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

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

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)

social trends:

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

the way forward is:

• social media
• viral marketing
• emotional branding

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

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}}

5. <<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

6. [[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

7. {{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

8. }}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

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’

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