Marketing Mix

Product; Price; Place; Promotion

Technology and the Marketing Mix
 Definitions
 Product benchmarking – comparing rival products so that a firm is able to match or improve on
them
 Reverse engineering – taking apart competing products to discover their strengths and weaknesses
and how they were made
 Branding – the process of creating distinctive and durable perceptions of a product in the minds of
consumers
 Brand name – a name used to identify and distinguish specific goods, services or businesses from
others
 Product life cycle – the profile of sales and profitability of a product over its commercial lifespan.
 Extension strategies – marketing methods used to extend sales and the profitable life of a mature
product
 Product portfolio – the range of different products produced and marketed by a business at any given
point in time.
 Definitions
 Cost plus pricing: adding a mark-up for profit over the average cost of producing a product
 Destruction pricing: strategy where a product or service is set at a very low price, intending to drive
competitors out of the market, or create barriers to entry for potential new competitors.
 Price war: intense price competition between rival businesses
 Price skimming: setting the initial price high at product launch in order to maximise profit in the short run
when where is little or no competition
 Penetration pricing: setting price low at a product launch to encourage sales and consumer acceptance of the
new product
 Promotional pricing: reducing the price of a product for a short period of time to boost sales
 Psychological pricing: using prices to influence consumer perceptions of a product
 Price elasticity of demand: the responsiveness of consumer demand to a change in price
 Price elastic demand: when a small change in price causes a significant change in demand
 Price inelastic demand: when a chance in price causes only a small change in demand
 Definitions
 Logistics: the process of planning, implementing, and controlling procedures for the efficient and effective
transportation and storage of goods. Includes managing inventories, transportation and distribution systems.
 Distribution channel: the people and organisations involved in the physical movement and transfer of
goods and services from producers to consumers
 Retailer: a business organisation specialising in the sale of products to consumers
 Wholesaler: an intermediary that buys and stores products in bulk from producers and sells small quantities
to retailers
 Delivery lead time: the time lag between placing an order for a product and its delivery
 Internet: shared global computing network
 E-commerce: commercial transactions (promoting; buying or selling) conducted electronically on the
Internet. Can be B2B or B2C.
 Search engine: e.g. Google. Software system that is designed to search for information on the World Wide
Web
 Social media: websites and applications that enable users to create and share content or to participate in
social networking.
 Definitions

 Above-the-line promotions: marketing communications using mass advertising media

 Below-the-line promotions: marketing promotions that do not use mass media
 Informative advertising: advertising that provides factual information about goods, services or
organisations
 Persuasive advertising: advertising designed to influence consumer preferences, encourage brand
switching and increase sales
 Public relations: actions to establish and maintain a good company and product image with the
general public
 Point-of-sale promotions: promotions targeted at the customer at places where a product is
displayed or sold
 Personal selling: face to face marketing communications with a customer
 Marketing budget: the money allocated to the marketing of a product
 Product

 The Marketing mix is made up of product; price; place and promotion

 Producing the right product at the right price is the first and probably the most important part of it’s
marketing mix – Agree or Disagree?
 The product needs to be fit for purpose (what does this mean?)
 The cost of making the product must be cheaper than the price that consumers are willing to pay for
it, or the business will be unable to make a profit.
 Packaging – apart from doing it’s basic job (i.e. protecting the product; making it easy to open and
use; being recyclable; and abiding by legal regulations like displaying who manufactured the product
etc.); it also serves design, colour and shape objectives
 A luxury brand will need attractive and luxurious packaging that is well designed
 Product

 What does a typical product development flow chart look like?

 Costs of developing new product –
 Market research to identify consumer needs (have to eliminate bias)
 Product development and design (time, money, field trials)
 Sales and reputation can be lost if the final product fails
 Benefits of developing a new product –
 Identifies a gap in the market and thus allows companies to charge higher prices
 Creates competitive advantage
 Increases potential sales
 Spreads risks because business have other products and adding new ones spreads the risk
(diversification). Builds a bigger product portfolio
Product

 Different types of products:

 Consumer goods – made up of durable and non-durable goods
 Services – made up of consumer services and producer services
 Capital goods – produced for other businesses and include machinery, ships etc.
 Semi-finished goods are materials and component parts used to produce other goods.
Product

 A successful brand makes the consumers in the target market remember a product when
they shop.
 Their product can be charged higher than less well-known brands
 Easier to launch new products into the market
 A brand name leads to brand image, which creates brand loyalty. Brand loyalty creates
brand awareness with frequent advertising, and ultimately achieves brand recognition.
 https://www.forbes.com/powerful-brands/list/#tab:rank
 Product

