3.4 Making marketing deicisions using the marketing mix Flashcards
Marketing mix
The main variables comprising a firm is marketing strategies.
The 7P’s
Price, Product, Place, Promotion, People, Process and Physical environment
What is Price to do with?
How consumers pay: e.g. cash and how much they pay.
What is Product to do with?
To meet customer needs and wants such as design features.
What is Place to do with ?
How the product reaches the customer.
What is Promotion to do with?
To do with how you communicate your product to potential customer.
What is Process to do with?
The ease of transaction .
What is People to do with?
To do with people within the business NOT the consumers.
What is Physical environment to do with?
How the product appears to the customer.
The influences on and the effects of changes in the elements of the marketing mix
- Technology
- Finance
- Market research
- Nature of the product
Finance
- Profitable business is able to cut prices significantly, at least in the short term
- Finance available
Nature of the product
- Type of product can influence which elements of the mix are emphasised
- Can spend more on advertising or more on the quality
Technology
- Products with the latest technology may use advertising to inform potential customers of their existence and benefits
- High prices to maximise short-term profits
- Affects place element
Market research
- Primary market research may be the most important influence is designing a marketing mix
- It’s findings may provide information to help to make judgements on the form, functions and design of the products
- May determine pricing strategies
Influences on and the value of new product development
Technology
- Developments in technology are the cause of many new products that come onto the market
Competitor’s actions
- A competitor producing a new product can be a spur to a rival to produce something then that is at least as good, if not better
The entrepreneurial skills of managers and owners
- Successful entrepreneurs require creativity - being able to think up new ideas for goods and services that fit with customer needs which leads to the development of many new products
Unique selling point
A USP allows a business to differentiate its products from others in the market.
Importance of unique selling point
- Business can base advertising campaigns on their USP
- Encourages brand loyalty
- Allows firm to charge premium price
Stages of the product life cycle
- Research and Development
- Introduction
- Growth
- Maturity
- Decline
Research and Development stage
- No sales
- R+D costs
- Negative cash flow
Introduction stage
- Low sales
- Marketing costs
- Negative cash flow
Growth stage
- Improving costs
- Marketing costs
- Negative to Positive cash flow
Maturity stage
- Peak sales
- Consider extension strategies
- Profits
- Positive cash flow
Decline stage
- Declining sales
- CONSIDER EXTENSION STRATEGIES
- Negative cash flow
Extension strategies
- Finding new markets for existing products
- Changing the appearance or packaging
The Boston Matrix
High relative market share, high market growth
- Star products
High relative market share, low market growth
- Cash cow
Low relative market share, high market growth
- Problem Child/ Question mark
Low relative market share, low market growth
- Dog
Price skimming
Initially setting a high price and lowering it over time.
- used when there are no competitors in the market
Price penetration
Initially setting a low price and increasing it over time.
- used to gain a foothold in the market
Pricing tactics
- Loss leaders: setting prices very low so consumers can purchase other products as well
- Special-offer pricing: involves reduced prices for a limited period of time or offers such e.g. three for the price of two
How businesses can make demand for their products more price inelastic
- Differentiating products from those of competitors
- Reducing competition through takeovers and mergers
Promotion
Promotion is bringing consumers’ attention to a product or business.
Promotion aims to achieve targets:
- Attract new customers
- Improve the position of the business
- Ensure the survival and growth of the business
- Increase awareness of a product
Promotional mix
The combination of methods used by businesses to communicate with prospective customers to inform them of their products and to persuade them to buy these products.
Elements of the marketing mix
- Advertising
- Exhibitions/ fair trade
- Packaging
- Branding
- Public relations
- Merchandising
- Personal selling
- Sales promotion
Advertising
Advertising is a paid form of non-personal communication using mass media to change the attitudes and buying behaviour of consumers.
Informative advertising vs Persuasive advertising
Informative advertising: designed to increase consumer awareness of a product by providing consumers with factual information.
Persuasive advertising: attempts to get consumers to purchase a particular product by claiming the product is better than the competition.
Sales promotion forms
- Merchandising
- Special offers and competition
- In-store demonstrations
- Coupons, vouchers and free gifts
Packaging
Packaging emphasizes the attractiveness of the product ad informs consumers of its features, functions and contents.
Exhibitions and trade fairs
Events staged to attracts people involved in a particular market, both sellers and buyers.
Branding
Establishes an identity for a product that distinguishes it from the competition. Successful branding allows higher prices to be charged and can extend a product’s life cycle due to brand loyalty.
Personal selling
Involves visits by a firm’s sales representatives to prospective customers.
Public relations
PR is promoting the company’s image to establish a favorable public attitude towards the company.
Influences on the choice of promotional mix
- The product’s position in its life cycle
- The type of product
- The finance available to the business
- Where consumers make purchasing decisions
- Competitor’s actions
Distribution of a product
Involves the range of activities necessary to make the product available to customers.
Factors that affect choosing outlets and distributors
- Location
- Credit terms
- Willingness to display products in prominent positions
Wholesalers
- Buy high volume from producers
- Purchasing economies of scale
- Sell to retailers
- Specialise in logistics
Retailers
- Buy smaller volume from retailers or producers
- Sell to customers
- Specialise in high reach
Types of distribution channels
- Traditional
- Modern
- Direct
Traditional
Producer —> Wholesaler —> Retailer —> Consumer
Modern
Producer ——> Retailer —> Consumer
Direct
Producer ———> Consumer
Factors that influence choice of a distribution channel
- Type of product
- Nature of the market
- Technical complexity of the product
Multi-channel distribution
Where firms use more than one type of distribution channel.
Integrated marketing mix
An integrated marketing mix is one that fits together.
Influences on an integrated marketing mix
- Position in the product life cycle
- Boston Matrix
- Type of product
- Marketing objectives
- Target market
- Competition
- Positioning
Value of digital marketing and e-commerce
- Businesses can gather more detailed information about consumers
- Greater contact between consumer and business
- Digital marketing makes it easy for businesses to set up and sell almost anywhere in the world
