The Marketing Mix

1. The Marketing Mix Also referred to as the 4Ps

2. 14 Human Responsibility – 4Ps

3. Marketing Mix The balance of product, price promotion and place is the key to products being successful in the market place.

4. The 4 Ps • The right Product • At the right Price • Where Promotion is appropriate • And it’s sold in the right Place for the type of product it is

5. The Product i • Product • Price • Promotion • Place

6. The Product • An object or a service that is mass produced or manufactured on a large scale with a specific volume of units. A typical example of a mass produced service is the hotel industry. A less obvious but ubiquitous mass produced service is a computer operating system. Typical examples of a mass produced objects are the motor car and the disposable razor. www.wikipedia.com

7. The Product • For a product to be successful it will need to be carefully designed, developed and tested. • Which costs money. • The product is refined and made ready to be launched to the public. • A graph of sales can then be plotted over the life of the product, this is called the PRODUCT LIFE CYCLE • X = Time and Y = volume of sales

8. Product Life Cycle Can you label each section of a product’s lifecycle? Maturity Growth Decline Volume of Sales Obsolete Introduction TIME Development 1 2 3 4 5 6

9. Introduction • Once a product has been developed by the R&D dept of a firm it is ready to be launched on the market. • At this point the sales will begin to climb slowly over time, hence the graph rises slowly (slow rate of adoption) • cost of product will be high • sales volume low • no/little competition - competitive manufacturers watch for acceptance/segment growth • There may be losses • demand has to be created by a marketing strategy • customers have to be prompted to try the product

10. Growth • The sales continue to rise as the public become aware of the product • costs reduced due to economies of scale • sales volume increases significantly, the graph rises rapidly (faster rate of adoption) • profitability • competition begins to increase with a few new players in establishing market • prices controlled to maximize market share

11. Maturity • Mature stage • costs are very low as you are well established in market & no need for publicity. • sales volume peaks • increase in competitive offerings • prices tend to drop due to the proliferation of competing products • brand differentiation, feature diversification, as each player seeks to differentiate from competition with "how much product" is offered • very profitable

12. Decline • Decline or Stability stage • costs become counter-optimal • sales volume decline or stabilize • prices, profitability diminish • profit becomes more a challenge of production/distribution efficiency than increased sales • consumer demand for spare parts, maintenance and or product servicing

13. Obsolescence • Product no longer manufactured and sold • New product has replaced this one • End of the line • Obsolete

14. Revitalisation • Before the product reaches death whilst it is in decline • The product can be revitalised

15. Revitalisation Maturity Growth Decline and revitalisation Product life extended Volume of Sales Introduction TIME Development

16. Frequent Revitalisation Maturity Decline and revitalisation Growth Product life extended Fast rate of adoption Volume of Sales Introduction TIME Development

17. FAD products A Fad product has a very short life cycle and is very quickly adopted onto the market. This quick adoption rate is given by the rapid rise in the graph. Maturity is very short and decline equally rapid. Maturity Volume of Sales Decline Growth Death Introduction TIME Development

18. FASHION products A Fashion product has a very rapid rate of adoption onto the market. This quick adoption rate is given by the rapid rise in the graph. Maturity and decline can depend on the fashion in question. Maturity Decline Growth Volume of Sales Death Introduction TIME Development

19. Trends in FADs FADs come and go very quickly, but with FADs come trends. A trend is plotted by looking at the performance of the FAD products on sale. If you consider, yoyos, utube, myspace, so there is a trend towards using PCs and away from conventional toys Volume of Sales Yoyo Utube Myspace Death TIME

20. Slow rate of adoption A product that is adopted slowly has a low growth in sales, tending to have a longer lifecycle. Volume of Sales Maturity Growth Decline Introduction TIME Development

21. Mobile music lifecycles Ipod MP3 player Walkman CD Walkman Volume of Sales iPhone TIME 1980 1985 1990 1995 2000 2005

22. Product Churning • Some companies deliberately keep the lives of certain products short • Producing new and improved products at frequent intervals. • This stimulates purchasers to have the ‘latest’ version of the product. • Popular in the 1980s with electronics and car industry

23. Product • In summary • A product is examined on three levels: • The core product is the benefit of the product, for example the convenience of a car • The actual product is the tangible, physical product, for example the car • The augmented product is the customer service support offered, for example warranty, guarantee and after-sales service

24. Product • In summary • The quality of a product depends on factors such as its: • Aesthetics • Performance • Maintenance, ease of servicing • Durability • Range of features • Ease/effectiveness of use • Brand name

25. Marketing Mix ii Product Price Promotion Place

26. Price • The price of a product can be a significant determinant in the market success of a product. Pricing is a complex business, and the price will be determined by a number of factors • The objectives of the company • Elastic demand • What the market will bear • Cost of production

27. Company Objectives • Price will depend on: • Whether the company is seeking to maintain or expand its market share • Whether it is trying to reach a certain return for a level of investment • Whether it is trying to achieve a steady rate of growth • Whether it is trying to keep up planned levels of output

28. Elasticity of demand • Price can be determined by elastic demand • Elastic demand is determined by how much demand changes with a small change in price • If demand remains the same when there is a price change then it is said to be inelastic • If demand changes dramatically when there is a change in price it is said to be elastic.

