Description
marketing mix
The term "marketing mix" was coined in 1953 by Neil Borden in his American Marketing Association presidential address. However, this was actually a reformulation of an earlier idea by his associate, James Culliton, who in 1948 described the role of the marketing manager as a "mixer of ingredients", who sometimes follows recipes prepared by others, sometimes prepares his own recipe as he goes along, sometimes adapts a recipe from immediately available ingredients, and at other times invents new ingredients no one else has tried. The marketing mix (price, product, distribution, promotion) forms the entire promotional campaign. As stated in “Management of a Sales Force” by Rosann L. Spiro, Gregory A. Rich, William J. Stanton, “when these are effectively blended, they form a marketing program that provides want-satisfying goods and services for the company’s market." The term became popular in the article written by Niel Borden called, “The Concept of the Marketing Mix,” as explained on the site netmba.com. He started teaching the term to many after he himself learned about it with an associate of his. The marketing mix is a broad concept which includes several aspects of marketing which all inquire to obtain a similar goal of creating awareness and customer loyalty. The marketing mix is not only an important concept, but a guideline to reference back to when implementing the price, promotion, product, and distribution. Those are the four main ingredients of the marketing mix, but there are other components not already mentioned on the Wikipedia site, including, planning, branding, packaging, display, distribution channels, personal selling, advertising, servicing, and physical handling. All in all the current description of the marketing mix is accurate, but missing some vital pieces of information which will allow individuals to gain a better understanding and implement a more effective marketing mix.[1] A prominent marketer, E. Jerome McCarthy, proposed a Four P classification in 1960, which has seen wide use.
Elements of the marketing mix are often referred to as the "Four 'P's", a phrase used since the 1960's
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Product - It is a tangible good or an intangible service that is mass produced or manufactured on a large scale with a specific volume of units. Intangible products are service based like the tourism industry & the hotel industry or codes-based products like cellphone load and credits. Typical examples of a mass produced tangible object are the motor car and the disposable razor. A less obvious but ubiquitous mass produced service is a computer operating system. Packaging also needs to be taken into consideration. Every product is subject to a life-cycle including a growth phase followed by an eventual period of decline as the product approaches market saturation. To retain its competitiveness in the market, product differentiation is required and is one of the strategies to differentiate a product from its competitors. Price – The price is the amount a customer pays for the product. The business may increase or decrease the price of product if other stores have the same product. Promotion represents all of the communications that a marketeer may use in the marketplace. Promotion has four distinct elements: advertising, public relations, personal selling and sales promotion. A certain amount of crossover occurs when promotion uses the four principal elements together, which is common in film promotion. Advertising covers any communication that is paid for, from cinema commercials, radio and Internet adverts through print media and billboards. Public relations are where the communication is not directly paid for and includes press releases, sponsorship deals, exhibitions, conferences, seminars or trade fairs and events. Word of mouth is any apparently informal communication about the product by ordinary individuals, satisfied customers or people specifically engaged to create word of mouth momentum. Sales staff often plays an important role in word of mouth and Public Relations (see Product above). Place – Place represents the location where a product can be purchased. It is often referred to as the distribution channel. It can include any physical store as well as virtual stores on the Internet.
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Any organization, before introducing its products or services into the market; conducts a market survey. The sequence of all 'P's as above is very much important in every stage of product life cycle Introduction, Growth, Maturity and Decline. In recent years the 4 P's have been updated to include several more factors. Some people even go up to as many as 27 P's.
Four Cs
(CONSUMER, COST, CONVENIENCE and COMMUNICATION , CULTURE ) Robert F. Lauterborn proposed a four Cs classification in 1993.[2] The Four Cs model is more consumeroriented and attempts to better fit the movement from mass marketing to niche marketing.
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Product part of the Four Ps model is replaced by 'Consumer' or Consumer Models, shifting the focus to satisfying the consumer needs. Another C replacement for Product is Capable. By defining offerings as individual capabilities that when combined and focused to a specific industry, creates a custom solution rather than pigeon-holing a customer into a product. Pricing is replaced by 'Cost' reflecting the total cost of ownership. Many factors affect Cost, including but not limited to the customer's cost to change or implement the new product or service and the customer's cost for not selecting a competitor's product or service. Placement is replaced by 'Convenience'. With the rise of internet and hybrid models of purchasing, Place is becoming less relevant. Convenience takes into account the ease of buying the product, finding the product, finding information about the product, and several other factors. Promotions feature is replaced by 'Communication' which represents a broader focus than simply Promotions. Communications can include advertising, public relations, personal selling, viral advertising, and any form of communication between the firm and the consumer.