 Product life cycle describes the stages a product goes through from when it was first thought of until it
finally is removed from the market.
 Not all products reach this final stage. Some continue to grow and others rise and fall.
 Main stages of product life cycle:
 Introduction
 Growth
 Maturity
 Decline
 Other stages that are sometimes seen – product development (before introduction/launch); Extension (after
decline)
More information on these 4 stages of the product life cycle and what they mean
http://productlifecyclestages.com/
 Product – Product life cycle (example)
Introduction/ Growth Maturity Decline
Launch
Objective Increase product Build brand loyalty Maintain brand loyalty Product or business
awareness and compete survival
Product Produce a basic model Add new versions Offer a full product Keep best sellers;
range scrap the rest
Price Price low to create Price competitively to Defend market share Adjust prices to stay
sales build market share and profits profitable
Place Use limited retail Increase outlets Expand methods of Only sell to profitable
outlets sale and outlets to outlets
wide distribution
network
Promotion High promotional Use advertising to Remind customers of Reduce to a minimum
activity build brand loyalty product qualities or introduce an
extension strategy
Product

 Extension strategies – (used to extend the maturity stage of a product)

 Finding new markets for the product (e.g. international)
 Adapting the product (better versions or increased product range e.g. iPhone 5 and 5c) or the
packaging to improve its appeal to consumers
 Increased advertising and other promotional activities (longer warranty periods; free delivery)
Price

 Setting a price on a product/service depends on:

 Costs of production and level of profit required
 Amount of competition
 The level and strength of consumer demand
 Is it a new or existing product?
 Is the product unique?
 Does the business have a well-known brand image?
 What are the marketing objectives of the business?
 Price

 Cost based pricing is a concept that follows on from the idea that every business needs to make a
profit.
 Selling price per unit = Cost per unit x mark up%
 Disadvantage: does not take into account what price consumers are willing to pay or how much
competition there is. What if consumers are not willing to pay that price?
 Price wars can cause businesses to compete for customers and may lead to destruction pricing
(also more commonly called predatory pricing).
 AMAZON!
http://www.cnbc.com/2014/06/30/amazons-predatory-pricing-questioned.html
 Price - (Demand based pricing)
 Demand-based pricing strategies involve setting prices at what the market will bear. Market
oriented firms will use this strategy.
 Price skimming – Profit earned is very high and it helps to recover research and development
costs. Disadvantages are that it may backfire if competitors produce similar products at a lower
price. E.g. Blu-ray disks when they first came out.
 http://
dealnews.com/features/The-First-Blu-ray-Player-Cost-1-000-Crazy-Price-Milestones-in-Our-16-Years/687
319.html
 Penetration pricing – Attracts customers quickly and can increase market share quickly.
Important for new companies to the market. However, possible loss in revenue due to lower prices
which could question business survival.
 E.g. 2degrees (note: 2degrees did a combination of penetration pricing and destruction pricing)
 http://
stoppress.co.nz/news/2degrees-of-penetration-mobile-upstart-an-upstart-no-more-as-big-customer-gains-an
nounced
 Price - (Demand based pricing)

 Psychological pricing – Manipulates price as consumers use price as an indicator of product

value and quality.
 “Designer” brands for customers who want some status of wealth.
 “Discounts” to make customers want to buy it as it is now a cheaper price (but is it a cheaper
price???)
 Products that sell for $9.99 instead of $10.00 as it makes a product look cheaper than it really is.
 Promotional pricing – Can be used as a strategy to get rid of unwanted/old stock to free up
space for new product lines (e.g. buy one get one free);
or can be used to set the price of “Product A” below cost to attract customers into the outlet in
the hope that they will buy “Product B” which is priced to earn a profit (called “loss leader
pricing”).
Price

 Price Elasticity of Demand is the responsiveness of consumer demand to a small change

in price.
 Products/services can be price elastic or price inelastic.
 Watch this video and read about price elasticity of demand – summarise
 http://www.investopedia.com/terms/p/priceelasticity.asp
 https://
image.slidesharecdn.com/factorsaffectingelasticityofdemand-130815220856-phpapp01/95/factors
-affecting-elasticity-of-demand-3-638.jpg?cb=1376604588
 Examples on slide 6,7,8,9 https://
www.slideshare.net/geoffriley/as-micro-the-importance-of-elasticity-of-demand
Place – distribution channels

 The method of distribution (e.g. through a retail store, or online, and whether this includes
delivery) and the image and quality of the place of sale (e.g. online vs in-store; dull
“warehouse” look vs stylish boutique look i.e. Platypus or Nike) can affect consumers’
buying behaviour.
 Watch from 2:45 https://www.youtube.com/watch?v=cuPnPJCWJwU
 Place – Distribution channels
 Distribution channel 1: Direct from producer to consumer

