Marketing mix refers to the different elements involved in the marketing of a good or service- the 4 P’s- Product,

Price, Promotion and Place.

Product

Product is the good or service being produced and sold in the market. This includes all the features of the
product as well as its final packaging.

Types of products include: consumer goods, consumer services, producer goods, producer services.

What makes a successful product?

● It satisfies existing needs and wants of the customers

● It is able to stimulate new wants from the consumers
● Its design – performance, reliability, quality etc. should all be consistent with the product’s brand image
● It is distinctive from its competitors and stands out
● It is not too expensive to produce, and the price will be able to cover the costs

New Product Development: development of a new product by a business. The process:

1. Generate ideas: the firm brainstorms new product concepts, using customer suggestions, competitors’
products, employees’ ideas, sales department data and the information provided by the research and
development department
2. Select the best ideas for further research: the firm decides which ideas to abandon and which to
research further. If the product is too costly or may not sell well, it will be abandoned
3. Decide if the firm will be able to sell enough units for the product to be a success: this research
includes looking into forecast sales, size of market share, cost-benefit analysis etc. for each product
idea, undertaken by the marketing department
4. Develop a prototype: by making a prototype of the new product, the operations department can see
how the product can be manufactured, any problems arising from it and how to fix them. Computer
simulations are usually used to produce 3D prototypes on screen
5. Test launch: the developed product is sold to one section of the market to see how well it sells, before
producing more, and to identify what changes need to be made to increase sales. Today a lot of digital
products like apps and software run beta versions, which is basically a market test
6. Full launch of the product: the product is launched to the entire market

Advantages:

● Can create a Unique Selling Point (USP) by developing a new innovative product for the first time in
the market. This USP can be used to charge a high price for the product as well as be used in
advertising.
● Charge higher prices for new products (price skimming as explained later)
● Increase potential sales, revenue and profit
● Helps spreads risks because having more products mean that even if one fails, the other will keep
generating a profit for the company

Disadvantages:

● Market research is expensive and time consuming

 ● Investment can be very expensive

Why is brand image important?

Brand image is an identity given to a product that differentiates it from competitors’ products.
Brand loyalty is the tendency of customers to keep buying the same brand continuously instead of switching
over to competitors’ products.

● Consumers recognize the firm’s product more easily when looking at similar products- helps
differentiate the company’s product from another.
● Their product can be charged higher than less well-known brands – if there is an established high
brand image, then it is easier to charge high prices because customers will buy it nonetheless.
● Easier to launch new products into the market if the brand image is already established. Apple is one
such company- their brand image is so reputed that new products that they launch now become an
immediate success.

Why is packaging important?

● It protects the product

● It provide information about the product (its ingredients, price, manufacturing and expiry dates etc.)
● To help consumers recognize the product (the brand name and logo on the packaging will help identify
what product it is)
● It keeps the product fresh

Product Life Cycle (PLC)

The product life cycle refers to the stages a product goes through from it’s introduction to it’s retirement in terms
of sales.
Extension strategies: marketing techniques used to extend the maturity stage of a product (to keep the product
in the market):

● Finding new markets for the product

● Finding new uses for the product
● Redesigning the product or the packaging to improve its appeal to consumers
● Increasing advertising and other promotional activities

The effect on the PLC of a product of a successful extension strategy:

Price

Price is the amount of money producers are willing to sell or consumer are willing to buy the product for.

Different methods of pricing:

● Market skimming: Setting a high price for a new product that is unique or very different from other
products on the market.

Advantages:

○ Profit earned is very high

○ Helps recover/compensate research and development costs

Disadvantage:

○ It may backfire if competitors produce similar products at a lower price

● Penetration pricing: Setting a very low price to attract customers to buy a new product

Advantages:

○ Attracts customers more quickly

○ Can increase market share quickly

Disadvantages:

○ Low revenue due to lower prices

○ Cannot recover development costs quickly
● Competitive pricing: Setting a price similar to that of competitors’ products which are already available
in the market

Advantage:

○ Business can compete on other matters such as service and quality

Disadvantage:

○ Still need to find ways of competing to attract sales.

