WELCOME principles of marketing marketing mix elements After going through the module, you are expected to: • Define a product and differentiate the product, services, and experiences • Identify and describe the factors to consider when setting prices and new product pricing and its general pricing approaches After going through the module, you are expected to: • Discuss the structure of distribution channels, its functions, and the nature of supply chain management • Define and identify relevant promotional tools, namely, advertising, sales promotion, personal selling, public relations, and direct marketing to create awareness and persuade the target market to buy the product or patronize the service. TOPICS • • • • Product Pricing Distribution Promotion Marketing Mix Elements • • • • Product Mix Price Mix Promotion Mix Place Mix • The constituents of marketing mix are said as marketing mix elements. • Elements are also referred as decision variables. • Marketing mix consists of mainly four elements. • Each element is also referred as mix, for example, product mix, price mix, promotion mix, and place mix. • Each mix contains a set of decisions. • They are called as 4P’s. Some writers have sited more 4P’s, but other P’s are not very practical and popular. • Additional P’s indicate duplication of one or more of basic 4P’s. • Here, our discussion is limited to 4P’s only. Figure 3 depicts four elements of marketing mix. product mix Product (mix) consists of various decisions relating to product. Product is the basic element of marketing mix because all other elements are required only when there is product. Product is the center of all the marketing activities. • Here, product includes both goods and services. • Marketer can satisfy needs and wants of consumers by product. • Product is the vehicle, medium, or means by which consumers can satisfy their needs. • Important and long-term marketing decisions on product may be termed as product strategies. product mix concerns with following decisions: 1. Development and introduction of new products 2. Matching the products with needs and wants of target consumers 3. Modifications (in term of qualities, features, and performance) on existing products 4. Product-related strategies including branding, packaging, labeling, color, weight, grading, etc. product mix concerns with following decisions: 5. Product line decisions including different varieties or models, and product mix decisions including width, depth, length, and consistency 6. Product-related services like after-sales services, home delivery, guarantee, warrantee, and demonstration 7. Study of competitive (or comparative) advantages of products 8. Product life cycle, relevant strategies for each of the stages of product life cycle, and consumer adoption process price mix • We need to set price when we have a new product, or when we enter a new market with an existing product • How? - Need to decide what position you want your product to be in. • Price mix is another important element of marketing mix. • It is considered as very critical element. • Price can be defined as the economic value of product normally expressed in form of money. • The price of product should be set in such a way that buyers can pay and company can earn adequate profits. • In case of price-sensitive customers on one hand and the prestige-sensitive customers on the other hand, the pricing decisions become vital in marketing. what are pricing objectives? why we need to change our pricing strategies What are Pricing Objectives? • To achieve return of investment (ROI). • To cover total and fixed costs expenses and salaries. • To increase the sales revenue. • To maximize profit. Why we need to change our pricing strategies? • Product Quality Leadership • Product Cost Leadership • Survival normally, pricing decisions involves: 1. Determining product development costs 2. Determining manufacturing (variable and fixed) costs the product 3. Studying pricing policies and strategies of the close competitors 4. Formulating appropriate pricing policies for the products 5. Deciding on level or margin of profits normally, pricing decisions involves: 6. Deciding on variable vs fixed pricing, price discrimination, discounts, allowances, and seasonal effect 7. Identifying and analyzing of various relevant factors influencing pricing decisions 8. Pricing policies/strategies in different stages of product life cycle 9. Deciding on price-setting methods 10. Pricing decisions for direct and indirect distribution of products Pricing Strategy Pricing Strategy is the tactic that company use to increase sales and maximize profits by selling their goods and services for appropriate prices. Pricing Strategy Pricing strategy means is a plan that companies follow when setting prices for their products or services to maximize profits. How to Price your product: Five Common Pricing Strategies 1. 2. 3. 4. 