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The marketing mix

a model to help firms develop an effective marketing strategy

+4Ps:

  • Product - the design mix
  • Promotion
  • Place - distribution method
  • Price

Product:

economic manufacture combined with the overall design of a product

needs to take into consideration social trends:

→ the ways society as a whole behaves and the values that determine that behaviour

e.g., health issues, being environmentally healthy, ethical sourcing, waste minimisation, scarce resource depletion (sustainability)

4Rs:

  • rethink - consider need vs want
  • reuse - buy second-hand
  • recycle - become materials for new products
  • recover - energy from waste

landfill - materials are buried

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basic ethical sourcing principles:

  • creating opportunities for economically disadvantaged producers
  • integrity
  • capability building
  • fair payments
  • working conditions
  • gender equality + children’s rights
  • the environment

Benefits of adapting the product to meet social trends:

  • benefits to firms:
    • cuts back on costs
    • stands up to competition
    • wider audience
  • benefits to consumers:
    • healthier/more sustainable etc
    • confidence + trust in products
    • cheaper prices
    • range in what you can buy

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Promotion:

the part of the marketing mix that focuses on persuading people to buy the product

branding - the skill of giving a product its distinctiveness

brand names - create an identity for products and highlight the ways they are different from competition

brand loyalty - refers to the way how customers will make many repeat purchases

types of branding:

  • individual brands (e.g., Unilever has Marmite)
  • umbrella (family brands) (e.g., Cadbury)
  • corporate brand (e.g., Nestle)
  • own label brand (e.g., Waitrose economy)
  • personal brand (e.g., the Beckenham’s)

objectives of promotion:

  • to tell customers about a new product
  • remind customers about an existing product
  • research a widely dispersed target audience
  • to show consumers that rival products aren’t as good
  • to persuade potential customers to buy it
  • to improve and develop brand image

types of promotion:

  • advertising
  • celebrity endorsements
  • sponsorship/donations
  • logo
  • press releases/events/donations
  • below the line
  • BOGOF
  • displays
  • gift cards/loyalty cards
  • competitions

The type of promotion that is best, will rely upon:

  • price range - budget availability
  • target demographic
  • product
  • legal requirements
  • competition

advertising:

Television adverts (3 types)

  • informative advertising - features of the product

main aim: designed to increase awareness of a product by focusing on the features of the product

  • persuasive advertising - better than the competition

main aim: adverts designed to put pressure on a customer often to buy their product rather than the competition’s, often appeals to emotions

  • reassuring advertising - existing customers bought the right choice

main aim: adverts aimed at existing customers and that they were right to buy the product

+ seen by large numbers of people

+ a quick way of reaching out to potential customers in a given area

+ informs and persuades so as to increase sales

+ can be tailored to suit the needs and size of the market

- with so much advertising about, it can be difficult for an advert to get noticed

- can be very expensive

- no way to assess how many people saw it/reacted to it

- many fast forward through the adverts, as so much is no longer live

Digital promotion

  • Facebook pages, online advertising, advergaming, social marketing, viral marketing

main aim: aimed to attract customers from online users

+ it is cheap and has the potential to reach a large number of people

+ the internet never sleeps so reaches potential customers at all times all over the world

+ once started a campaign can develop a life of its own without any need for the firm to be involved

- there is a lot of competition

- customers can easily ignore it - scroll past/skip

Sales promotions

  • gifts, coupons, BOGOF, loyalty cards, competitions

main aim: to increase sales by making the product cheaper

+ tempt customers to buy now and so save money

+ hopefully leads consumers to ignore rival more expensive options

+ some offers will develop customer loyalty

- some customers will take advantage of the cheap offer and stock up, leading to reduced profit margin for the firm

Public relations

  • press releases, press conferences, sponsorship, donations

main aim: to increase sales by improving the company’s image

+ reaches a wide range of people

+ enhances a firm’s reputation leading to greater sales or customer loyalty

- can be expensive

- no guarantee it will have any effect on customers

- sponsorships etc can backfire

Merchandising and packaging

  • product layout, display material, well-stocked shelves, nice looking store, mood lighting and music etc

main aim: to increase sales by making the product eye catching

+ placing products by the checkout increases compulsive buys

+ can often be cheap as all you are doing is moving merchandise around

+ enhances the shopping experience so can build customer loyalty

- designing new packaging can take time and expense

Direct mailing and direct selling

  • cold calling

main aim: creates direct contact between the salesperson and the customer

+ message can be adapted to suit the customer and any queries can be handled so increasing the success rate