● Cost plus pricing: Setting price by adding a fixed amount to the cost of making the product
Advantages:

○ Quick and easy to work out the price

○ Makes sure that the price covers all of the costs

Disadvantage:

○ Price might be set higher than competitors or more than customers are willing to pay,
which reduces sales and profits
● Loss leader pricing/Promotional pricing: Setting the price of a few products at below cost to attract
customers into the shop in the hope that they will buy other products as well

Advantages:

○ Helps to sell off unwanted stock before it becomes out of date

○ A good way of increasing short term sales and market share

Disadvantage:

○ Revenue on each item is lower so profits may also be lower

Factors that affect what pricing method should be used:

● Is it a new or existing product?

If it’s new, then price skimming or penetration pricing will be most suitable. If it’s an existing product,
competitive pricing or promotional pricing will be appropriate.
● Is the product unique?
If yes, then price skimming will be beneficial, otherwise competitive or promotional pricing.
● Is there a lot of competition in the market?
If yes, competitive pricing will need to be used.
● Does the business have a well-known brand image?
If yes, price skimming will be highly successful.
● What are the costs of producing and supplying the product?
If there are high costs, costs plus pricing will be needed to cover the costs. If costs are low, market
penetration and promotional pricing will be appropriate.
● What are the marketing objectives of the business?
If the business objective is to quickly gain a market share and customer base, then penetration pricing
could be used. If the objective is to simply maintain sales, competitive pricing will be appropriate.

Price Elasticity

The PED of a product refers to the responsiveness of the quantity demanded for it to changes in its price.

PED (of a product) = % change in quantity demanded / % change in price

When the PED is >1, that is there is a higher % change in demand in response to a change in price, the PED is
said to be elastic.
When the PED is <1, that is there is a lower % change in demand in response to a change in price, the PED is
said to be inelastic.

Producers can calculate the PED of their product and take suitable action to make the product more profitable.

If the product is found to have an elastic demand, the producer can lower prices to increase profitability.
The law of demand states that a fall in price increases the demand. And since it is an elastic product (change in
demand is higher than change in price), the demand of the product will increase highly. The producers get more
profit.
If the product is found to have an inelastic demand, the producer can raise prices to increase profitability.
Since quantity demanded wouldn’t fall much as it is inelastic, the high prices will make way for higher revenue
and thus higher profits.

Motivation Theories
● F. W. Taylor: Taylor based his ideas on the assumption that workers were motivated by personal
gains, mainly money and that increasing pay would increase productivity (amount of output produced).
Therefore he proposed the piece-rate system, whereby workers get paid for the number of output they
produce. So in order, to gain more money, workers would produce more. He also suggested a scientific
management in production organisation, to break down labour (essentially division of labour) to
maximise output
However, this theory is not entirely true. There are various other motivators in the modern workplace,
some even more important than money. The piece rate system is not very practical in situations where
output cannot be measured (service industries) and also will lead to (high) output that doesn’t guarantee
high quality.
● Maslow’s Hierarchy: Abraham Maslow’s hierarchy of needs shows that employees are motivated by
each level of the hierarchy going from bottom to top. Mangers can identify which level their workers
are on and then take the necessary action to advance them onto the next level.

One limitation of this theory is that it doesn’t apply to every worker. For some employees, for example,
social needs aren’t important but they would be motivated by recognition and appreciation for their work
from seniors.

● Herzberg’s Two-Factor Theory: Frederick Herzberg’s two-factor theory, wherein he states that people
have two sets of needs:
Basic animal needs called ‘hygiene factors’:
○ status
○ security
 ○ work conditions
○ company policies and administration
○ relationship with superiors
○ relationship with subordinates
○ salary

Needs that allow the human being to grow psychologically, called the ‘motivators’:

○ achievement
○ recognition
○ personal growth/development
○ promotion
○ work itself

According to Herzberg, the hygiene factors need to be satisfied, if not they will act as de-motivators to the
workers. However hygiene factors don’t act as motivators as their effect quickly wear off. Motivators will truly
motivate workers to work more effectively.