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A company needs to consider the marketing mix in order to meet their consumers' needs effectively.
Elements of the marketing mix
The marketing mix is the combination of product, price, place and promotion for any business venture.
Marketing Mix No one element of the marketing mix is more important than another – each element ideally supports the others. Firms modify each element in the marketing mix to establish an overall brand image and unique selling point that makes their products stand out from the competition.
Using the marketing MIX
An exclusive brand of jewellery uses the best materials but comes at a high price. Such designer brands can only be bought at exclusive stores and are promoted using personal selling sales assistants. By contrast, cheap and cheerful jewellery for the mass market is best sold in supermarkets and can be promoted using television adverts. Market research findings are important in developing the overall marketing mix for a given product. By identifying specific customer needs a business can adjust the features, appearance, price and distribution method for a target market segment. New technologies and changing fashion means goods and services have a limited product life cycle. Ideally, the marketing mix is adjusted to take account of each stage. For example, the life of a product can be extended by changing packaging to freshen a tired brand and so boost sales. There is no single right marketing mix that works for all businesses at all times. The combination of product, price promotion and place chosen by a business will depend on its size, competition, the nature of the product and its objectives. The overall marketing mix is the business’ marketing strategy and is judged a success if it meets the marketing department’s objectives, eg increase annual sales by 5% The law gives customers protection against unfair selling practices. You do not need to know specific Acts but you do need to understand how fair trading regulations protect consumers. The consumer has basic legal rights if the product is:
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given a misleading description of an unsatisfactory quality not fit for its intended purpose Sale and Supply of Goods Act 1994
This Act says that all products have to be of a 'satisfactory quality'. This means that they have to:
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be safe last for a reasonable amount of time be fit for their intended purpose have nothing wrong with them (unless the defect was noted at the time of sale) Trade Descriptions Act
According to the Trade Descriptions Act, false or misleading information must not be given about products. For example, accurate information must be given about who made the product. Fake designer goods that are marketed as genuine are a clear breach of the Trade Descriptions Act.
Consumer Credit Act 1974
This Act protects you when you borrow or buy on credit. The Consumer Credit Act states that:
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Businesses must have licences to give credit. No one under 18 is to be invited to borrow or buy on credit. Businesses have to state an Annual Percentage Rate (APR). If you sign a credit agreement at home you have several days in which you can tear up the agreement. This is called a 'cooling off period'.
Product
A business can adjust the features, appearance and packaging of a product to create competitive advantage.
What is a product?
Brands use packaging and logos to create a brand image A product is a good or a service that is sold to customers or other businesses. Customers buy a product to meet a need. This means the firm must concentrate on making products that best meet customer requirements. A business needs to choose the function, appearance and cost most likely to make a product appeal to the target market and stand out from the competition. This is called product differentiation.
How product differentiation is created: • Establishing a strong brand image (personality) for a good or service. • Making clear the unique selling point (USP) of a good or service, for example, by using the tag line quality items for less than a pound for a chain of discount shops. • Offering a better location, features, functions, design, appearance or selling price than rival products.
Having a brand image helps products to stand out in a competitive market Firms face a dilemma if they choose to launch a premium brand. Improving the quality or appearance of a product adds to the cost of making it. In turn, this means that the business must charge higher prices if they are to make a profit. An alternative marketing strategy is to produce a budget brand. If a mobile phone has limited functions and a standard design then it can be manufactured cheaply. The low production costs allow for discount pricing.
Product life cycle
The product life cycle diagram shows that four stages exist in the ‘working life’ of most products.
Product life cycle diagram These are:
Launch 2. Growth 3. Maturity 4. Decline In the launch and growth stages sales rise. In the maturity stage, revenues flatten out.
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Getting a product known beyond the launch stage usually requires costly promotion activity. At some point sales begin to decline and the business has to decide whether to withdraw the item or use an extension strategy to bolster sales. Extension strategies include updating packaging, adding extra features or lowering price.
Product differentiation
A product portfolio is the range of items sold by a business. It can be analysed using the Boston Matrix.
Boston Matrix Star products have a high market share in a fast growing market. Cash Cows have a high market share in a slow growing market. Question marks or problem children products have a low market share in fast growing markets. Dogs are products with a low market share in slow growing markets. Firms with just a few items in their product portfolio – or who have all their products at the same stage in the product life cycle[an error occurred while processing this directive] – are in the dangerous position of having ‘all their eggs in one basket’. Such firms may prioritise broadening their product range.
Price
A business must take many factors into account before deciding on the price of a product.
