3.3.4 Flashcards
what is the marketing mix (7Ps)
collection of factors that a business must consider when marketing its products in order to meet the needs of its customers.
integrated marketing mix
In order to be successful these seven factors must complement each other if the marketing mix is going to be successful.
7Ps
product
price
place
process
physical environment
people
promotion
product
everything that the customer buys - brand, features and benefits of a good or service
price
set to match the expectations of customers and the features of the product
place
using the right channels to get the product to the customer
process
making the transaction convenient, efficient and effective for the customer
physical environment
matching the physical environment in which the transaction takes place to the product and brand
people
adding to the product by using the right people in the transaction
promotion
communicating the product offer, creating an awareness and desire to buy
convenience products
bought on impulse
not brand loyal
consumers are sensitive
to price changes
products must be widely
available
shopping products
consumers will ‘shop around’
consumers take their time and will compare product features
brand and price become
more important in the
purchasing decision
available
consumers are susceptible to promotion techniques
speciality products
high levels of engagement
consumers take a long time to process information and make a decision
people involved in the transaction are very important
physical environment is very important
consumers are willing to travel far
core benefits of a product
this is what the product actually does and how well it does it. How well does the product do its function?
the actual product
this includes all of the product features.
The details and benefits that add value. This might include features to improve quality, convenience, efficiency, style and reliability.
the augmented product
this includes everything the business builds around the product. Service, advice, after-sales care and features to build loyalty and a long-term relationship with the brand.
when developing products a business must consider the ‘whole product’ along with what other 3 factors
cost
function
design
balance between the 3
Influencing any one of these features can have a detrimental impact
on the other 2
e.g. improving the design could reduce the functionality of the product or improving the functionality could increase costs
what is product portfolio analysis
analyse and track the development of multiple products over time taking into account a number of factors such as growth, sales and market conditions.
stages of product life cycle
introduction
growth
maturity
saturation
decline
axis of product life cycle
y = sales
x = time
introduction stage
Price may be low to initial sales. Heavy promotion to create awareness. Low number of product variations launched.
growth stage
Price may increase with popularity. New varieties and distribution methods introduced. Business must keep up with demand growth.
maturity stage
Consider cutting price to maintain demand, promotion slows as customers are aware of product, introduction of new customers slows down - focus instead on retention and repeat purchase.
saturation stage
The market is ‘full’ - all potential customers have the product and there are other better / cheaper alternatives. Price may be cut to maintain competitiveness.
decline stage
Further price cuts to maintain demand. Variety of products streamlined to the most popular. Business may consider discontinuing product if replacement can be introduced. An extension strategy may be used to re-launch the product to boost new growth.
advantages of product portfolio analysis
Useful analysis tool for a business with a wide product range.
Useful for making decisions about where funds should be allocated.
Can be used to predict future sales and therefore plan production/distribution
disadvantages of product portfolio analysis
Products and markets are complicated and do
not necessarily follow a pattern.
Does not provide clear solutions for a business.
As with all models, PPA simplifies what can be a complex issue.
high growth rate and high market share
stars
low growth rate and high market share
cash cows
low market share and high growth rate
question marks
low growth rate low market share
dogs
what are stars
Possibly a leading brand in
the market. Distribution must be effective to
ensure product availability
what are question marks
Fast growing market but not yet an established product.
Normally requires heavy investment to develop and ensure success. Usually lots of competition from rival brands.
what are dogs
Invest to revitalise or discontinue the product.
what are cash cows
Successful products in mature markets. Cash cows generate high revenue for a business that can be invested in other areas. Relatively little promotion is required.
what does price determine
demand for a product
contribution of a product and the overall profit margin of the business
what influences price
costs - profit margin to be achieved
PED - potential for a business to change price
competition - level of competition and price set by the market
product life cycle - stage of life cycle product is in
branding - perceptions customers have of the brand and how much value they place on it
other elements of marketing mix - 7Ps must complement each other
what is price skimming
used to capitalise on ‘first movers’ (people who are willing to pay a premium price to be the first to own the product)
initial price is high so the profit in the market is ‘skimmed’
suitable for established brands where anticipation for a new product is high
particularly effective in tech markets
then eventually lower the price
what is dynamic pricing
applied to products where price can fluctuate with the level of demand, such as hotel rooms.
what is penetration pricing
applied to a new product attempting to enter the market.
Initial price is low in order to penetrate the market by undercutting competitors. Over time price may increase as demand grows and reputation/popularity builds.
why is promotion important
key method a business will use to communicate with its customers and potential customers. Successful promotion will create awareness, understanding, and a desire for the product.
what influences promotion
promotion budget
message
technology
competition
target audience
target audience
choosing the right method and channel to reach the right people. For example, placing an advert in a magazine for a product that matches the demographic of the readership, such as an advert for a new face cream in a fashion magazine aimed at older women.
promotion budget
the promotion budget will determine which methods are available and the geographical reach of the campaign.
the message
a public apology might be posted on a company’s website, but a sneak peek at a new product line might be shared via Twitter. Sponsoring a sporting event might encourage an association with healthy living.
technology
can help a business narrow down its promotion so that it only reaches the right people.
Subscription services also allow a business to target customers with personal messages and relevant information.
competition
a business may use similar channels to its competitors in order to challenge their message or use strategies that allow it to stand out and be unique
factors important when choosing right medium for advertising
focus and reach
promotion methods
Advertising - above-the-line (mass media) and below-the-line (small and focused promotion) techniques.
Direct marketing - direct communication with the customer, often personal.
Sales promotions - special offers to encourage sales.
Sponsorship - paid association with a business or product.
Social media - promotion through networks such as
Facebook and Twitter.
Public relations - media attention generated through a third party, such as a review from a blogger.
importance of branding - strong brand
adds value to the product
allows a premium price to be charged
builds trust
makes a product recognisable
product might become the natural choice for the novice customer
helps a business to position itself in the market relative to other competitors
brands can be traded
what is distribution
refers to how the product gets to the customer. Many products use multichannel methods to reach the customer. The key is to make distribution easy and convenient for the customer in order to maximise sales.
what influences distribution
control over promotion and pricing
expectations of customers
nature of the product
scope/scale
Control over promotion and pricing
a business may opt to use its own website or retail chain if controlling these factors is important.
expectations of customers
will customers expect to access the product via multi-channels or will one suffice?
nature of the product
some products are not suitable for certain
channels. For example, it can be difficult and costly to ship plants, flowers and other delicate objects.
scope/scale
a product sold internationally may require distribution through an extensive network of wholesalers, agents and distribution companies.
By contrast a local business may simply require one retail outlet.
many modern products use what
multiple channels, such as direct, click and collect and in-store purchasing.
Each stage in the distribution network adds
to the cost and / or adds value, therefore increasing the price of the product.
value of digital marketing and e-commerce
allow small businesses to target a global market builds relationships through a more personal service by tracking buying habits
targeting specific segments is much easier - even on an individual basis
allows businesses to gather customer information easily
opportunities for personalisation and involving customers in the design of products
