CERTIFICATE IN BUSINESS

MANAGEMENT

LESSON 8 – MARKETING MIX ELEMENTS

FOCUS ON SATISFYING CUSTOMER NEEDS PROFITABLY

MARKETING MIX

Marketing Mix is a term coined by Neil Borden, are the

ingredients that combine to capture and promote a brand or product‟s unique selling points, those that differentiate it from its competitors.

In 1960. E. Jerome McCarthy called them as:

“The Four Ps.”

However, in recent times, the 'four Ps' have been expanded to the 'seven Ps' with the addition of process, physical evidence and people which was proposed by Booms and Bitner in 1981.

Marketing Mix is the set of controllable, tactical marketing tools

that the firm blends to produce the response it wants in the target market.

The marketing mix consists of everything the firm can do to influence the demand for its product.

(Philip Kotler – 12th edition)

MARKETING MIX

MARKETING MIX

“Marketing Mixes have to be changed from time to

time in response to new factors in the marketing

picture. The firm can react to environmental changes

in an expedient or a systematic fashion”

Philip Kotler

MARKETING MIX ELEMENTS

Product: is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. A product is everything both favorable and unfavorable that is received in an exchange.

Price: is the amount of money customers has to pay to obtain the product, or the sum of the values that consumers exchange for the benefits of having or using the product.

Place: includes all activities in order to make the product available to target consumers in the „right place‟ and at the „right time‟.

Promotion: are the means by which an organisation attempts to inform, persuade, and remind consumers – directly or indirectly – about the products they sell.

THE EXTENDED MARKETING MIX

Why Extended Marketing Mix?

The advent of service into the marketing equation created issues for marketers to manage service situations with the existing marketing mix. (Services marketing mix)

Therefore there was a requirement to extend the traditional marketing mix with other extended elements. Thus, the traditional 4 P marketing mix was extended to a 7 P marketing mix.

People: Relates to all personnel dealing with delivering the marketing experience to the target audience.

Process: All procedures, systems and policies a consumer needs to go through in dealing with the organisation.

Physical Evidence: Deals with all aspects of giving tangibility to the intangible service offered to the consumer

EXTENDED MARKETING MIX ELEMENTS

PEOPLE

Anyone who comes into contact with your customers will make an impression, and that can have a profound effect – positive or negative on customer satisfaction levels. The reputation of your organisation rests in your peoples hands.

People are an essential ingredient in service provision; recruiting and training the right staff is required to create a competitive advantage.

Customers make judgments about service provision and delivery based on the people representing your organisation. This is because people are one of the few elements of the service that customers can see and interact with.

Staff require appropriate interpersonal skills, attitude, aptitude, and product/service knowledge in order to deliver a quality service. In the UK many organisations apply for the "Investors in People" Accreditation to demonstrate that they train their staff to prescribed standards and best practices.

PEOPLE

All procedures, systems and policies a consumer needs to go through in dealing with the organization.

Processes are the way in which customers are served

Co-ordination of activities and concern that customers be fully satisfied must underpin the systems and procedures.

Efficient processes creates a competitive advantage

PROCESS

Confirmation is always sought. If the physical evidence does not match

customer expectations then the customer will withdraw.

The role of the marketer is to design and implement such tangible evidence.

PHYSICAL EVIDENCE

Physical layout - supermarket, college, university, banks, airports

Signage – providing instructions, information

Logos

Company vehicles, parking area

Employee Uniforms/name tags

Packaging - certificates

Letterheads

Business Cards, Catalogues, brochures

Ambience

PHYSICAL EVIDENCE

Product

Marketing Mix

Focus on satisfying customer‟s

needs profitably

Price

Process

Physical Evidence

Promotion

People Place

MARKETING MIX

Seven P‟s might be better described as the seven C‟s:

Producers View (7P’s)

Product

Price

Place

Promotion

People

Process

Physical Evidence

Customers View (7C’s)

Customer Value

Cost

Convenience

Communication

Consideration

Co-ordination

Confirmation

DEFINITION OF A PRODUCT

Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need.