Producer Consumer

Advantages – Selling direct to customer Disadvantages – Selling direct to customer

- Business retains full control of the distribution channel - Consumers are not always able to try before they buy
- Can build a close relationship with customers - Delivery costs may be high if there are customers over
- Distribution costs are lower because there is no middle a wide area
man adding mark up - All storage costs must be paid for by the producer
- Producer controls all parts of the marketing mix - All promotional activities must be carried out and
- Quickest method of getting the product to the financed by the producer
customer
 Place – Distribution channels
 Distribution channel 2: Indirect through a retailer

Producer Retailer Consumer

Advantages – Selling through a retailer Disadvantages – Selling through a retailer

- Consumers can see and try the product before - The retailer takes some of the profit away from the
buying it producer
- The cost of holding inventories of the product is - Business has no relationship with final consumers
paid by the retailer of its product
- The retailer will pay for advertising   and other - The producer must pay for delivery costs to the
promotional activities retailers
- Retailers are usually more conveniently located for - Retailers usually sell competitors’ products as well
consumers
 Place – Distribution channels
Distribution channel 3: Indirect through an agent

Producer Agent Wholesaler Retailer Consumer

Advantages – Using an agent Disadvantages – Using an agent

- The agent has specialist knowledge of the market - Another middleman is added so even more profit
(especially if selling overseas) is taken away from the producer
- Business has far less control over the distribution
and sale of its product
 Place – Distribution channels
 Distribution channel 4: Indirect through a wholesaler

Producer Wholesaler Retailer Consumer

Advantages – using a wholesaler Disadvantages – using a wholesaler

To a manufacturer: To a manufacturer:
- Buys in bulk and pays for storage - Less control over the distribution and sale
- Uses own transport and covers cost of transport to - Wholesaler will add a mark-up
retailers - Products take longer to reach the final customer
- Provides market research data on what is selling well To a retailer:
To a retailer: - Adds a mark-up
- Offers a wide range of products - Wholesalers may not sell/transport goods to smaller
- Delivers products just in time, reducing storage costs retailers
- Breaks up the bulk and sells small quantities to retailers.
 Place – Distribution channels
 What is a wholesaler used for?

M1 M2 M3 M4 M5 Manufacturer

1 2 3 4 5 6 7 8 9 10 11 12 Retailer

M1 M2 M3 M4 M5

W1

1 2 3 4 5 6 7 8 9 10 11 12 Retailer
 Place – Distribution channels
 The main problem that producers face is reducing delivery lead time – the time taken
between a customer placing an order with a business and when it is delivered.
 Usually, the faster the delivery time, the higher the cost e.g. using a ship to deliver a product
instead of a plane; or a truck instead of a train.
 JIT inventory system  What is it? https://www.youtube.com/watch?v=iTi3JECum80
Promotion

ShaveMate’s strategy
 http://www.nytimes.com/2010/04/29/business/smallbusiness/29sbiz.html
 http://
query.nytimes.com/gst/fullpage.html?res=9D06EFD7113BF93AA15757C0A9669D8B63
 Above the line promotion – uses mass advertising media to increase sales e.g. TV; radio;
newspapers
 Below the line promotion - Aimed to “pull” customers into retail stores. Uses product
placement and endorsements by famous celebrities; public relations; personal selling; and
sales incentives e.g. free gifts and competitions.
 Promotion – Below the line promotions

 Publicity: through sales literature; signage; vehicle livery; product endorsements; product
placements; trade shows
 http://fetchgraphics.com/wp-content/uploads/2015/03/Why-Vehicle-Graphics-Infographic.pdf
 http://inkbotdesign.com/vehicle-graphics-effective/
 Public Relations: sponsorship; donations; fundraising events; press releases
 Point-of-sale promotions: includes attractive stands and displays; posters near checkouts; and
friendly sales representatives who offer customers free samples.
 Sweets and magazines are strategically placed at the end of the store just at the checkout. Why?
 http://www.nzherald.co.nz/lifestyle/news/article.cfm?c_id=6&objectid=11580887
Promotion – Below the line promotions

 Sales Incentives: using money-off coupons; competitions and loyalty cards and bonuses
(e.g. Onecard for Countdown)
 Direct Mail: letters and emails containing promotional messages, discounts and other
offers. Disadvantage: may end up in Junk mail folder.
 Personal Selling: face to face sales e.g. having Apple employees walking around in the
store; or Noel Leeming representatives ready to help you – customers want to discuss
product features before they buy.
 Sales staff help to persuade customers and “close the sale”.
 After sales care: used as a product feature and a promotional feature. Involves a
“guarantee” or a call centre to solve problems etc.
 Promotion - Advertising

