3.4 Making marketing decisions: using the marketing mix Flashcards
What are the 7P’s of the marketing mix
- product
- place
- price
- promotion
- people
- process
- physical environment
what does people. part of the 7p’s, include
- customer-facing staff (customer service assistants)
- employees involved in a transaction when a customer purchases a product or service
what does process. part of the 7p’s, include
- the systems in place to support the transaction which the customer must deal with to complete the transaction successfully
what does physical environment. part of the 7p’s, include
- physical premises
- the design
- the layout of the premises
- condition and placement of products within a store
Why would a business change their marketing mix
Market conditions and customer tastes and preferences change
Factors influencing the marketing mix?
- Availability
- Product information
- Luxury products
Why does availability affect the marketing mix?
Convenience items, such as basic groceries, need to be accessed quickly by customers so businesses may focus on marketing mix factors related to speed and availability
Why does product information affect the marketing mix?
Shopping items, such as computer tablets and clothes, may be considered for purchase by customers for a longer period so a business may focus on the customer service ‘people’ factor so that customers can access product information easily
Why does luxury products affect the marketing mix?
Speciality products, such as cars and jewellery are luxury purchases for customers. Consumers who buy luxury goods may expect sophisticated stores and customer service processes to support the transaction.
Businesses operating in luxury or speciality goods is likely to focus on processes & physical evidence, whilst making sure the other P’s are consistent with their brand
Stages of the product lifestyle
- Research and development
- Introduction
- Growth
- Maturity
- Saturation
- Decline
What is Research and Development?
- before the product is made
- investment in researching a certain area of the market and if they discover a business opportunity, they may then take the time and resources to develop a product or service that fits a gap in the market
e.g pharmaceutical company investing into research for a drug that might cure a disease
What is Introduction
- businesses introduces or launches the new product / service to the market
- marketing and advertising are important because consumers need to be made aware that the product exists and what it is
What is growth in the product life cycle
- just after introduction, the rate of growth tends to increase
- successful products often undergo a period of growth as more and more customers discover and buy the product
What is maturity
- the number of new customers buying the product has slowed down
- sales are still rising, just less quickly than before
What is saturation
- the sales have reached its peak
- sales no longer increase but remain steady
- all consumers who want it have brought / acquired it
What is decline
- changes in fashion, consumer tastes/preferences, technological advances and new competition offering similar products can all mean demand is falling
What does the boston matrix show
Where to position a product to help choose its marketing mix
Position of a ‘dog’ on the boston matrix
Low market share
Low market growth
e.g DVD & CD discs
Position of a ‘cash cow’ on the boston matrix
High market share
Low market growth
e.g Apple TV products
Position of a ‘star’ on the boston matrix
High market share
High market growth
e.g new iPhones
Position of a ‘question mark’ on the boston matrix
Low market share
High market growth
Factors influencing decisions on the market mx
- The business’ marketing objectives
- The target market
- The presence and size of competitors
- The type of product
What are the four segments of the Boston Matrix
- stars
- question mark
- dogs
- cash cows
What internal factors influence the pricing decisions
- Costs
- The product life cycle
What external factors influence the pricing decisions
- The nature of a product
- The degree of competition
Why does costs affect pricing decisions
- businesses usually aim to make a profit
- their price and costs determine how much profit the business will make. Businesses cannot afford to set a price lower than their costs forever
Why does the product life cycle affect pricing decisions
- position determines whether a high or low price will be charged
- when a new product is launched, businesses may charger higher prices to take advantage of exclusivity
Why does the nature of the product affect pricing decisions
- luxury good or not
- whether the product is hard to differentiate from competitors
Why does degree of competition affect the pricing decisions
- more competition = more options for customers
- when customers have lots of options for similar products, businesses must compete to attract customers using a lower price
What is price skimming
Relatively high initial price that gradually lowers over time
When is price skimming often used
before a business faces competition in the market, once competition arrives, there will be a downward pressure on the price to fall
Why is price skimming used
To maximise revenue: consumers who buy early are willing to pay a higher price but it can still attract other customers who can pay a lower price later on in the product’s life cycle
Advantage of price skimming
Covers fixed costs (R&D)
- helps to recover the costs of R&D, which can be expensive or technology products
Disadvantage of price skimming
Slower unit sales growth
- slows down the growth, can give competitors more time to launch a competing product / service
- does not maximise the number of sales at the start so competitors can get more of a chance to enter the market
What is price penetration
Where a business tries to increase market share by offering a low initial price that increases over time
- loss leader work in a similar way
Advantage of price penetration
Increase market share
- a business can attract customers from established competitors
Disadvantage of price penetration
Lower short term profits
- can lead to lower average profits than would be earned with a higher price
- HOWEVER, market share may be more important for the long-term profitability of a business
What are loss leaders
Products or services that are sold by a business at a price where the business makes a loss (average revenue < average costs)