Pricing strategies
Remember there is a big difference between costs and price. Costs are the expenses of a firm. Price is the amount customers are charged for items. Firms think very carefully about the price to charge for their products. There are a number of factors to take into account when reaching a pricing decision:
Customers. Price affects sales. Lowering the price of a product increases customer demand. However, too low a price may lead customers to think you are selling a low quality ‘budget product’. • Competitors. A business takes into account the price charged by rival organisations, particularly in competitive markets. Competitive pricing occurs when a firm decides its own price based on that charged by rivals. Setting a price above that charged by the market leader can only work if your product has better features and appearance. • Costs. A business can make a profit only if the price charged eventually covers the costs of making an item. One way to try to ensure a profit is to use cost plus pricing. For example, adding a 50% mark up to a sandwich that costs £2 to make means setting the price at £3. The drawback of cost plus pricing is that it may not be competitive. There are times when businesses are willing to set price below unit cost. They use this loss leader strategy to gain sales and market share.
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Pricing new products
Half price sales are an example of penetration pricing A business can choose between two pricing tactics when launching a new product:
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Penetration pricing means setting a relatively low price to boost sales. It is often used when a new product is launched, or if the firm’s main objective is growth. Price skimming means setting a relatively high price to boost profits. It is often used by well-known businesses launching new, high quality, premium products.
Promotion
There is much more to promotion than advertising. Businesses use various methods to gain publicity.
Customer awareness
Promotion refers to the methods used by a business to make customers aware of its product. Advertising is just one of the means a business can use to create publicity. Businesses create an overall promotional mix by putting together a combination of the following strategies:
Promotional material on a high street in Shanghai
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Advertising, where a business pays for messages about itself in mass media such as television or newspapers. Advertising is non-personal and is also called above-the-line promotion. Sales promotions, which encourage customers to buy now rather than later. For example, point of sale displays, 2-for-1 offers, free gifts, samples, coupons or competitions.
Personal selling using face-to-face communication, eg employing a sales person or agent to make direct contact with customers. • Direct marketing takes place when firms make contact with individual consumers using tactics such as ‘junk’ mail shots and weekly ‘special offer’ emails. There is no one right promotional mix for all firms. The combination of promotional elements selected takes into account the size of the market and available resources. Large businesses have the resources to use national advertising. Small firms with limited resources and a local market may instead opt for leaflet drops to promote their activities.
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Place
As part of its marketing strategy, a company needs to decide where best to distribute a product.
What is place?
Place is the point where products are made available to customers. A business has to decide on the most cost-effective way to make their products easily available to customers. This involves selecting the best channel of distribution. Potential methods include using:
Telesales is one possible channel of distribution
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Retailers. Persuading shops to stock products means customers can buy items locally. However, using a middle man means lower profit margins for the producer. Producers can opt to distribute using a wholesaler who buys in bulk and resells smaller quantities to retailers or consumers. This again means lower profit margins for the manufacturer. Telesales and mail order. Direct communication allows a business to get products to customers without using a high street retailer. This is an example of direct selling[an error occurred while processing this directive]. Internet selling or e-commerce. Online selling is an increasingly popular method of distribution and allows small firms a low cost method of marketing their products overseas. A business website can be both a method of distribution and promotion.
Developing new or improved channels of distribution can increase sales and allow a firm to grow.
The marketing mix is the combination of marketing activities that an organisation engages in so as to best meet the needs of its targeted market. Traditionally the marketing mix consisted of just 4 Ps. For example, a motor vehicle manufacturer like Audi: • Produces products that are of the highest quality and fit for the needs of different groups of consumers, Offers a range of cars at value for money prices, depending on the market segmented they are targeted at, Sells the cars through appropriate outlets such as dealerships and showrooms in prime locations, i.e. in the right places, and Supports the marketing of the products through appropriate promotional and advertising activity.
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The marketing mix thus consists of four main elements: 1. Product 2. Price 3. Place 4. Promotion. Getting the mix of these elements right enables the organisation to meet its marketing objectives and to satisfy the requirements of customers. In addition to the traditional four Ps it is now customary to add some more Ps to the mix to give us Seven Ps. The additional Ps have been added because today marketing is far more customer oriented than ever before, and because the service sector of the economy has come to dominate economic activity in this country. These 3 extra Ps are particularly relevant to this new extended service mix. The three extra Ps are: 1. Physical layout - in the days when manufacturing dominated the UK economy the physical layout of production units such as factories was not very important to the end consumer because they never went inside the factory. However, today consumers typically come into contact with products in retail units - and they expect a high level of presentation in modern shops - e.g. record stores, clothes shops etc. Not only do they need to easily find their way around the store, but they also often expect a good standard or presentation. The importance of quality physical layout is important in a range of service providers, including: • Students going to college or university have far higher expectations about the quality of their accommodation and learning environment than in the past. As a result colleges and universities pay far more attention to creating attractive learning environments, student accommodation, shops, bars and other facilities.
