TOPIC 7: MARKETING MIX 1 Flashcards
Product differentiation is (3)
Is central to successful marketing
increases the value of the product / service on offer to the customer
Is concerned with providing solutions to customers problems or ways of satisfying need
Levels of Product / Service Offering (4)
- Core offer
- Expected Offer
- Augmented Offer
- Potential Offer
Core offer (levels of product/services)
- the basic offering e.g. easyjet
Easyjet stripped its airline offer down to the Core Offer, removing Expected Offer elements to reduce price
Expected Offer (levels of product/services)
Additional benefits normally provided with core offer
Augmented Offer (levels of product/services)
Additional benefits not normally provided but serving to differentiate from competitors offer e.g. Kia
Kia provide an Augmented Offer including 7 year warranties
Potential Offer (levels of product/services)
Additional benefits not currently offered but that could be considered as a way of augmenting the offer e.g. google
Google are exploring / developing a Potential Offer for cars involving driverless technology
4 Ways to achieve product differentiation
Quality- durability, responsiveness, realibilty
Packaging- storage and protection, Facilitates use
Branding- image, reputation
Service- ‘product wrapper’ Enhanced value for a product
How do customers choose products?
Most purchases are a combination of rational and emotional
Balance will vary dramatically depending upon category
Designing the features of the product / service
Features, attributes and benefits (FAB to sales professionals) are used to help sell a product or service.
Benefit- what you want it to do
Attribute- what you would want it to do as an extra
Feature- how you will do it
The New Product Development Process
New Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialisation New product/ service
Introduction (Product Life Cycle)(1)
Audience- early adopters market- small sales- low competition- low business focus- awareness Design focus- tuning
Create product awareness and trial
Growth (Product Life Cycle)(2)
Audience- mainstream market-growing sales-high competition-moderate business focus-market share Design focus-scaling
Maximise market share
Maturity (Product Life Cycle)(3)
Audience-late adopters market-large sales-steady/flattening competition-high business focus- customer retention Design focus-support
Maximise profits while defending market share
Decline(Product Life Cycle)(4)
Audience-Laggards market-contracting/shrinking sales-Moderate competition-Moderate business focus-Transition Design focus-Transition
Reduce expenditure and milk brand
However as a product reaches decline, sometimes it can have
product extension, which rejuvinate the brand
e.g. gillete razors
Factors Impacting the Pricing Situation
Economic value to customer Competitor price levels Elasticity demand Production costs Corporate objectives Desired Positioning
Pricing signals
Signals product value
Competitive tool; high or low pricing to competition
Determines financial performance
Used as a substitute for selling effort
Reinforce other functional and marketing activities
Harvest (Pricing Portfolio approach)
Keep high prices despite market share falls in order to fund other products
Maintain position (Pricing Portfolio approach)
Reduce pricing to maintain market share
Growth (Pricing Portfolio approach)
Aggressive pricing to grow market share
Premium positioning (Pricing Portfolio approach)
Positioned within a niche sector and priced for a non-price sensitive audience
Pricing Strategy – Little / No knowledge of customer value
Cost and pricing e.g.government pays you 10% extra of what it takes to build a road
Going rate- same as competitors
Auction and Participative e.g. Ebay
Pricing Strategy –Good knowledge of customer value
Premium- product perceived as high value/unique e.g. Gucci
Skimmimg- maximise revenues on new products, then decrease over time e.g. Apple
Market Penetration- price lower level to attract new customers. Then as you get better known can charge more e.g. kia
Economy- aims to attract more price-conscious consumers
Promotional Pricing
Loss leaders to attract customers into store / initial purchase (e.g. Printers) Freemium: spotify Cash rebates inc coupons Low interest finance Psychological pricing (£4.99) Bundle Pricing
Break Even Analysis
Fixed Costs- Business costs that remain constant regardless of the number of units produced e.g. price of standard haircut
Variable Costs- Business costs that increase with the number of units produced e.g. more electricity being used for more customers, more staff needed for haircuts
Break Even Analysis eq
(Total fixed cost / Production unit volume) + Variable cost per unit