Marketing Strategy
A marketing strategy is a plan to combine the right combination of the four elements of the marketing mix for a
product to achieve its marketing objectives. Marketing objectives could include maintaining market shares,
increasing sales in a niche market, increasing sale of an existing product by using extension strategies etc.

Factors that affect the marketing strategy:

Legal Controls on Marketing

There are various laws that can affect marketing decisions on quality, price and the contents of advertisements.
● laws that protect consumers from being sold faulty and dangerous goods
 ● laws that prevent the firms from using misleading information in advertising Example: Volkswagen
falsely advertised environmentally friendly diesel cars and were legally forced to pull all cars from the
market
● laws that protect consumers from being exploited in industries where there is little or no competition,
known as monopolising.

Entering New Markets

Growing business in other countries can increase sales, revenue and profits. This is because the business is
now available to a wider group of people, which increases potential customers. If the home markets have
saturated (product is in maturity stage), firms take their products to international markets. Trade barriers and
restrictions have also reduced significantly over the years, along with new transport infrastructures, so it is now
cheaper and easier to export products to other countries.

Problems of entering foreign markets:

● Difference in language and culture: It may be difficult to communicate with people in other countries
because of language barriers and as for culture, different images, colors and symbols have different
meanings and importance in different places. For example, McDonald’s had to make its menu more
vegetarian in Indian markets
● Lack of market knowledge: The business won’t know much about the market it is entering and the
customers won’t be familiar with the new business brand, and so getting established in the market will
be difficult and expensive
● Economic differences: The cost and prices may be lower or higher in different countries so businesses
may not be able to sell the product at the price which will give them a profit
● High transport costs
● Social differences: Different people will have different needs and wants from people in other countries,
and so the product may not be successful in all countries
● Difference in legal controls to protect consumers: The business may have to spend more money on
producing the products in a way that complies with that country’s laws.

How to overcome such problems:

● Joint venture: an agreement between two or more businesses to work together on a project. The
foreign business will work with a domestic business in the same industry. Eg: Japan’s Suzuki Motor
Corporation created a joint venture with India’s Maruti Udyog Limited to form Maruti Suzuki, a highly
successful car manufacturing project in India.

Advantages:

○ Reduces risks and cuts costs

○ Each business brings different expertise to the joint venture
○ The market potential for all the businesses in the joint venture is increased
○ Market and product knowledge can be shared to the benefit of the businesses

Disadvantages:
 ○ Any mistakes made will reflect on all parties in the joint venture, which may damage their
reputations
○ The decision-making process may be ineffective due to different business culture or
different styles of leadership
​ Franchise/License: the owner of a business (the franchisor) grants a licence to another person or
business (the franchisee) to use their business idea – often in a specific geographical area. Fast food
companies such as McDonald’s and Subway operate around the globe through lots of franchises in
different countries.

ADVANTAGES DISADVANTAGES

Rapid, low cost method of

business expansion
Profits from the franchise needs
to be shared with the franchisee
Gets an income from franchisee
in the form of franchise fees and
Loss of control over running of
royalties
business

Franchisee will better

If one franchise fails, it can affect
understand the local tastes and
the reputation of the entire brand
so can advertise and sell
TO FRANCHISOR
appropriately

Franchisee may not be as skilled

Can access ideas and
suggestions from franchisee

Need to supply raw

material/product and provide
support and training
Franchisee will run the
operations

Cost of setting up business

Working with an established

No full control over business-
brand means chance of
need to strictly follow
business failing is low
franchisor’s standards and rules
TO FRANCHISEE
Franchisor will give technical
and managerial support
Profits have to be shared with
franchisor
 Franchisor will supply the raw Need to pay franchisor franchise
materials/products fees and royalties

Need to advertise and promote

the business in the region
themselves

Market research

is the process of collecting, analysing and interpreting information about a product.