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Air passengers expect attractive and stimulating environments, such as interesting departure lounges, with activities for young children etc. Hair dressing salons are expected to provide pleasant waiting areas, with attractive reading materials, access to coffee for customers, etc. Physical layout is not only relevant to stores, which we visit, but also to the layout and structure of virtual stores, and websites.
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2. People / Provision of customer service - customer service lies at the heart of modern service industries. Customers are likely to be loyal to organisations that serve them well - from the way in which a telephone query is handled, to direct face-to-face interactions. Although the 'have a nice day' approach is a bit corny, it is certainly better than a couldn't care less approach to customer relations. Call centre staff and customer interfacing personnel are the front line troops of any organisation and therefore need to be thoroughly familiar with good customer relation's practice. 3. Processes - associated with customer service are a number of processes involved in making marketing effective in an organisation e.g. processes for handling customer complaints, processes for identifying customer needs and requirements, processes for handling order etc The 7 Ps - price, product, place, promotion, physical presence, provision of service, and processes comprise the modern marketing mix that is particularly relevant in service industry, but is also relevant to any form of business where meeting the needs of customers is given priority.
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Modern marketing has supplemented the traditional marketing mix structure of ”4 Ps” with three more “Ps” to give you “7 Ps” of marketing. The new additions to the marketing mix are People, Process and Physical Evidence. This new marketing mix is discussed below with emphasis on why thinking about these additional elements of the marketing mix are important to your sales and marketing efforts. This ties into the larger debate about what the marketing mix really is and what it means today.
The New Marketing Mix Structure: Adding “Ps”
Why add more “Ps”? The answer to this question is that the traditional marketing mix was designed in and created for the age of marketing brought about by the manufacturing explosion of the 50s and 60s. The “4 Ps” are simply not enough to describe new marketing systems, paradigms and methodologies which are much more focused on people and technology.
The fact of the matter is that even “7 Ps” may not be enough to cover everything that you need to know to successfully create marketing plans. However you define the components of the marketing mix the real question is, what do you need to know to create customers today? In looking at the “3 Ps” of People, Process and Physical Evidence in the new marketing mix, think about what other factors will play a role in creating a successful marketing program. These may be as important for you to consider as traditional elements of the marketing mix.
People
The marketing equation of the past was traditionally concerned with only two parties, you and your customer (“You”). The new marketing mix structure broadens this to include a myriad of other people involved in modern business.Your Marketing Communication Strategy must now encompass employees, shareholders, partners, the press, analysts and the general public. Each of these groups is a stakeholder in your businesses whose needs must be addressed. While the complexity of the diverse interests you must cater to can seem intimidating, they provide you the opportunity to provide a rich message that delivers more value to your customers in the form of an experience and not just a product.
Process
It is not enough to say you have a Product and a Place where your consumer will purchase from you without more focus on the shape and form your business will take. Sales and marketing today is far more complicated than the simple transactions of the past. Some of the questions covered by Process within the components of the marketing mix are not only where and how customers will do business with you but what added value you provide and how you can develop relationships and provide an interactive experience. The advent of e-commerce has caused an explosion and exponential growth in new ways of doing business. The most successful organizations today are those that interact and transact with customer through a variety of methods. In cultivating long term relationships with your customers, Process within the new marketing mix will come to include not only how you promote and deliver the value you create but also how you educate and support customers on an ongoing basis.
Sales and Marketing for "You" means making sure you keep your customer in mind throughout the sales and marketing process. In looking at this element of the marketing communication mix, always keep their needs in mind. Are they being serviced excellently? Do they have all the information they need? Is their experience of interacting with your organization satisfying and rewarding?
Physical Evidence
What is Physical Evidence? Within the new marketing mix structure this refers to whatever your customers can see before purchasing. This can include the physical environment, packaging, supporting collateral and anything else that helps in presentation. Physical Evidence as one of the components of the marketing mix is most useful in selling and marketing services and intangible products. Whenever your customer can't feel or see your end product, then supporting physical evidence they can see and feel becomes important. Physical Evidence within the marketing mix structure should once be tied into trying to understand your customer's perspective. What experience are you providing them during the purchase process itself? Is it pleasant and rewarding doing business with you? How can you tailor your customer interactions to be in and of themselves a value add and unique differentiator for you?