(Philip Kotler – 12th Edition)

Product Classifications

Consumer Products

Convenience Products

Shopping Products

Specialty Products

Unsought Products

Industrial Products

Capital Equipment

Accessory Equipment

Materials and parts

Supplies and services

CONSUMER PRODUCTS

Convenience Products - Staple, Impulse, Emergency Relatively inexpensive & Frequently purchased

Customer puts little effort into the purchasing decision

Convenience takes priority over brand loyalty

Example- Bread, Milk, Soap, Groceries (FMCG)

SHOPPING PRODUCTS

Less frequently purchased

Customers compare on suitability, quality, price and style

Purchase is usually made after a good deal of advance planning and shopping around

Examples:- bicycles, cameras, furniture, consumer durables etc…

SPECIALTY PRODUCTS

Products with unique characteristics or brand identification

Significant group of buyers are willing to make a special purchase effort.

Examples:- designer clothes, specific brands and types of cars, high priced photographic equipment, High-end electronics, and the service of medical and legal specialists.

Buyers normally do not compare specialty products.

FIVE LEVELS OF A PRODUCT

• Potential Product

• Augmented Product

• Expected Product

• Basic product

• Core benefit

WHAT IS PRICE?

Price is the amount of money charged for a product or

service, or the sum of all the values that consumers exchange for the benefit of having or using the product or service. (Philip Kotler - 12th edition)

Cost-based Pricing

Cost-based pricing setting prices based on the costs for

producing, distributing, and selling the product plus a fair rate of return for effort and risk

Cost Plus pricing - In cost plus pricing, the seller’s costs are determined

and the price is then set by adding a specified amount or percentage of the cost to the sellers cost.

Mark-up pricing - A common pricing method among retailers is mark-up pricing. In mark-up pricing, a product’s price is derived by adding a pre-determined percentage of the cost, called mark-up, to the cost of the product

PRICING STRATEGIES

When an organisation is planning to launch a new product it may choose from the following two pricing methods/strategies: Market Skimming Pricing

Market Penetration Pricing

Market Skimming Pricing Setting a high price for new or innovative product to skim

maximum revenues layer by layer from the segments willing to pay the high price. "When Sony introduced the world's first high definition television to the Japanese market in 1990, the high-tech sets cost $43,000. These televisions were purchased only by customer who could afford to pay a high price for the new technology. Sony rapidly reduced the price over the next several years to attract new buyers. By 1993, a 28-inch HDTV cost a Japanese buyer just over $6,000. In 2001, a Japanese consumer could buy a 40-inch HDTV for about $2000, a price that many more customers could afford. In this way, Sony skimmed the maximum amount of revenue from the various segments of the market."

Price-skimming strategy is favored under following conditions:

When a truly innovative product with distinctive features - does not have any substitutes.

The Product quality and image must support its high price, and sufficient buyers must want to buy the product at that price

The new product is protected from competitors through one or more entry barriers. (Example: patent rights)

Market Penetration Pricing

Penetration pricing is setting a low price in order to penetrate the market quickly and produce a larger unit sales volume.

Penetration strategy is favored under following conditions:

When a high level of competition is expected

When the target market is very price sensitive.

The low price will discourage any new competitors

Economies of scale

Customer Value-Based Pricing

Value-based pricing uses the buyers’ perceptions of value, not the sellers cost, as the key to pricing

Value-based pricing is customer driven

Cost-based pricing is product driven

Customer perceptions of the product's value set the ceiling for prices. If customers perceive that a product's price is greater than its value, they will not buy the product.

Psychological Pricing

Prices set to induce customers to purchases goods based on their emotional reactions rather than on rational.

o Image/Prestige Pricing: setting a high price to convey an image of high quality. E.g. Mercedes Benz, Rolex, Designer labels

o Odd pricing: selling a product at Rs. 99.00 as customers would feel that they are getting a bargained price. (Example Bata pricing)

Promotional Pricing Strategy

• Cash rebates - An offer to consumers for a cash discount on the purchase of a consumer good.