 Informative advertising: provides information about a product to a consumer e.g. bus and train
timetables; restaurant menus.
 Informative advertising helps increase product credibility and generate good reputation. Governments
use informative advertising.
 Persuasive advertising: Communication with consumers aimed at getting them to buy a firm's
product rather than a competitor's product. Creating a good brand image creates brand loyalty.
 Brand loyalty has the following benefits:
 Repeat purchases from loyal customers and customers continue to buy the product even if rival product is on
discount
 Protects market share
 Customers may pay a higher price for the brand
 Reduces price elasticity of demand for the product
 Promotion - Advertising
 Company A wants to advertise to people who like mountaineering. Should they advertise on TV?
 Company B wants to advertise toys for 6-10 year olds. Should they advertise at any time on TV or a specific
time? 2am? 4am? 8am? 3pm? 5pm? 9pm?
 What are the advantages/disadvantages of using the following forms of advertising media?
 National newspaper
 Local newspaper
 Magazines
 Radio
 TV
 Movies (cinema ads)
 The Internet – example on next slide
 Leaflets?
Promotion - Advertising

Advantages – using the internet as Disadvantages – using the internet as

advertising media advertising media
- Easy and relatively cheap if you want to - Internet access is limited in some countries
develop a website - Many websites online means you have to
- Promotional material can be specifically spend money to get your website up on
targeted to different segments of customers google rankings
using Facebook; Instagram etc - Website could get hacked, or customer
credit cards could get hacked
 Setting an appropriate marketing budget

 Market research costs:

 Design, preparation and analysis Smaller budgets means
you cannot spend on
 Test marketing
expensive promotions
 Conducting interviews and surveys e.g. TV
 General marketing expenses:
 Office space
 Salaries for marketing assistants and managers
 Travel costs
 Marketing communications costs:
 Printing and mailing
 Development of a brand’s logo
 Developing and hosting a website
 Attending events
 Sponsorships and donations
 Radio, TV and cinema advertising
Technology and the Marketing Mix

 How technology changed the 4P’s:

 Product: Technology created new consumer wants and products e.g. smartphones. Product
life cycles are becoming shorter. Products can be designed by machines e.g. 3D printers
 Price: Dynamic pricing is available readily e.g. flights changing their seat prices in real
time.
 Place: No physical place. Online. Producers can now offer their services direct to
consumers online.
 Promotion: Businesses can promote their products through “pop-up” ads on websites and
on social media e.g. Facebook.
 E-commerce
 https://www.youtube.com/watch?v=AhgtoQIfuQ4
 https://www.youtube.com/watch?v=nxSDHBdsWqA

Advantages of e-commerce to Disadvantages of e-commerce to

businesses businesses
- Websites are a cheap way of marketing - Increases competition with businesses,
and selling to customers not just locally but internationally
internationally - consumers are less likely to buy
- Websites attract more consumers products from new businesses they
- Saves money renting outlets or don’t know or websites that don’t have
employing retail staff SSL encryptions.
- Information about customers and their
purchasing history can be recorded
easily and analysed for promotions
 E-commerce

Advantages of e-commerce to consumers Disadvantages of e-commerce to consumers

- Convenience: Consumers can order their products - Increased online shopping could force local physical
from the comfort of their own homes shops to close
- Wider choice: Consumers are now able to buy goods - More inconvenient and expensive to return goods
which they would not have had access to if they were which do not meet the consumer’s needs
only able to uses local shops - No personal service: There is no face-to-face contact
- Lower prices: competition is worldwide and this between the consumer and seller
reduces prices - Fraud: A website might take a consumer’s money and
- Better information: Consumers are able to read about not deliver goods
the goods and services available from websites of
different businesses
 Phishing?
 https://
www.scamwatch.gov.au/types-of-scams/attempts-to-gain-your-personal-information/phishi
ng#how-does-this-scam-work-
How to use social media for promotional
marketing
 Use social networking sites e.g. Google+ or Facebook
 Micro-blogging sites e.g. Instagram
 Online video-hosting services e.g. Youtube
 Online blogs
 Coupon websites e.g. GrabOne
 Location-based marketing websites: These deliver targeted marketing messages to
customers in particular locations using GPS of their smartphones.
Social media for marketing

Advantages of using social media Disadvantages of using social media

- Cost effective way to reach large amounts - Pop-ups and constant messaging can be
of people annoying
- Allows you to target specific groups and - Some governments restrict social media
specific locations use
- Social media is free (unless you’re paying - Ad-blockers can be used to ignore/block
for promotions) ads and pop-ups.
- Promotional messages can be updated
quickly to respond to market changes
- Messages can be personalised and allow
for instant two-way communication