Answer for 1b
doc_704264450.docx
marketing mix
The term "marketing mix" was coined in 1953 by Neil Borden in his American Marketing Association presidential address. However, this was actually a reformulation of an earlier idea by his associate, James Culliton, who in 1948 described the role of the marketing manager as a "mixer of ingredients", who sometimes follows recipes prepared by others, sometimes prepares his own recipe as he goes along, sometimes adapts a recipe from immediately available ingredients, and at other times invents new ingredients no one else has tried. The marketing mix (price, product, distribution, promotion) forms the entire promotional campaign. As stated in “Management of a Sales Force” by Rosann L. Spiro, Gregory A. Rich, William J. Stanton, “when these are effectively blended, they form a marketing program that provides want-satisfying goods and services for the company’s market." The term became popular in the article written by Niel Borden called, “The Concept of the Marketing Mix,” as explained on the site netmba.com. He started teaching the term to many after he himself learned about it with an associate of his. The marketing mix is a broad concept which includes several aspects of marketing which all inquire to obtain a similar goal of creating awareness and customer loyalty. The marketing mix is not only an important concept, but a guideline to reference back to when implementing the price, promotion, product, and distribution. Those are the four main ingredients of the marketing mix, but there are other components not already mentioned on the Wikipedia site, including, planning, branding, packaging, display, distribution channels, personal selling, advertising, servicing, and physical handling. All in all the current description of the marketing mix is accurate, but missing some vital pieces of information which will allow individuals to gain a better understanding and implement a more effective marketing mix.[1] A prominent marketer, E. Jerome McCarthy, proposed a Four P classification in 1960, which has seen wide use.
Elements of the marketing mix are often referred to as the "Four 'P's", a phrase used since the 1960's
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Product - It is a tangible good or an intangible service that is mass produced or manufactured on a large scale with a specific volume of units. Intangible products are service based like the tourism industry & the hotel industry or codes-based products like cellphone load and credits. Typical examples of a mass produced tangible object are the motor car and the disposable razor. A less obvious but ubiquitous mass produced service is a computer operating system. Packaging also needs to be taken into consideration. Every product is subject to a life-cycle including a growth phase followed by an eventual period of decline as the product approaches market saturation. To retain its competitiveness in the market, product differentiation is required and is one of the strategies to differentiate a product from its competitors. Price – The price is the amount a customer pays for the product. The business may increase or decrease the price of product if other stores have the same product. Promotion represents all of the communications that a marketeer may use in the marketplace. Promotion has four distinct elements: advertising, public relations, personal selling and sales promotion. A certain amount of crossover occurs when promotion uses the four principal elements together, which is common in film promotion. Advertising covers any communication that is paid for, from cinema commercials, radio and Internet adverts through print media and billboards. Public relations are where the communication is not directly paid for and includes press releases, sponsorship deals, exhibitions, conferences, seminars or trade fairs and events. Word of mouth is any apparently informal communication about the product by ordinary individuals, satisfied customers or people specifically engaged to create word of mouth momentum. Sales staff often plays an important role in word of mouth and Public Relations (see Product above). Place – Place represents the location where a product can be purchased. It is often referred to as the distribution channel. It can include any physical store as well as virtual stores on the Internet.
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Any organization, before introducing its products or services into the market; conducts a market survey. The sequence of all 'P's as above is very much important in every stage of product life cycle Introduction, Growth, Maturity and Decline. In recent years the 4 P's have been updated to include several more factors. Some people even go up to as many as 27 P's.
Four Cs
(CONSUMER, COST, CONVENIENCE and COMMUNICATION , CULTURE ) Robert F. Lauterborn proposed a four Cs classification in 1993.[2] The Four Cs model is more consumeroriented and attempts to better fit the movement from mass marketing to niche marketing.
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Product part of the Four Ps model is replaced by 'Consumer' or Consumer Models, shifting the focus to satisfying the consumer needs. Another C replacement for Product is Capable. By defining offerings as individual capabilities that when combined and focused to a specific industry, creates a custom solution rather than pigeon-holing a customer into a product. Pricing is replaced by 'Cost' reflecting the total cost of ownership. Many factors affect Cost, including but not limited to the customer's cost to change or implement the new product or service and the customer's cost for not selecting a competitor's product or service. Placement is replaced by 'Convenience'. With the rise of internet and hybrid models of purchasing, Place is becoming less relevant. Convenience takes into account the ease of buying the product, finding the product, finding information about the product, and several other factors. Promotions feature is replaced by 'Communication' which represents a broader focus than simply Promotions. Communications can include advertising, public relations, personal selling, viral advertising, and any form of communication between the firm and the consumer.