- attract new customers or sell to existing customers, in the hope that they make extra purchases
What is cost-plus pricing
Business charges the customer based on what it costs to produce the product/service
- work out the cost to produce on average, then add a “mark-up” on top of this cost to ensure they make a profit
What is competitive pricing
Business sets prices for its products and services based on what other business in the market are charging
- used when products are similar
What are promotional methods
Different methods used to inform consumers about their products & services in order to persuade consumers to buy them
What are different types of promotional methods
- Public relations
- Product placements
- Sponsorship
- Advertising
- Sales promotion
- Social media
Types of advertising platforms
- Newspapers
- Magazines
- Television
- Internet
- Billboards
- Social media
The platform that the business uses depends on the target market in order to have the maximum impact
What does public relations aim to do
- Maintain a good public image by:
- managing the spread of information by keeping it as positive as possible and reaches the largest possible audience
Examples of PR
Newspaper editorials:
people in the business manage the business’ relationships with different newspapers, sending them articles to publish about the business
They do not pay the newspaper unlike for advertising
Types of sales promotion
- Discount coupons
- Free gifts
- Point of sale displays
- Value for money offers (buy 1 get 1 free)
- Samples
- Competitions
Factors influencing the promotional mix
- Target market
- Competitor actions
- Finance available
- The nature of the market
- The nature of product / service
Why does target market affect the promotional mix
- different types of people use different platforms more often
- a business wants to promote its product to its potential customers
Why does competitor actions affect the promotional mix
They want to reach consumers using the same channel as rivals
Why does finance available affect the promotional mix
- some businesses will have more finance available to spend on promotions
- some promotional methods are more expensive than others (TV advertising)
Why does the nature of the market affect the promotional mix
As the market matures, the rate of growth changes:
- market growing slowly: advertising may be less important
- market growing rapidly: businesses will be battling for market share and are willing to spend more on advertising as it will affect sales by a larger amount
Why does the nature of the product/service affect the promotional mix
- A technical product (laptop) may want to give consumers more information about their product
- A simple product (orange juice) may not need to give info
Reasons for promotion
- To inform/remind customers about the product
- To persuade customer to buy the product
- To create or change the image of the product / service (celeb sponsorship can give the product a fun, luxury or innovative image)
- To create or increase sales
What are the different types of distribution channels
1) Retailer - consumer
2) Manufacturer - Retailer - Customer
3) Manufacturer - Wholesaler - Retailer - Customer
What do wholesaler do
Sell products in bulk to a network of retailers
Advantage of wholesalers
- have a large network of buyers
businesses reach a lot of customers quickly
Disadvantages of wholesalers
- Less interaction with customers (worse customer service)
- Wholesalers and retailers take a cut of the profit, customers are likely to pay higher prices - less competitive on price
Features involved in Manufacturer - Retailer - Customers
- Higher margins or lower price (bypassing wholesalers makes it likely that customers will pay lower prices because the business is “cutting out the middle man)
- Hard to contact retailers (hard for businesses, especially start ups, to get retailers to stock their products)
- Control over shops (producer / manufacturer can have complete control over which shops customers can buy their products from)
- Higher logistics costs (may increase a business’ delivery and logistics costs if they have to deliver all the products to a retailer themselves)
Features involved in Direct - Consumer
- Nobody else takes a cut (lets a business charger the lowest price possible to the consumer because there are no organisations in the middle who take a cut of the profit. The business can charge the same price and have a higher margin)
- Hard to reach customers (a business will have to invest time and money into setting up new stores or their own website)
- E-commerce (easier to reach more consumers directly, lots of businesses don’t need to set up physical stores)
What is E-commerce
The purchase that takes place electronically on the internet
What is M-commerce
Buying goods online using a mobile phone
Benefits of E-commerce and M-commerce
- Reach more customers
- Sell direct to consumer (B2C)
- Cheaper to set up a business
Why is reaching more customers a benefit of using e-commerce and m-commerce
- can reach international markets without setting up stores or overseas subsidiaries
- small businesses in particular rarely have the finance needed to set up shops internationally. Before e-commerce, expanding was harder for small businesses
Why is selling directly to consumer a benefit of using e-commerce and m-commerce
- No middlemen take a cut, the business can offer a lower price to the customer
- Lower average costs, usually lower prices
- Helps to remain competitive
Why is cheaper to set up a business a benefit of using e-commerce and m-commerce
- Don’t have to invest lots of money in opening stores and hiring people to work in-store
Drawbacks of E-commerce and M-commerce
- Selling online can create problems
- Investment needed
- Increased competition
Why is selling online a drawback of E-commerce and M-commerce
Some goods are harder to judge from a computer / mobile phone. Consumers may want to see a product in person before buying it.
Why is the investment needed a drawback of E-commerce and M-commerce
- Businesses must invest in specialists who can build websites
- Large businesses who sell a large volume of products may have to invest in warehouses and fulfilment centres
Why is increased competition a drawback of E-commerce and M-commerce
- E-commerce allows a business to easily reach wider markets, UK businesses face more competition. Foreign businesses can compete in the UK more easily
- Increased competition can have a negative impact on profits
