The Marketing Mix
Also referred to as the 4Ps
Human Responsibility – 4Ps
Marketing Mix
The balance of product, price
promotion and place is the key
to products being successful in
the market place.
The 4 Ps
•
•
•
•
The right Product
At the right Price
Where Promotion is appropriate
And it’s sold in the right Place for the type
of product it is
The Product
•
•
•
•
Product
Price
Promotion
Place
The Product
• An object or a service that is mass produced or
manufactured on a large scale with a specific
volume of units. A typical example of a mass
produced service is the hotel industry. A less
obvious but ubiquitous mass produced service is
a computer operating system. Typical examples
of a mass produced objects are the motor car
and the disposable razor. www.wikipedia.com
The Product
• For a product to be successful it will need to be
carefully designed, developed and tested.
• Which costs money.
• The product is refined and made ready to be
launched to the public.
• A graph of sales can then be plotted over the life
of the product, this is called the PRODUCT LIFE
CYCLE
• X = Time and Y = volume of sales
Product Life Cycle
Can you label each section of a product’s lifecycle?
Maturity
Volume of Sales
Growth
Decline
Obsolete
Introduction
TIME
Development
1
2
3
4
5
6
Introduction
• Once a product has been developed by the R&D dept of
a firm it is ready to be launched on the market.
• At this point the sales will begin to climb slowly over
time, hence the graph rises slowly (slow rate of adoption)
• cost of product will be high
• sales volume low
• no/little competition - competitive manufacturers watch
for acceptance/segment growth
• There may be losses
• demand has to be created by a marketing strategy
• customers have to be prompted to try the product
Growth
• The sales continue to rise as the public become
aware of the product
• costs reduced due to economies of scale
• sales volume increases significantly, the graph
rises rapidly (faster rate of adoption)
• profitability
• competition begins to increase with a few new
players in establishing market
• prices controlled to maximize market share
Maturity
• Mature stage
• costs are very low as you are well established in market
& no need for publicity.
• sales volume peaks
• increase in competitive offerings
• prices tend to drop due to the proliferation of competing
products
• brand differentiation, feature diversification, as each
player seeks to differentiate from competition with "how
much product" is offered
• very profitable
Decline
•
•
•
•
•
Decline or Stability stage
costs become counter-optimal
sales volume decline or stabilize
prices, profitability diminish
profit becomes more a challenge of
production/distribution efficiency than increased
sales
• consumer demand for spare parts, maintenance
and or product servicing
Obsolescence
•
•
•
•
Product no longer manufactured and sold
New product has replaced this one
End of the line
Obsolete
Revitalisation
• Before the product reaches death whilst it
is in decline
• The product can be revitalised
Revitalisation
Maturity
Volume of Sales
Growth
Decline and
revitalisation
Product life
extended
Introduction
Development
TIME
Frequent Revitalisation
Maturity
Volume of Sales
Growth
Decline and
revitalisation
Product life
extended
Fast rate of
adoption
Introduction
Development
TIME
FAD products
A Fad product has a very short life cycle
and is very quickly adopted onto the
market. This quick adoption rate is
given by the rapid rise in the graph.
Maturity is very short and decline
equally rapid.
Volume of Sales
Maturity
Decline
Growth
Introduction
Development
Death
TIME
FASHION products
Maturity
Decline
Volume of Sales
Growth
A Fashion product has a
very rapid rate of
adoption onto the
market. This quick
adoption rate is given by
the rapid rise in the
graph. Maturity and
decline can depend on
the fashion in question.
Death
Introduction
Development
TIME
Trends in FADs
Volume of Sales
FADs come and go very quickly, but with FADs come trends. A trend is plotted by
looking at the performance of the FAD products on sale. If you consider, yoyos,
utube, myspace, so there is a trend towards using PCs and away from conventional
toys
Yoyo
Utube
Myspace
Death
TIME
Volume of Sales
Slow rate of adoption
A product that is adopted slowly has a low growth in sales, tending to have a longer
lifecycle.