- people dislike cold callers which can damage the firm’s reputation

- can be very costly to employ and train a skilled sales force

Exhibitions and trade fares

main aim: enables the firm to do face-to-face sales to both commercial buyers and consumers

+ products can be tested out on consumers before a full launch

+ products can be demonstrated and questions answered

+ often attracts media interest which gives free advertising

- can be expensive

- if don’t have skilled staff can result in few sales

reasons to create a recognisable brand:

USP → recognition → build reputation → brand loyalty

  • be able to sell the brand (if you create a good one)
  • help to make them stand out in markets
  • create an image suitable for target demographic
  • stand out in the market
  • USP
  • enable them to charge a higher price

brand loyalty leads to:

  • trust
  • habit purchasing
  • easier when shopping, knowing you can trust the company for quality
  • identify with brand/image (status symbol) (like what the brand says about them)

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social trends:

[[==traditional advertising is dead==[[

the way forward is:

  • social media
  • viral marketing
  • emotional branding

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Place:

distribution - getting products to the right place at the right time for consumers

it is so important because:

  • it can be the biggest barrier to entry for a new firm
    • can’t sell anything if you can’t get the product from A to B

<<a distribution channel is the route taken by the product as it moves from the producer to the consumer<<

choosing the right channel depends on:

  • the nature of the product
  • the market
  • the nature and size of the firm

distribution channels:

  • 2 stage distribution channel (producer → customer)

    + allows to sell at higher price

    + you can keep all profits

    - lower customer base

    - you have to pay for storage (+delivery if online)

    - more expensive for customer may steer them away

  • 3 stage distribution channel (producer → retailer → customer) RETAILER IN CONTROL

    + allows to spread product further

    + trustworthy retailer makes customers feel product is trustworthy

    - can be very expensive to pay retailer

  • 3 stage distribution channel (producer → retailer → customer) PRODUCER IN CONTROL

    + no storage costs

    + don’t have to worry about making sales → can focus more on the product

    - if the retailers are rude etc, it ruins the firm’s reputation

  • 4 stage distribution channel (producer → wholesaler → retailer → customer)

    + don’t need storage (no storage costs)

    + able to focus on the products

    + paying for wholesaler expertise in managing and selling product

    - have to rely on the wholesaler to distribute goods

    - less profit

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Price:

price x quantity = revenue

revenue - costs = profit

4 main pricing types:

  1. <<cost plus pricing<<
  2. [[competitive pricing[[
  3. {{psychological pricing{{
  4. }}predatory pricing}}

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  1. <<cost + % mark up = price<<
    • is simple but doesn’t take into account the competition (focus on product vs competition)
    • often used in the food industry and retail stores
  2. [[setting prices in line with or slightly below the competition[[
    • ideal in a highly competitive market, often high volume, low margin, but it costs money; you need to undertake research
    • often used in the supermarket industry, cars, phones, holidays, airlines
  3. {{setting a price designed to put notions of value/exclusiveness into the minds of customers{{
    • e.g., 99p vs £1
    • often used in retail stores
  4. }}setting prices at below-cost prices so that you put the competition out of business}}
    • usually leads to the victor raising their prices once the competition dies
    • illegal under UK, EU+ US laws but hard to prove → only predatory if the pricing lasts 6 months+
    • e.g., Tesco avoided the law by making the pricing lower for just under 6 months

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factors to take into account for pricing:

  • cost of raw materials
  • cost of labour
  • income
  • cost of production
  • price of competition
  • quality of product

2 main pricing strategies:

  1. <<price skimming<<
    • setting an initial high price when launching a new product, aimed at getting extra revenue + testing the market to see what price it will take
  2. [[penetration pricing[[
    • setting an initial low price when launching a new product, with limited short term profit, in order to build market share before switching to a more profitable price
    • usually in the form of an ‘introductory offer’

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choosing the right pricing strategy:

have to take into account:

  • the level of competition
  • the costs of the company relative to its revenue
  • where a product is on its product life cycle

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