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A company needs to consider the marketing mix in order to meet their consumers' needs effectively.
Elements of the marketing mix
The marketing mix is the combination of product, price, place and promotion for any business venture.
Marketing Mix No one element of the marketing mix is more important than another – each element ideally supports the others. Firms modify each element in the marketing mix to establish an overall brand image and unique selling point that makes their products stand out from the competition.
Using the marketing MIX
An exclusive brand of jewellery uses the best materials but comes at a high price. Such designer brands can only be bought at exclusive stores and are promoted using personal selling sales assistants. By contrast, cheap and cheerful jewellery for the mass market is best sold in supermarkets and can be promoted using television adverts. Market research findings are important in developing the overall marketing mix for a given product. By identifying specific customer needs a business can adjust the features, appearance, price and distribution method for a target market segment. New technologies and changing fashion means goods and services have a limited product life cycle. Ideally, the marketing mix is adjusted to take account of each stage. For example, the life of a product can be extended by changing packaging to freshen a tired brand and so boost sales. There is no single right marketing mix that works for all businesses at all times. The combination of product, price promotion and place chosen by a business will depend on its size, competition, the nature of the product and its objectives. The overall marketing mix is the business’ marketing strategy and is judged a success if it meets the marketing department’s objectives, eg increase annual sales by 5% The law gives customers protection against unfair selling practices. You do not need to know specific Acts but you do need to understand how fair trading regulations protect consumers. The consumer has basic legal rights if the product is:
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given a misleading description of an unsatisfactory quality not fit for its intended purpose Sale and Supply of Goods Act 1994
This Act says that all products have to be of a 'satisfactory quality'. This means that they have to:
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be safe last for a reasonable amount of time be fit for their intended purpose have nothing wrong with them (unless the defect was noted at the time of sale) Trade Descriptions Act
According to the Trade Descriptions Act, false or misleading information must not be given about products. For example, accurate information must be given about who made the product. Fake designer goods that are marketed as genuine are a clear breach of the Trade Descriptions Act.
Consumer Credit Act 1974
This Act protects you when you borrow or buy on credit. The Consumer Credit Act states that:
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Businesses must have licences to give credit. No one under 18 is to be invited to borrow or buy on credit. Businesses have to state an Annual Percentage Rate (APR). If you sign a credit agreement at home you have several days in which you can tear up the agreement. This is called a 'cooling off period'.
Product
A business can adjust the features, appearance and packaging of a product to create competitive advantage.
What is a product?
Brands use packaging and logos to create a brand image A product is a good or a service that is sold to customers or other businesses. Customers buy a product to meet a need. This means the firm must concentrate on making products that best meet customer requirements. A business needs to choose the function, appearance and cost most likely to make a product appeal to the target market and stand out from the competition. This is called product differentiation.
How product differentiation is created: • Establishing a strong brand image (personality) for a good or service. • Making clear the unique selling point (USP) of a good or service, for example, by using the tag line quality items for less than a pound for a chain of discount shops. • Offering a better location, features, functions, design, appearance or selling price than rival products.
Having a brand image helps products to stand out in a competitive market Firms face a dilemma if they choose to launch a premium brand. Improving the quality or appearance of a product adds to the cost of making it. In turn, this means that the business must charge higher prices if they are to make a profit. An alternative marketing strategy is to produce a budget brand. If a mobile phone has limited functions and a standard design then it can be manufactured cheaply. The low production costs allow for discount pricing.
Product life cycle
The product life cycle diagram shows that four stages exist in the ‘working life’ of most products.
Product life cycle diagram These are:
Launch 2. Growth 3. Maturity 4. Decline In the launch and growth stages sales rise. In the maturity stage, revenues flatten out.
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Getting a product known beyond the launch stage usually requires costly promotion activity. At some point sales begin to decline and the business has to decide whether to withdraw the item or use an extension strategy to bolster sales. Extension strategies include updating packaging, adding extra features or lowering price.
Product differentiation
A product portfolio is the range of items sold by a business. It can be analysed using the Boston Matrix.
Boston Matrix Star products have a high market share in a fast growing market. Cash Cows have a high market share in a slow growing market. Question marks or problem children products have a low market share in fast growing markets. Dogs are products with a low market share in slow growing markets. Firms with just a few items in their product portfolio – or who have all their products at the same stage in the product life cycle[an error occurred while processing this directive] – are in the dangerous position of having ‘all their eggs in one basket’. Such firms may prioritise broadening their product range.
Price
A business must take many factors into account before deciding on the price of a product.
