Unit 5 Marketing Mix Flashcards
What is the marketing mix
product
price
place
promotion
what is the product in the marketing mix
creating value
- Includes services and physical / tangible goods
- Brand
- Size
- Quality
- Packaging
- Warrenty
what is the price in the marketing mix
transacting value
- list price
- discounts
- allowance
- costs
- payment method
- credit terms
what is the promotion aspect of the marketing mix
communicating values
- advertising
- sales promotion
- personal selling
- public selling
- direct marketing
- digital media
what is the place aspect of the marketing mix
delivering value
- marketing channels
- distribution
- locations
- retailers vs online
- supply chain
- logistics
what is the complexity of products
actual product: brand name, quality level, packaging, features and design
associated services: financing, product warranty, product support
BCG Portfolio Analysis
Stars
- High markets share & High growth
- Most ideal for long-term profits
Cash cows
- High market share & Low growth
- Keep making money
Question marks
- Low market share & High growth
- There is potential - this could increase market share and could be good (Or it could happen the other way)
Dogs
- Low market share & Low growth
- The worst type of products/brands (Do something dramatic or get rid of them)
Growth Strategies (Ansoff Product Market Matrix)
Market penetration
- Existing product & Existing market
- Do more promotion/advertising (ex. Coke Cola)
Market development
- Existing product & New market
- Ex. Taco Bell in India
Product development
- Existing market & New product
- Coming out with a new car (Toyota)
Diversification
- New product & New markets
- Ex. Apple launches a new product (iPhone)
Diffusion of Innovation
Innovators - Consumers who buy the first products
Early adaptors - The ones who follow the innovators
Early majority - Larger group of consumers
Late majority - The latter half of consumers who adopt the new product
Laggards - Will try not to adopt new technology & Hold on to old technology for as long as they can
Product Life Cycle
Introduction
- sales: low
- profits: negative or low
- typical consumers: innovators
- competitors: one or few
Growth
- sales: rising
- profits: rapidly rising
- typical consumers: early adaptors and early majority
- competitors: few but increasing
Maturity
- sales: peak
- profits: peak to declining
- typical consumers: late majority
- competitors: high number of competitors and competitive products
decline
- sales: declining
- profits: declining
- typical consumers: laggards
- competitors: low number of competitors and products
Price signal
Prices can be both too high or too low
Price is too low may signal poor quality
Price set too high might signal low value
Pricing strategies
Cost-oriented
Competitive-oriented
Demand-oriented
Value-based pricing
Price discrimination
economics approach to find price
profit = quantity (price) * (price - unit cost)
find price where marginal costs = marginal revenue
Cost-oriented pricing
When a company sets its prices as costs + markup percentage or fixed amount (cost plus)
Markup pricing makes sense:
- If average unit cost are fairly constant for different points on the demand function
- If costs elasticity are constant over time
Very common, but ignores the current elasticity of demand when setting prices, and will probably not lead, except by chance, to max profits
Competitive-oriented pricing
When a company bases its price chiefly on what its competitors are charging rather than on cost or demand
Competitive-oriented pricing mostly characterizes markets with homogeneous commodities
Creates a price-stagnant market:
- If a firm increases prices – loses a lot of market shares
- If a firm decreases prices – other quickly follow suit
Demand-oriented pricing
When a company sets its prices as function of demand
Charging higher prices when demand is higher
Charging lower prices when demand is lower
what is Garbor-Granger
Customers are asked to indicate their buying intention for a product at a number of price levels:
1 – will never buy
5 – will absolutely buy
Price levels are presented randomly and in different order for each respondent (reduces rationalization, bias)
Demand curve and price elasticity are estimated based on all responses
Pros:
- Simple design
- One measurement per price level
- Robust, proven method
Cons:
- No margins of error or confidence intervals for optimal price level
- Assumes data accuracy (purchase likelihood could be 0.3 instead of 0.5)
- Assumes optimal price is actually measured (what if out of range)
demand based pricing and price discrimination
Revenue management is the art and science of selling the right product to the right customer for the right price at the right time
High fixed cost industries
Service industry (here we focus on hotels and airlines)
Revenue management
estimate demand for each class of service (demand arrives over time so you have to update demand function/remaining supply)
allocate remaining space to: maximize profitability, meet other criteria
Promotion mix
Advertising - print newspapers and magazines, TV, radio, outdoor
social media and mobile media
direct marketing - direct mail, catalogues, Direct TV, kiosks
Public relations - media relations, news releases, press kits, annual reports
Sales promotion - coupons, deals, premiums, samples, loyalty programs, POP displays, rebates
Personal selling - sales calls, telemarketing
Advertising Budgeting in Practice
Affordable method: setting advertising budge according to what companies can afford
Percent of sales: many companies set their advertising expenditures at a specific percentage of their sales (ex. Automobile industry)
Competitive parity method: setting advertising budgets specifically to match competitors’ outlays
Objective/task method: Defining advertising objectives as specifically as possible (to inform, persuade, or remind), Determine the tasks, Estimating the costs of those tasks
Model based / response model approach: Advertising response model for online banner and keyword advertising offer firms
Promotional types and targets
Manufacturer -> Trade (retailors)
Trade promotions: case allowances, advertising allowances, display allowances, contests
Trade (retailor) -> consumer
retailor promotions: price cuts, displays, feature ads, retailor coupons, free goods
Manufacturer -> consumer
consumer promotions: coupons, samples, price packs, value packs, refunds, contests, tie ins