Why is market research important/needed?

Firms need to conduct market research in order to ensure that they are producing goods and services that will
sell successfully in the market and generate profits. If they don’t, they could lose a lot of money and fail to
survive. Market research will answer a lot of the business’s questions prior to product development such as ‘will
customers be willing to buy this product?’, ‘what is the biggest factor that influences customers’ buying
preferences- price or quality?’, ‘what is the competition in the market like?’ and so on.

Market research data can be quantitative (numerical-what percentage of teenagers in the city have internet
access) or qualitative (opinion/ judgement- why do more women buy the company’s product than men?)

Market research methods can be categorized into two: primary and secondary market research.

Primary Market Research (Field Research)

The collection of original data. It involves directly collecting information from existing or potential customers.
First-hand data is collected by people who want to use the data (i.e. the firm). Examples of primary market
research methods include questionnaires, focus groups, interviews, observation, and online surveys and so on.

The process of primary research:

1. Establish the purpose of the market research

2. Decide on the most suitable market research method
3. Decide the size of the sample (customers to conduct research on) and identify the sample
4. Carry out the research
5. Collate and analyse the data
6. Produce a report of the findings

Sample is a subset of a population that is used to represent the entire group as a whole. When doing research, it
is often impractical to survey every member of a particular population because the number of people is simply too
large. Selecting a sample is called sampling. A random sampling occurs when people are selected at random
for research, while quota sampling is when people are selected on the basis of certain characteristics (age,
gender, location etc.) for research.

Methods of primary research

● Questionnaires: Can be done face-to-face, through telephone, post or the internet. Online surveys
can also be conducted whereby researchers will email the sample members to go onto a particular
website and fill out a questionnaire posted there. These questions need to be unbiased, clear and easy
to answer to ensure that reliable and accurate answers are logged in. (The first part of this wikiHow
article will give you the basic idea of how a questionnaire should be prepared.)

Advantages:

○ Detailed information can be collected

○ Customer’s opinions about the product can be obtained
○ Online surveys will be cheaper and easier to collate and analyse
○ Can be linked to prize draws and prize draw websites to encourage customers to fill out
surveys

Disadvantages:

○ If questions are not clear or are misleading, then unreliable answers will be given
○ Time-consuming and expensive to carry out research, collate and analyse them.
● Interviews: interviewer will have ready-made questions for the interviewee.

Advantages:

○ Interviewer is able to explain questions that the interviewee doesn’t understand and can
also ask follow-up questions
○ Can gather detailed responses and interpret body-language, allowing interviewer to come
to accurate conclusions about the customer’s opinions.

Disadvantages:

○ The interviewer could lead and influence the interviewee to answer a certain way. For
example, by rephrasing a question such as ‘Would you buy this product’ to ‘But, you would
definitely buy this product, right?’ to which the customer in order to appear polite would say
yes when in actuality they wouldn’t buy the product.
○ Time-consuming and expensive to interview everyone in the sample
● Focus Groups: A group of people representative of the target market (a focus group) agree to provide
information about a particular product or general spending patterns over time. They can also test the
company’s products and give opinions on them.
Advantage:

○ They can provide detailed information about the consumer’s opinions

Disadvantages:

○ Time-consuming
○ Expensive
○ Opinions could be influenced by others in the group.
● Observation: This can take the form of recording (eg: meters fitted to TV screens to see what channels
are being watched), watching (eg: counting how many people enter a shop), auditing (e.g.: counting of
stock in shops to see which products sold well).

Advantage:

○ Inexpensive

Disadvantage:

○ Only gives basic figures. Does not tell the firm why consumer buys them.

