online distribution changed it in the way that you can see a wide range of products, which can be updated daily on online websites

From product to service

• Some services will never be distributed online, or in any other way than face to face, such as haircuts, clubbing, or staying in a hotel will always involve personal interaction.

Product life cycle

A pattern of sales overtime that products tend to follow.

Phases of the product life cycle.

• Introduction

• Growth

• Maturity

• Decline

Sometimes, an additional phase, development is identified as happening before launch.

Introduction

Sales are slow and rise slowly

Growth

Sales begin to rise much quicker

Maturity

Growth in sales now slows, sales stabilise at their highest level.

Decline

During this phase, sales of the product begin to fall, until the product is phased out, or an extension strategy is placed.

Extension strategy

A medium to long term plan for extending the life cycle of a product.

The two adjustments leading to a successful extension strategy

• Changes to the product

• Changes to promotion

Changes to the product

• Adding extra functions or features

• Changing ingredients/ materials

• Launching slightly different variations of the product, e.g size, shapes etc.

Change in promotion

• Targeting a different market segment

• Finding new uses for the product

• Increasing use of product among existing customers

Product portfolio

The variety/range of products a business has.

The Boston Matrix

Used to assess each product within a firms product portfolio.

The key variables considered are market share and market growth

Quadrants of the Boston matrix diagram

• Cash cow

• Rising star

• Dog

• Problem Child

Cash cow

Products in stable markets that hold high market share.

Generate high sales with low market expenditure, as a result generating high profits which can be used to develop other products in the portfolio,

Rising star

These are products in exciting and rapidly growing markets that hold a high share, and are the future money makers for the firm.

Although these products will need alot of money spent on them, to fight off competitors.

If high share is maintained, future profitability is likely.

Dogs

These products have a low share of a low growth market, therefore unattractive members of the portfolio, They are most likely candidates to be killed off.

Problem child

These products may be successful in the future, but have low market share, their potential is based on the fact that they are being sold in rapidly growing markets offering the chance of rapid sales growth.

Marketing strategy

The general approach to marketing used by a business

Mass market strategy

Selling a standard product to almost all consumers in a market

Niche market strategy

Selling specialised product to smaller subsections of the market

Benefits of a successful mass market strategy

• High distribution levels

• Greater control over advertising and promotion

• A degree of influence over pricing within the market.

Benefits of a successful niche marketing strategy

• Able to meet customer needs more precisely

• Able to charge a higher price than mass market products

• Less direct competition

Niche market strategies

The key to successful niche marketing:

• Depth of understanding of the product

• Depth of understanding of consumer tastes that take years to build up

As a result, entering a niche market can’t be rushed, a patient approach is needed to ensure customers needs are met properly.

Business to consumer strategies.

• Getting and keeping the right image for the product/service is vital.

• The goal of any business to consumer marketing strategy must be developing customer loyalty among an ever growing base of customers.

Business to business strategies

Same principles as to consumer, but price and reliability are more important as factors.

Types of marketing strategies

• Mass marketing

• Niche marketing

• B2B (Business to business)

• B2C (Business to consumer)