5. Cost Plus Pricing Competitive Pricing Value-based pricing Price skimming Penetration pricing Cost Plus Pricing • simply calculating your costs and adding a mark-up Competitive Pricing • setting a price based on what the competition charges • setting a price in comparison with competitors. • a company has three options and these are to price lower, to price the same or to price higher. Value-based Pricing • setting a price based on how much the customer believes what you’re selling is worth Price Skimming • setting a high price and lowering it as the market evolves. • Involves setting high prices when a product first enters the market to ‘skim’ profit from those willing to pay more before gradually lowering the price to reach the remaining markets. • Applies you new, distinctive products, early in the Product Life Cycle> Penetration Pricing • setting a low price to enter a competitive market and raising it later • Penetration pricing is a marketing strategy used by businesses to attract customers to a new product or service by offering a lower price during its initial offering. promotion mix what is a promotional mix? • the different advertising strategies used to achieve goals for your product • Promotion mix deals with those activities directed to increase sales volume. • It is also known as market communication. • In today’s marketing practices, market promotion has much vital role. • Promotion mix involves all those efforts directed to increases sales of products on a continuous basis. • It includes providing information to customers, inspiring them to buy, and offering incentives. • Note that market promotion is concerned not only with raising sales volume, but it is also a tool for establishing longterm relations with the parties involved and is a matter of image, reputation, and goodwill for the company. objectives of a promotional mix Objectives of a promotional mix: Increase demand for your product Inform customer about your product distinguish your product in the market place elements or tools of promotion mix Elements or tools of promotion mix advertising selling direct/ personal selling sales promotion Public relations/ publicity • Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor. • A short term incentive offered to encourage buying a good or service. • Can be directed at the following parties: manufacturer, retailer, employees • A promotional method in which one party (e.g. sales person) uses skills and techniques for building personal relationship with another party (e.g. involved in a purchse decision) that results in both parties obtaining value. • An interactive system of marketing that uses one or more advertising media to effect a measurable response and/ or transaction at any location. • Public Relations: Any activity designed to create a favorable image toward a business, its product, or its policies. • Publicity: a non-paid (free) form of placing positive, newsworthy information about a business or its products in the media. • Press Release: an official statement issued to media giving information on a particular matter, place mix • In the marketing mix, the process of moving products from the producer to the intended user is called place. • In other words, it is how your product is bought and where it is bought. • This movement could be through a combination of intermediaries such as distributors, wholesalers and retailers. • Place mix is related to distribution of product. • This element of marketing mix basically concerns with physical distribution and channel of distribution. • This is the last element of marketing mix but very important as marketing goals can be achieved only if the products reach the hand of consumers conveniently. • This element concerns with making the products available to the customers effectively. • That means, the right products can be made available to the right consumers, in the right way, at the right time and at the right place, and in the right form. place decisions involve 1. Studying geographical concentration of customers 2. Studying types of distribution channels and channel members 3. Analyzing various relevant factors affecting channel decisions 4. Selecting suitable channel of distribution. place decisions involve 5. Strategic decisions related to distribution activities 6. Physical distribution including transportation, communication, warehousing, inventory control, insurance, banking, etc. 7. Balancing distribution costs and selling price 8. Designing a suitable distribution network, and long-term distribution strategies 9. Developing and adopting logistics management for effective distribution of products Table 3 shows the summary of key decisions in each of the marketing mix elements . Main Marketing Mix Elements Key Decisions in Each of Marketing Mix Elements Product Mix • • • • • • • • Product Mix, Product Line And Product Items Product Qualities Product Features Product-related Services Brand and Branding Packing and Packaging Labelling Issues Relating to New Production Development • Product Life Cycle • Consumer Adoption Process Price Mix • • • • • • • Pricing Objectives Price Setting Responsibility Component of Selling Price Factors Affecting Pricing Policies Price-Setting Methods General Pricing Policies Issues Relating to Discount, Price Allowance and Rebate, Cash vs credit price, price discrimination, etc. (Market) Promotion • • • • • • • • Promotion Objectives Promotion Budget Decisions on Market Promotion Tools: Advertising Personal selling and sales force Sales Promotion Publicity and Public Relations Measuring Promotion’s Cost vs Contribution Place (Distribution) Mix Objectives of Physical Distribution Key Decisions of Physical Distribution: Transportation Warehousing Inventory Management Insurance Billing and Collection, etc. Direct vs Indirect Distribution Market Channel Options and Selection of Suitable Option • Channel Members’ Services • Market Logistics Management • • • • • • • • •