1.3. Marketing Mix & Strategy Flashcards
Marketing Mix ( 7 P’s )
Product : Meets customer needs / wants ( Design & Features )
Price : How they pay? / How much they pay? ( Cash, Card,
Payment Plan, Discounts)
Promotion : How do you communicate product to potential customers? ( Visibility, Advertising, )
Place : How product gets to the customer ( Location, Retail Outlet, Wholesalers )
People : People who serve you ( Leval of Training / Expertise )
Physical Environment : Influence shopping decisions ( How much you spend )
Process : Ease of transaction ( Digital / Cashless Economy )
Business wont put equal weighing on each P.
Business must adapt MMix over time
The Design Mix
The product design mix refers to the combination of elements that make up a product’s design.
Aesthetics :
1. Appearance Of Product
2. Includes Packaging
3. Does It Fit The Segment e.g. ( Apple products = Luxury = Luxury Packaging )
Function :
1. Does it do what it’s it supposed to do?
2. Extra Features
3. USP > Rivals Product ( Competitive Advantage Over RIvals )
Cost :
1. Do the economics make sense?
2. Compare Intended Price to VC Per Unit
3. The cost of production must be considered as it directly affects the price point at which it can be sold
A+F+C = Viable Product = Increase Chance Of Profit
Promotional Methods
Advertising : Persuade + inform potential customers to purchase your products via. ( Newspapers, Magazines, Television, Billboards )
Sponsership : Paying an event to display a business name
Product Trials : Temporary offering of a product ( Test Product )
Branding : Logo / Slogan Customers able to identify product
Special Offers : Point of sales display , 2 For 1 , Free Gifts etc.
Technology & Promotion : Targeted Advertising / Social Media
- Finance Available = Cost Of Promotion
- Rivals Actions = What They Do? Will It Work For You?
- Target Market = Segments
- Nature Of Market = Mass vs Niche / ( Fast / Slow ) Growing
- Nature of Product / Service = 2 for 1 sound good for fast food but not for cars
Brand Image
PROS / CONS
The impression that potential and existing customers have of the business
PROS:
↑ Impression
Short Term = ↑ Sales
Long Term= ↑ Repet Sales
This Builds Brand Loyalty
Potential = This makes it harder barriers to entry
Current = Rivals will have to ↓ Price or ↑ Quality of Product
CONS:
Cost
For ↑ Marketing , ↑ Customer Service, e / m Commerce
& Reputation built up over many years can be lost in a Instant + Hard to rebuild
Cost Plus Pricing
PROS / CONS
The business calculates the cost of production and then adds a markup to determine the final price
The formula for cost-plus price :
Unit cost + ( Mark up percentage x Unit cost )
PROS:
- Helps ensure cost are covered and garantees profit.
- Simple method of deciding price
- Justify price to customers
CONS:
- Takes no account of product’s Demand
- Takes no account of rivals prices
- Encourages an ‘ inefficient ‘ operations department as just
Cost x Mark-up
DON’T USE IN A COMPETITIVE MARKET
Common In Manufacturing Sector
Price Skimming
Setting a high initial price before gradually lowering it over time.
This is done to maximise profits from early adopters ( inelastic PED )
then lower price gradually to attract more price sensitive customers
( thoes with more elastic PED )
Price Penetration
Setting a low initial price to help enter a market then gradually increase price over time
This is done to stimulate demand / encourage customers to ‘ switch ‘
elastic PED focus away from rivals ( temporarily )
Objective is to grow market share / enter new market,
Competitive Pricing
Setting price in line with ( or below ) Rivals.
Competitive prices = more customers = grow market share
Dynamic Pricing
Changing prices depending on
Demand
Supply
Seasonality
Time / Day Of Week
Stock Levels
Done to maximise revenue. ↑ Price when more in demand
Distribute utilisation e.g. Gyms
Preditory Pricing
Selling products at very low prices, often below cost, to drive competitors out of the market.