Pricing strategies
Remember there is a big difference between costs and price. Costs are the expenses of a firm. Price is the amount customers are charged for items. Firms think very carefully about the price to charge for their products. There are a number of factors to take into account when reaching a pricing decision:
Customers. Price affects sales. Lowering the price of a product increases customer demand. However, too low a price may lead customers to think you are selling a low quality ‘budget product’. • Competitors. A business takes into account the price charged by rival organisations, particularly in competitive markets. Competitive pricing occurs when a firm decides its own price based on that charged by rivals. Setting a price above that charged by the market leader can only work if your product has better features and appearance. • Costs. A business can make a profit only if the price charged eventually covers the costs of making an item. One way to try to ensure a profit is to use cost plus pricing. For example, adding a 50% mark up to a sandwich that costs £2 to make means setting the price at £3. The drawback of cost plus pricing is that it may not be competitive. There are times when businesses are willing to set price below unit cost. They use this loss leader strategy to gain sales and market share.
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Pricing new products
Half price sales are an example of penetration pricing A business can choose between two pricing tactics when launching a new product:
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Penetration pricing means setting a relatively low price to boost sales. It is often used when a new product is launched, or if the firm’s main objective is growth. Price skimming means setting a relatively high price to boost profits. It is often used by well-known businesses launching new, high quality, premium products.
Promotion
There is much more to promotion than advertising. Businesses use various methods to gain publicity.
Customer awareness
Promotion refers to the methods used by a business to make customers aware of its product. Advertising is just one of the means a business can use to create publicity. Businesses create an overall promotional mix by putting together a combination of the following strategies:
Promotional material on a high street in Shanghai
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Advertising, where a business pays for messages about itself in mass media such as television or newspapers. Advertising is non-personal and is also called above-the-line promotion. Sales promotions, which encourage customers to buy now rather than later. For example, point of sale displays, 2-for-1 offers, free gifts, samples, coupons or competitions.
Personal selling using face-to-face communication, eg employing a sales person or agent to make direct contact with customers. • Direct marketing takes place when firms make contact with individual consumers using tactics such as ‘junk’ mail shots and weekly ‘special offer’ emails. There is no one right promotional mix for all firms. The combination of promotional elements selected takes into account the size of the market and available resources. Large businesses have the resources to use national advertising. Small firms with limited resources and a local market may instead opt for leaflet drops to promote their activities.
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Place
As part of its marketing strategy, a company needs to decide where best to distribute a product.
What is place?
Place is the point where products are made available to customers. A business has to decide on the most cost-effective way to make their products easily available to customers. This involves selecting the best channel of distribution. Potential methods include using:
Telesales is one possible channel of distribution
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Retailers. Persuading shops to stock products means customers can buy items locally. However, using a middle man means lower profit margins for the producer. Producers can opt to distribute using a wholesaler who buys in bulk and resells smaller quantities to retailers or consumers. This again means lower profit margins for the manufacturer. Telesales and mail order. Direct communication allows a business to get products to customers without using a high street retailer. This is an example of direct selling[an error occurred while processing this directive]. Internet selling or e-commerce. Online selling is an increasingly popular method of distribution and allows small firms a low cost method of marketing their products overseas. A business website can be both a method of distribution and promotion.
Developing new or improved channels of distribution can increase sales and allow a firm to grow.
The marketing mix is the combination of marketing activities that an organisation engages in so as to best meet the needs of its targeted market. Traditionally the marketing mix consisted of just 4 Ps. For example, a motor vehicle manufacturer like Audi: • Produces products that are of the highest quality and fit for the needs of different groups of consumers, Offers a range of cars at value for money prices, depending on the market segmented they are targeted at, Sells the cars through appropriate outlets such as dealerships and showrooms in prime locations, i.e. in the right places, and Supports the marketing of the products through appropriate promotional and advertising activity.
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The marketing mix thus consists of four main elements: 1. Product 2. Price 3. Place 4. Promotion. Getting the mix of these elements right enables the organisation to meet its marketing objectives and to satisfy the requirements of customers. In addition to the traditional four Ps it is now customary to add some more Ps to the mix to give us Seven Ps. The additional Ps have been added because today marketing is far more customer oriented than ever before, and because the service sector of the economy has come to dominate economic activity in this country. These 3 extra Ps are particularly relevant to this new extended service mix. The three extra Ps are: 1. Physical layout - in the days when manufacturing dominated the UK economy the physical layout of production units such as factories was not very important to the end consumer because they never went inside the factory. However, today consumers typically come into contact with products in retail units - and they expect a high level of presentation in modern shops - e.g. record stores, clothes shops etc. Not only do they need to easily find their way around the store, but they also often expect a good standard or presentation. The importance of quality physical layout is important in a range of service providers, including: • Students going to college or university have far higher expectations about the quality of their accommodation and learning environment than in the past. As a result colleges and universities pay far more attention to creating attractive learning environments, student accommodation, shops, bars and other facilities.