Growth
Maturity
Decline
Introduction
Development
TIME
Volume of Sales
Mobile music lifecycles
Ipod MP3
player
Walkman
CD Walkman
iPhone
1980
1985
1990
1995
2000
2005
TIME
Product Churning
• Some companies deliberately keep the
lives of certain products short
• Producing new and improved products at
frequent intervals.
• This stimulates purchasers to have the
‘latest’ version of the product.
• Popular in the 1980s with electronics and
car industry
Product
• In summary
• A product is examined on three levels:
– The core product is the benefit of the product,
for example the convenience of a car
– The actual product is the tangible, physical
product, for example the car
– The augmented product is the customer
service support offered, for example warranty,
guarantee and after-sales service
Product
• In summary
• The quality of a product depends on
factors such as its:
– Aesthetics
– Performance
– Maintenance, ease of servicing
– Durability
– Range of features
– Ease/effectiveness of use
– Brand name
Marketing Mix
Product
Price
Promotion
Place
Price
• The price of a product can be a significant
determinant in the market success of a
product. Pricing is a complex business,
and the price will be determined by a
number of factors
• The objectives of the company
• Elastic demand
• What the market will bear
• Cost of production
Company Objectives
• Price will depend on:
• Whether the company is seeking to maintain or
expand its market share
• Whether it is trying to reach a certain return for a
level of investment
• Whether it is trying to achieve a steady rate of
growth
• Whether it is trying to keep up planned levels of
output
Elasticity of demand
• Price can be determined by elastic demand
• Elastic demand is determined by how much
demand changes with a small change in price
• If demand remains the same when there is a
price change then it is said to be inelastic
• If demand changes dramatically when there is a
change in price it is said to be elastic.
What the market will bear
• Price can be affected by the type of product
being sold
• Radically new products are harder to determine
a price for than products that are developments
on existing offerings.
• When this is the case market research needs to
be carried out in order to determine what the
highest price can be charged to ensure a
targeted level of sales.
designer v traditional
Traditional
Radically New
Costs
• Price will always be affected by costs
• Material Costs – which are variable, raw
materials etc
• Production Costs – fixed, machines, tools,
buildings
• Distribution costs – variable, transportation
• Higher volume of sales will mean lower
production costs and likewise lower volume of
sales will lead to higher production costs. This is
known as economy of scale.
Henry Ford’s production line
Pinball machine production line
Costs
• Working out the final price can be calculated by
a cost plus strategy.
• This involves estimating the average cost of
producing and marketing the product and adding
a mark up for profit.
• contribution pricing is similar, but takes
account of the variation of production costs for
different levels of sales
Price
• A company may choose to not to use any of the
above to determine the price.
• It could set it’s price to compete with a rival
company.
• It could also set its selling price by using a
market research strategy to determined
perceived value.
• Such a strategy will usually be accompanied by
a promotional strategy and emphasise quality
and value of the product.
Price and the Product Life Cycle
• The strategy adopted to determine a
product’s price will change throughout its
lifecycle
• Early in a product’s life the price maybe
high however the price will reduce by
improvements in the production process
and economies of larger scale production.
Price and the product life cycle
Volume of Sales
Maturity
During the introduction phase
of a product’s life a pricing
strategy could be to price the
product low to stimulate
interest. This is known as
MARKET PENETRATION.
Alternatively you might price
the product at a high level to
reach a smaller target market
and create an image of
exclusiveness and quality.