Pros:
1. Attracts customers with low prices.
2. Eliminates competition temporarily.
Cons:
1. Often illegal and unethical.
2. Can lead to long-term harm to the market.
3. Unsustainable for businesses without deep resources.
Channels Of Distribution
PROS / CONS
- Producer → Consumer
PROS:
No wholesaler or retailer involved ∴ No cut taken ∴ ↓ prices = ↑ Demand = ↑ Sales
CONS:
Sales in ↓ volume ∴ ↑ Distribution Costs
↓ Reach ∴ ↑ Marketing Costs - Producer → Retailer → Consumer
PROS:
Way to overcome ↑ Marketing Costs as retailer will have ↑ Reach
( Well known and multiple locations )
CONS:
Won’t receive full price consumer pays ( Retailer Margin )
If ↑ Retailers = ↑ Distribution costs - Producer → Wholesaler → Retailer → Consumer
PROS:
Wholesaler burys in bulk ∴ ↑ Sales
↓ Distribution / Logistics Costs ↓ Risk
Includes Retailer ∴ ↓ Marketing Costs
CONS:
Retailer / Wholesaler seek margin
e.g. Producer( $3 ) → Wholesaler( $4 ) → Retailer ( $6 ) ∴ ↑ Price To Final Customer = ↓ Sales
Less able to provide effective customer service to consumer
Online Distribution Channels
delivering products or services to consumers through internet based platforms.
Pros:
- Access wider markets & 24/7
- Reduce Overhead & Fixed Costs ( warehouse in cheep location / no rent / no outlets required )
Cons:
- Cost of creation
- Cost of maintenance
- Cost of improvement
- Developers = Skilled = ↑ Wage = Training = ↑ Cost
Multi Channel Distribution
Many Channels of Distribution
PROS:
- Open 24/7
- Different prices for different channels
- Increased brand visibility
- Better customer feedback
CONS:
- Using more channels = ↑ Cost
- Hard to ensure customer service will be equal on all channels
- Risk customers are very price sensitive
Product Life Cycle
The productlife cycle describes the different stages a product goes through from its conception to its eventual decline in sales
Five Stages :
Development, Introduction, Growth, Maturity, Decline
Development:
- The focus is on designing and developing the product which requires market reserch. ( High Cost for research and development, market research, and product testing )
- Cash flow is usually negative during this stage and The marketing strategy during this stage is creating awareness and interest in the product
Introduction:
- Stage where product is released. Characterised by slow sales growth as the productis still new
- Cash flow is usually negative as cost of distribution and promotion is high
Growth:
- Sales begin to increase rapidly & The business focus shifts to building market share and increasing production to meet the growing demand
- Cash flow usually turns positive during this stage as sales revenue increases and costs are spread out over a larger volume of production
- The marketing strategy is to differentiate the product from its competitors and build brand loyalty
Maturity:
- Characterised by slowing sales growth as the product reaches its peak in terms of market penetration
- Cash flow is usually positive during this stage as sales revenue continues to come in and costs are reduced through economies
of scale
- Maintain market share and increase profitability by cutting costs and finding new markets
Decline:
- Cash flow usually turns negative as sales revenue declines and costs associated with the product’s decline increase
- Over saturated
- Reducing its price to clear inventory and maybe discontinue product
Extension Strategies
Method for a business to increase sales when in a saturated market
( Usually In Maturity Stage )
Product-related extension strategies: Changing or Modifying the product to make it more appealing to customers
i.) Product Improvements - e.g. Samsung new phone new features & improvements every year
ii.) Line Extensions - e.g. Coca-Cola introduced Diet Coke and Coke Zero as line extensions of its original Coca-Cola
iii.) Repositioning - e.g. personal computer division started losing market share to other brands, it repositioned its products as
high-end business machines and focused on the enterprise market
Promotion-related extension strategies: Involves changing the marketing and promotion of the product to extend its life cycle
i.) Changes To Advertising - e.g Kellogg’s continues to recreate adverts for its Corn Flakes cereal which has been around since 1906
ii.) Price promotions - e.g. Price promotions e.g. Cyber Monday occurs on the first Monday after Thanksgiving in the USA and
electronic firms discount prices signifficantly to boost sales of their products
iii.)Sales promotions - e.g. many coffee shops offer a loyalty program