29. What the market will bear • Price can be affected by the type of product being sold • Radically new products are harder to determine a price for than products that are developments on existing offerings. • When this is the case market research needs to be carried out in order to determine what the highest price can be charged to ensure a targeted level of sales.

30. designer v traditional Traditional Radically New

31. Costs • Price will always be affected by costs • Material Costs – which are variable, raw materials etc • Production Costs – fixed, machines, tools, buildings • Distribution costs – variable, transportation • Higher volume of sales will mean lower production costs and likewise lower volume of sales will lead to higher production costs. This is known as economy of scale.

32. Henry Ford’s production line

33. Pinball machine production line

34. Costs • Working out the final price can be calculated by a cost plus strategy. • This involves estimating the average cost of producing and marketing the product and adding a mark up for profit. • contribution pricing is similar, but takes account of the variation of production costs for different levels of sales

35. Price • A company may choose to not to use any of the above to determine the price. • It could set it’s price to compete with a rival company. • It could also set its selling price by using a market research strategy to determined perceived value. • Such a strategy will usually be accompanied by a promotional strategy and emphasise quality and value of the product.

36. Price and the Product Life Cycle • The strategy adopted to determine a product’s price will change throughout its lifecycle • Early in a product’s life the price maybe high however the price will reduce by improvements in the production process and economies of larger scale production.

37. Price and the product life cycle Maturity During the introduction phase of a product’s life a pricing strategy could be to price the product low to stimulate interest. This is known as MARKET PENETRATION. Alternatively you might price the product at a high level to reach a smaller target market and create an image of exclusiveness and quality. This is know as MARKET SKIMMING Growth Decline Volume of Sales Product sales dying TIME 1 2 3 4 5 6

38. Price and the product life cycle During the growth stage the aim of a company will be to keep prices steady in order to encourage new and repeat purchasers. However during this phase of a product's life the competition will be known and it is possible that either the price of the product will be reduced to make the product more competitive or new features will be added to the basic product to give it added value Maturity Decline Volume of Sales Product sales dying TIME 1 2 3 4 5 6

39. Price and the product life cycle During the maturity stage the aim Maturity Decline Volume of Sales Product sales dying TIME 1 2 3 4 5 6

40. Price and the product life cycle In the decline phase of a product life cycle decisions will have to be made about how long the decline can be sustained. The strategies may not involve price changes but the company will look for ways in which to cut the costs that they incur in producing, distributing and marketing the product Volume of Sales TIME 1 2 3 4 5 6

41. Trigger and Incremental Products • Another aspect of product development is the distinction between trigger and incremental products a company will sell. • Trigger products will be marketed on their own merit but incremental products are sold on the goodwill created by the trigger product.

42. Trigger Products • TRIGGER products are key products in a company’s product range which will prompt a potential customer to make a purchase. • Examples are computer hardware and the operating software. • Tesco’s TRIGGER products are its range of groceries.

43. Incremental Products • INCREMENTAL products are not worth buying on their own, they are add ons to the purchase of a trigger product. • Examples are computer printer and the word processing software. • Tesco’s incremental products are its services like photography, insurance and the like.

44. Consumers Late majority Early majority Early adopters Volume of Sales Laggards Innovators TIME

45. Categories of purchaser • Innovators are those consumers most likely to take a risk and buy radically new innovations • Early adopters are slightly more cautious than innovators but are the targets of a company’s marketing strategy • Early Majority wait to see a product become established before taking the risk. • Late majority wait until they see the price drop, or for special offers which will enable them to purchase. • Laggards purchase at the end of a product’s life from cultural or financial reasons. They may just feel compelled to buy the product for social reasons.

46. Price – a summary • Demand • Costs (need to cover all costs incurred) • Government taxes • Competition • Stage in the life cycle (price increases in growth and falls decline)

47. Price – a summary • Methods of pricing include: • Penetration pricing – price set artificially low to gain market share; once achieved, the price is increased • Price skimming – if product has competitive edge, a high price can be set; this will fall with increased supply • Psychological pricing – charging £1.99 rather than £2.00 • Predatory pricing – undercutting competitors, creating price wars

48. Marketing Mix iii Product Price Promotion Place

49. Promotion • If a company’s products are to succeed people need to know about them. • Promotion is about image creation both for the company and for specific products and about creating loyalty to brands and products in various ways including the use of monetary incentives.

50. Promotion