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Air passengers expect attractive and stimulating environments, such as interesting departure lounges, with activities for young children etc. Hair dressing salons are expected to provide pleasant waiting areas, with attractive reading materials, access to coffee for customers, etc. Physical layout is not only relevant to stores, which we visit, but also to the layout and structure of virtual stores, and websites.
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2. People / Provision of customer service - customer service lies at the heart of modern service industries. Customers are likely to be loyal to organisations that serve them well - from the way in which a telephone query is handled, to direct face-to-face interactions. Although the 'have a nice day' approach is a bit corny, it is certainly better than a couldn't care less approach to customer relations. Call centre staff and customer interfacing personnel are the front line troops of any organisation and therefore need to be thoroughly familiar with good customer relation's practice. 3. Processes - associated with customer service are a number of processes involved in making marketing effective in an organisation e.g. processes for handling customer complaints, processes for identifying customer needs and requirements, processes for handling order etc The 7 Ps - price, product, place, promotion, physical presence, provision of service, and processes comprise the modern marketing mix that is particularly relevant in service industry, but is also relevant to any form of business where meeting the needs of customers is given priority.
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Modern marketing has supplemented the traditional marketing mix structure of ”4 Ps” with three more “Ps” to give you “7 Ps” of marketing. The new additions to the marketing mix are People, Process and Physical Evidence. This new marketing mix is discussed below with emphasis on why thinking about these additional elements of the marketing mix are important to your sales and marketing efforts. This ties into the larger debate about what the marketing mix really is and what it means today.
The New Marketing Mix Structure: Adding “Ps”
Why add more “Ps”? The answer to this question is that the traditional marketing mix was designed in and created for the age of marketing brought about by the manufacturing explosion of the 50s and 60s. The “4 Ps” are simply not enough to describe new marketing systems, paradigms and methodologies which are much more focused on people and technology.
The fact of the matter is that even “7 Ps” may not be enough to cover everything that you need to know to successfully create marketing plans. However you define the components of the marketing mix the real question is, what do you need to know to create customers today? In looking at the “3 Ps” of People, Process and Physical Evidence in the new marketing mix, think about what other factors will play a role in creating a successful marketing program. These may be as important for you to consider as traditional elements of the marketing mix.
People
The marketing equation of the past was traditionally concerned with only two parties, you and your customer (“You”). The new marketing mix structure broadens this to include a myriad of other people involved in modern business.Your Marketing Communication Strategy must now encompass employees, shareholders, partners, the press, analysts and the general public. Each of these groups is a stakeholder in your businesses whose needs must be addressed. While the complexity of the diverse interests you must cater to can seem intimidating, they provide you the opportunity to provide a rich message that delivers more value to your customers in the form of an experience and not just a product.
Process
It is not enough to say you have a Product and a Place where your consumer will purchase from you without more focus on the shape and form your business will take. Sales and marketing today is far more complicated than the simple transactions of the past. Some of the questions covered by Process within the components of the marketing mix are not only where and how customers will do business with you but what added value you provide and how you can develop relationships and provide an interactive experience. The advent of e-commerce has caused an explosion and exponential growth in new ways of doing business. The most successful organizations today are those that interact and transact with customer through a variety of methods. In cultivating long term relationships with your customers, Process within the new marketing mix will come to include not only how you promote and deliver the value you create but also how you educate and support customers on an ongoing basis.
Sales and Marketing for "You" means making sure you keep your customer in mind throughout the sales and marketing process. In looking at this element of the marketing communication mix, always keep their needs in mind. Are they being serviced excellently? Do they have all the information they need? Is their experience of interacting with your organization satisfying and rewarding?
Physical Evidence
What is Physical Evidence? Within the new marketing mix structure this refers to whatever your customers can see before purchasing. This can include the physical environment, packaging, supporting collateral and anything else that helps in presentation. Physical Evidence as one of the components of the marketing mix is most useful in selling and marketing services and intangible products. Whenever your customer can't feel or see your end product, then supporting physical evidence they can see and feel becomes important. Physical Evidence within the marketing mix structure should once be tied into trying to understand your customer's perspective. What experience are you providing them during the purchase process itself? Is it pleasant and rewarding doing business with you? How can you tailor your customer interactions to be in and of themselves a value add and unique differentiator for you?
Answer for 1b
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