This is know as MARKET
SKIMMING
Growth
Decline
Product sales
dying
TIME
1
2
3
4
5
6
Volume of Sales
Price and the product life cycle
During the growth stage the aim
of a company will be to keep
prices steady in order to
encourage new and repeat
purchasers. However during this
phase of a product's life the
competition will be known and it
is possible that either the price of
the product will be reduced to
make the product more
competitive or new features will
be added to the basic product to
give it added value
Maturity
Decline
Product sales
dying
TIME
1
2
3
4
5
6
Price and the product life cycle
During the maturity stage the aim
Volume of Sales
Maturity
Decline
Product sales
dying
TIME
1
2
3
4
5
6
Price and the product life cycle
Volume of Sales
In the decline phase of a product life cycle decisions will have to be made about how
long the decline can be sustained. The strategies may not involve price changes but the
company will look for ways in which to cut the costs that they incur in producing,
distributing and marketing the product
TIME
1
2
3
4
5
6
Trigger and Incremental Products
• Another aspect of product development is
the distinction between trigger and
incremental products a company will sell.
• Trigger products will be marketed on their
own merit but incremental products are
sold on the goodwill created by the trigger
product.
Trigger Products
• TRIGGER products are key products in a
company’s product range which will
prompt a potential customer to make a
purchase.
• Examples are computer hardware and the
operating software.
• Tesco’s TRIGGER products are its range
of groceries.
Incremental Products
• INCREMENTAL products are not worth
buying on their own, they are add ons to
the purchase of a trigger product.
• Examples are computer printer and the
word processing software.
• Tesco’s incremental products are its
services like photography, insurance and
the like.
Volume of Sales
Consumers
Early
Late
majority
majority
Early
adopters
Laggards
Innovators
TIME
Categories of purchaser
• Innovators are those consumers most likely to take a risk
and buy radically new innovations
• Early adopters are slightly more cautious than innovators
but are the targets of a company’s marketing strategy
• Early Majority wait to see a product become established
before taking the risk.
• Late majority wait until they see the price drop, or for
special offers which will enable them to purchase.
• Laggards purchase at the end of a product’s life from
cultural or financial reasons. They may just feel
compelled to buy the product for social reasons.
Price – a summary
•
•
•
•
•
Demand
Costs (need to cover all costs incurred)
Government taxes
Competition
Stage in the life cycle (price increases in
growth and falls decline)
Price – a summary
• Methods of pricing include:
– Penetration pricing – price set artificially low
to gain market share; once achieved, the
price is increased
– Price skimming – if product has competitive
edge, a high price can be set; this will fall with
increased supply
– Psychological pricing – charging £1.99 rather
than £2.00
– Predatory pricing – undercutting competitors,
creating price wars
Marketing Mix
Product
Price
Promotion
Place
Promotion
• If a company’s products are to succeed
people need to know about them.
• Promotion is about image creation both
for the company and for specific products
and about creating loyalty to brands and
products in various ways including the use
of monetary incentives.
Promotion
Sales Promotion
• In store promotions known as push
strategies
• Newspaper adverts or coupons to
encourage purchasers to seek out the
product, known as pull strategies
Advertising
• A radically new product will need to be
launched on to the market in such a way
that potential purchasers understand what
the product does, as well as selling the
idea that it is worth buying
• Dyson Adverts
Advertising
• The Dyson vacuum cleaner did
this very well.
• A new concept was advertised
on TV and in newspapers.
• The product was made
colourful in order that potential
purchasers saw a design
element to it.
Advertising
•
•
•
•
•
•
•
Newspapers and Magazines
TV
Hoardings
Leaflets
Posters
TV channels
Internet (viral)
Publicity
•
•
•
•
•
Unlike advertising
Newspaper articles
PR Public Relations
Image
Company doesn’t control what others write
Personal Selling
• Door to door
• Cultivate contacts
• Salesperson can persuade potential
customer to buy
• Sales force
Exhibitions and Trade fairs
• Trade fairs useful for influencing ‘those in
the trade’
• Home Exhibition
• Boat Show
Promotion - summary
• Promotion
– Decisions have to be made on how best to
promote the product and bring it to the
attention of potential customers.
– The intention is to win new customers or
persuade them to change brand loyalty.
