1.3 Marketing Mix Flashcards
What is a Good?
Physical product for the customer
What is a Service?
Something the business does for the customer
Core Product
What the customer wants to get out of the product. The benefit of having that product and makes it valuable to have.
Actual Product
What the product is. The design, its quality.
The Augmented Product
The extras to the product- Non- physical part of the product. Adds to its value.
Design Mix: Aesthetics
Appearance of the product; its shape, smell, size, taste or presentation. Does it fit the segment?
Design Mix: Function
Does it do what its supposed to do? Its extra features and unique selling point (USP) A product must be fit for purpose, which means its capable of doing its job.
Design Mix: Cost
Do the economics make sense? Compare the intended price vs variable cost per unit.
Examples of changing the Design Mix for social trends
Waste Management- Products that can be wasted easily
Design for reuse- Products that can be reused or taken apart for easy repair.
Design for recycling- Increased use or recycled materials in products.
Pros of Resource Depletion Strategies
Save money through more efficient use of raw materials, packaging and technology
Allows you to cut waste disposal costs
Compliance with environmental legislation becomes cheaper and easier.
Cons of Resource Depletion Strategies
Businesses may need to redesign products and production methods
Sourcing of recycled materials can be difficult.
Ethical Sourcing
Businesses only use materials, components and services from suppliers that respect the environment, treat their workers paying them well. Providing a safe working environment and generally trade with them honestly.
Pros of Ethical Sourcing Strategies
Used to market the business and build brand trust
Can help attract investors
Motivates staff and promotes loyalty as they’re happier to work ethically
Cons of Ethical Sourcing Strategies
Finding ethical suppliers can be hard and expensive
Need to balance profit margins with what they’re prepared to pay.
Production costs are increased
Factors influencing prices: Target Market
If PED for target market is inelastic then a higher price can be set but if the demand is elastic then prices must be competitive
Factors influencing prices: Customer Expectations
Most markets have a range of prices that customers expect products to fall into. Businesses need to ensure products are not priced higher or lower than the range.
Factors influencing prices: Competition
In a monopoly, firms can set prices. In highly competitive markets, firms have to keep prices close to other firms to stay competitive.
Factors influencing prices: Production Costs
Price needs to cover production costs and distribution. Should also include a margin of profit for the manufacturer. The cost of production should be fixed before fixing price of the product.
Factors influencing prices: Business Objectives
Businesses want to maximise profits, will set high prices. If they wait to grow, increase sales then lower prices may be set.
Prestige Pricing
Pricing at near or at the end of the price range to help attract the status of a high end product.
Price discrimination
Customers charged different prices based on backgrounds or affordability.
Skimming
Set price high and lower it overtime to gain more customers and market share
Promotional Pricing
Reducing the price of product or service to attract customers for short period of time.
Going rate Pricing
Establishing the price of the product or service based on prevalent market price.
Distribution
Process of getting the right product or service to the customer in the right place
Channels of distribution
Paths the businesses use to get the goods from the manufacturer to the consumer
Wholesalers
Take large quantities from the manufacturer and distribute them to smaller stores in a local area
Benefits of Wholesaler
Deals with the storage of product
Sells them off
Employs sales to increase sales
Cons of wholesaler
Wholesaler will need to make a profit so final price is higher
Businesses has no direct contact with the consumer
Retailers
Buy the goods from a manufacturer, distributor or wholesaler and sell them on to the customer at a marked up price
Benefits of a Retailer
Spread over the country so sales can be increased
Display product, creating an appropriate image offering customer care
Cons of a retailer
Competition between retailers may lead to a lower selling price of the product
Direct Distribution
Products being sold directly from the manufacturer to the consumer
Benefits of Direct Distribution
Full control over sales process
Sell direct means you can get direct feedback
Cons of Direct Distribution
High costs developing and managing sales expenses
Higher costs of distribution
Difficult to grow the business quickly
Online distribution
Selling online
Products can reach a wider range
Low barriers to entry as set up costs are small
Home Delivery
Customers have a high expectations for home delivery, next day, click and collect, tracking purchases
E-Commerce
buying and selling of goods and services online
M-Commerce
buying and selling of goods and services though a mobile device
Impacts of E-Commerce
Reduction in sales of high street stores who can’t compete with online businesses
Retailers of CD’s have been completely replaced by online retail
Clothes shopping becomes popular in online retail
Supermarkets now offer online shopping and delivery
Multi- Channel Distribution
Use of several methods of distribution in order to maximise sales, profit and loyalty by giving customers choice and convenience
Product Portfolio
Range of products made by a business
Advantages of product portfolio
Target new customers
Spread risks
Increase sales and profit
Disadvantages of Product Portfolio
Increased advertising
Danger of cannibalisation
Lack of economies of scale (Bulk Buying)
Boston Matrix: Cash Cow
Very profitable products with an established brand image
Boston Matrix: Star
Products that have high market share of potentially high products
Boston Matrix: Question Mark ?
Poor situation for marketing, people have a product in a fast growing Market but the products aren’t selling
Boston Matrix: Dog
Low market share in a mature market- not generally worth spending money on redeveloping and designing on older products as it won’t result in more sales