Secondary Market Research (Desk Research)

The collection of information that has already been made available by others.
Second-hand data about consumers and markets is collected from already published sources.
Internal sources of information:

● Sales department’s sales records, pricing data, customer records, sales reports
● Opinions of distributors and public relations officers
● Finance department
● Customer Services department

External sources of information:

● Government statistics: will have information about populations and age structures in the economy.
● Newspapers: articles about economic conditions and forecast spending patterns.
● Trade associations: if there is a trade association for a particular industry, it will have several reports on
that industry’s markets.
● Market research agencies: these agencies carry out market research on behalf of the company and
provide detailed reports.
● Internet: will have a wide range of articles about companies, government statistics, newspapers and
blogs.

Accuracy of Market Research Data

The reliability and accuracy of market research depends upon a large number of factors:

● How carefully the sample was drawn up, its size, the types of people selected etc.
● How questions were phrased in questionnaires and surveys
● Who carried out the research: secondary research is likely to be less reliable since it was drawn up by
others for different purpose at an earlier time.
● Bias: newspaper articles are often biased and may leave out crucial information deliberately.
● Age of information: researched data shouldn’t be too outdated. Customer tastes, fashions, economic
conditions, technology all move fast and the old data will be of no use now.

Presentation of Data from Market Research

Different data handling methods can be used to present data from market research.
This will include:
● Tally Tables: used to record data in its original form. The tally table below shows the number and type of
vehicles passing by a shop at different times of the day:

● Charts: show the total figures for each piece of data (bar/ column charts) or the proportion of each piece
of data in terms of the total number (pie charts). For example the above tally table data can be recorded
in a bar chart as shown below:

The pie chart above could show a company’s market share in different countries.
 ● Graphs: used to show the relationship between two sets of data. For example how average
temperature varied across the year.

Niche & Mass Marketing

Niche Marketing: identifying and exploiting a small segment of a larger market by developing products to suit it.
For example, Versace designs and Clique perfumes have niche markets- the rich, high-status consumer group.

Advantages:

● Small firms can thrive in niche markets where large forms have not yet been established
● If there are no or very few competitors, firms can sell products at a high price and gain high profit
margins because customers will be willing be willing to pay more for exclusive products
● Firms can focus on the needs of just one customer group, thereby giving them an advantage over
large firms who only sell to the mass market

Limitations:

● Lack of economies of scale (can’t benefit from the lower costs that arise from a larger
operations/market)
● Risk of over-dependence on a single product or market: if the demand for the product falls, the firm
won’t have a mass product they can fall back on
● Likely to attract competition if successful

Mass Marketing: selling the same product to the whole market with no attempt to target groups with in it. For
example, the iPhone sold is the same everywhere, there are no variations in design over location or income.

Advantages:

● Larger amount of sales when compared to a niche market

 ● Can benefit from economies of scale: a large volume of products are produced and so the average
costs will be low when compared to a niche market
● Risks are spread, unlike in a niche market. If the product isn’t successful in one market, it’s fine as there
are several other markets
● More chances for the business to grow since there is a large market. In niche markets, this is difficult as
the product is only targeted towards a particular group.

Limitations:

● They will have to face more competition

● Can’t charge a higher price than competition because they’re all selling similar products

Why some markets have become more competitive:

● Globalization: products are being sold in markets all over the world, so there are more competitors in
the market
● Improvement in transportation infrastructures: better transport systems means that it is easier and
cheaper to distribute and sell products everywhere
● Internet/E-Commerce: customers can now buy products over the internet form anywhere in the world,
making the market more competitive

How business can respond to changing spending patterns and increased competition:

A business has to ensure that it maintains its market share and remains competitive in the market. It can ensure
this by:

● maintaining good customer relationships: by ensuring that customers keep buying from their
business only, they can keep up their market share. By doing so, they can also get information about
their spending patterns and respond to their wants and needs to increase market share
● keep improving its existing products, so that sales is maintained.
● introduce new products to keep customers coming back, and drive them away from competitors’
products
● keep costs low to maintain profitability: low costs means the firm can afford to charge low prices. And
low prices generally means more demand and sales, and thus market share.