Promotion - summary
• Methods include
– Short-term promotions such as Buy One Get One
Free (BOGOF), competitions and coupons
– Exhibitions and trade fairs
– Publicity campaigns
– Personal selling/sales representatives
– Can be expensive and risky, careful budgeting
required.
– The acronym AIDA is used with promotion and
advertising: draw attention, create interest, generate
desire, invite action.
Promotion - summary
• Advertising
– Advertising is used to bring a product to the
attention of potential customers.
– When deciding on the appropriate way to
advertise a product you should consider
• overall costs,
• the target market or audience
• and the most appropriate medium.
Promotion - summary
Medium
Advantages
Limitations
Cost issues
Television
Very high, mass market
coverage; low cost per
exposure; can generate
powerful emotive
response; can include
images; sounds and
special effects
Quick, fleeting
exposure; target
markets selected by
scheduling, for
example between
4opm and 6pm for
children
Expensive: key
viewing times
very expensive
Radio
Very good local impact; high
geographic selectivity;
national radio effective
for consumers on the
move (for example in a
car)
Audio only; fleeting
exposure; fairly low
attention,
background ‘noise’
Relatively low cost
for local radio.
Higher rates for
national
commercial
stations
Promotion - summary
Newspapers
and magazines
Very good local markets,
national or geographic
selected coverage; broad
acceptability; high
believability; prestige;
magazines often very highquality images
Very short life; generally
poor image quality in
newspapers; no
guarantees of positioning
of advert
High cost in
national and
prestigious
magazines; right
hand page often
more expensive
than left
(readability)
Direct mail
Very high audience selection;
can be personalised with
mail-merge systems
Often discarded as junk
mail; poor image
Relatively high cost
per exposure
Billboards
Flexibility; high repeat
exposure; local targeting;
positioned in high traffic
areas to catch mobile
consumers; some are
electronic with several
adverts repeating
Little audience
selectivity; image only;
easily vandalised
Generally low cost;
key sites (for
example outside
airports) can be very
expensive
Promotion - summary
Online
High selectivity; instant; can
be powerful, moving images
and sound; can be as long as
viewer wishes; can be
interactive; direct access to
supplier; increasingly popular
Small by rapidly
growing audience;
relatively low impact;
anxiety over invasion of
personal space; linked to
spam and spyware
Low cost; purchases
can be made
directly for the
advert
Marketing Mix
Product
Price
Promotion
Place
Place
• Place refers to how the product is
distributed to the target market
• “In the right place at the right time”
– Geographical Placement
– Physical Placement
– Direct Marketing
Place
• Geographical Placement
– Local
– Regional
– National
– International
• Companies sometimes launch products in
one location to see how they will sell
Place
• Physical Placement
– Right place right time
– JIT (just in Time)
• JIT
– Costs in transport not storage
– Diverse destinations
– Missing launch dates impact on publicity
– Efficient
Place
• Direct marketing
– Door to door
– Mail order
– Company owned stores (SONY)
Place - summary
• Place
– Or placement refers to the location where a
customer can purchase a product. It is
sometimes known as the distribution channel.
It can include any physical store or shop as
well as TV shopping channels and the internet
Place - summary
• There are four main channels of distribution:
–
–
–
–
Manufacturer-Consumer e.g. mail order, farm shops
Manufacturer-Retailer-Consumer e.g. high-street stores
Manufacturer-Wholesaler-Consumer e.g. furniture
Manufacturer-Wholesaler-Retailer-Consumer e.g. medium-size
convenience stores (large supermarkets often cut out the
wholesaler)
• Functions of distribution channels include: contacting
prospective buyers; matching the offer to the buyer’s
needs; negotiating agreement on price and terns; and
storing and transporting the products.
Marketing Mix
SAQ Task
Task
• Use a product of your choice and explain
how each stage of the product life cycle is
catered for in the design process.