• Special event pricing

• Everyday low pricing (EDLP): involves charging a constant everyday low price with few or no temporary price discounts

• Low interest deals: For example 0% interest payment schemes offered for credit card holders

• Loss Leader pricing – modern trade

Competitor-based Pricing

A pricing method that utilizes competitor prices as a benchmark, rather than setting a price based on company costs or customer value. (Consumers will base their judgments of a product’s value on the prices that competitors charge for similar products.)

PLACE (DISTRIBUTION) ELEMENT OF THE MARKETING MIX

THE ROLE AND IMPORTANCE OF

PLACE IN MARKETING

The role of this element of the marketing mix is to ensure that products and services are available to target customers in the 'right place' and at the 'right time'.

However, there are other important aspects to the place element.

For example, the marketer's products and services also need to be available:

In the 'right quantities'

In the 'right condition'

With the 'right degree' of advice, installation and after- sales service.

WHAT IS DISTRIBUTION

Distribution is the process of making a product or service available for use or consumption by a consumer or business user, using direct means, or using indirect means with intermediaries.

In other words, the main task of distribution management is placing the goods in hand of potential customers at the right time and place.

VALUE ADDED SERVICES - FUNCTIONS

Value Added Services

Facilitating Value

Financing Training

Information After sales

Transactional Value

Risk

Marketing Administration

Logistical Value

Assortment Storage Sorting

Bulk breaking Transportation

CHANNELS OF DISTRIBUTION

MARKET COVERAGE STRATEGIES

INTENSIVE DISTRIBUTION

SELECTIVE DISTRIBUTION

EXCLUSIVE DISTRIBUTION

MARKET COVERAGE STRATEGIES

INTENSIVE DISTRIBUTION

Intensive distribution occurs when the product is placed in as many outlets as possible and no interested intermediary is barred from stocking the product.

The key benefit to customer is that convenience and availability may be just around the corner.

Intensive distribution is ideal for convenience goods such as bread, newspapers, milk, soap, soft drinks etc.

SELECTIVE DISTRIBUTION

A more selective approach in using a small number of carefully selected outlets within a defined geographical area to distribute the products.

This strategy is appropriate for shopping goods such as consumer durables, furniture, clothing etc which need a specialist retailer who might be expected to offer technical advice and after sales services.

EXCLUSIVE DISTRIBUTION

Exclusive distribution is the opposite of intensive distribution, and means that only one outlet is used in a relatively large geographical area to distribute the product.

This strategy is appropriate for specialty products of high value and prestigious. (higher image control)

Example would include Mercedes, Rolex watches, Designer labels etc.

The Voice of the Organisation Communicating Customer Value

"Marketing communications are the means by which

firms attempt to inform, persuade, and remind

consumers - directly, or indirectly - about the products

and brands that they sell”

Phillip Kotler

MARKETING COMMUNICATIONS

“EVEN THE BEST PRODUCTS WILL GO UNSOLD,

IF MARKETERS CANNOT COMMUNICATE, OR PROMOTE, THEIR VALUE TO

CUSTOMERS”

MARKETING COMMUNICATION MIX

The marketing communications mix or the promotions mix – consists of the specific blend of communication tools the organisation uses to persuasively communicate customer value and build and maintain customer relationships with customers and public.

MARKETING COMMUNICATION MIX ELEMENTS

MARKETING COMMUNICATION MIX ELEMENTS

Advertising: Any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor. (Philip Kotler)

• Sales Promotion: A variety of short-term incentives to encourage trial or purchase of a product or service. (Philip Kotler)

Public Relations: Building good relationships with the company’s various publics by obtaining favorable publicity, building a good “corporate image” and handling or heading off unfavorable rumors, stories and events. (Philip Kotler)

MARKETING COMMUNICATION MIX ELEMENTS

Personal Selling: Personal presentations by the firms sales force for the purpose of making sales and building customer relationships.

(Philip Kotler)

Direct Marketing: Direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate long term relationships.

(Philip Kotler)