Marketing mix

Marketing mix The marketing mix is the combination of variables that a business uses to carry out its marketing strategy and meet customer needs. The marketing mix is often called the 4Ps: Product Price Place Promotion

Product ‘Product’ refers to the functions and features of a good or service Should satisfy the needs of the customer May have a Unique Selling Proposition (USP) ‘Product’ also includes a range of factors such as packaging, quality, warranties, after-sales service and branding

Product lifecycle The product lifecycle looks at the sales of a product over time

Stages of product lifecycle Development – high costs but no sales Launch – high expenditure on promotion and product development, low sales Growth – sales increase and product should break-even Maturity – sales stabilise, less expenditure on promotion needed, revenue & profit should be high Decline – sales decline, extension strategies can be adopted or the product withdrawn

Extension strategies Extension strategies should maintain or increase sales. They include: Modifying the product Reducing the price Adding a feature Promoting to a different market sector

Price The price of a product will depend on: The cost to make it The amount of profit desired Other objectives of the business The price competitors charge The price customers are willing to pay Is there a high demand? Is demand sensitive to changes in price?

Price leaders and takers Price leader – businesses that dominate the market can often dictate the price charged for a product. Other businesses follow this lead. Price taker – businesses have to charge the market price. This is often the case where there are many small firms competing against each other.

Pricing strategies & tactics Skimming Launching with a high price when there is little competition, then reducing the price later. Often used with technology. Penetration Low price charged initially to penetrate the market and build brand loyalty; prrice is then increased e.g. introductory offers on magazines. Competitive A similar price is charged to that of competitors’ products. Loss leader Products may be sold at a price lower than the cost to produce it. Often used by supermarkets to encourage people into the store where it is hoped they will buy other products. Psychological A price is set which customers perceive as lower than it is e.g. £39.99 instead of £40. Skimming - Penetration Competitive Loss leader Psychological Price leaders Price takers

Place Products should be conveniently available for customers to buy ‘Places’ include: Stores Mail order Telesales Internet The use of e-commerce (promoting and selling on the internet) has grown massively over the last few years

Channels of distribution Manufacturers Wholesaler Retailer Consumer Wholesaler – buys in bulk from suppliers/manufacturers and then breaks this up to sell into smaller quantities to retailers Retailer – a shop which sells products to the consumer. May be a customer of a wholesaler or manufacturer. Consumer – uses the goods/services Direct selling occurs when the consumer buys direcly from the manufacturer. The internet and factory shops allow this to happen.

Promotion The aims of promotion are to: Raise awareness Encourage sales Create or change a brand image Maintain market share

Promotion Above-the-line promotion This uses advertising media over which a firm has no direct control e.g. television, radio and newspapers Below-the-line promotion This uses promotional media which the firm can control e.g. direct mail, sales promotions and sponsorship

Promotional activities Advertising e.g. TV, billboards and internet. Sales promotions e.g. Loyalty cards, BOGOF, discounts & free gifts Sponsorship – a business pays to be associated with another firm, event or cause Direct mailing – promotional material is sent to potential customers by post/email Public relations – building the relationship between the firm and the public by enhancing its reputation

Promotional mix Most businesses use a combination of different promotional activities. The chosen promotional mix will depend on: Cost Target market Product Competitors

How the marketing mix evolves over time The marketing mix will evolve over time. For example: The product portfolio may grow as a business becomes more established More expensive promotional activities may be adopted as a firm’s revenue increases More outlets may be opened, or products sold via the internet Price may increase as demand grows

Marketing mix in context

Product range at McCain McCain Food’s product range includes frozen vegetables, ready meals and desserts; McCain is also the world’s leading manufacturer of frozen potato products such as Oven Chips. What factors have driven changes in the product range? Use the McCain Food’s case study to help you Factors affecting the product range include: Changing lifestyles – microwaveable snacks are handy for consumers who do not want to take long preparing food Increasing demand for healthy diets – only sunflower oil is used in the preparation of McCain chips

Pricing at McCain Foods McCain uses a range of pricing strategies associated with adding value for money. One of the factors it must consider is how much the consumer will be prepared to pay. Why do you think consumers will pay more for Oven Chips than it would cost them to buy the potatoes and oil to prepare chips themselves? Convenience – consumers may pay extra for the ease and speed of using Oven Chips instead of preparing them, themselves Health – Oven Chips may be considered as a healthier option Quality – the McCain brand indicated that the product will be of a high quality

McCain distribution channels McCain sells its products to both wholesalers and retailers. Draw these distribution channels. How does McCain reduce the environmental impact of transporting its products? Use the case study to help The environmental impact is reduced by: Using local farmers when possible to reduce food miles Using double-decker trucks to save lorry journeys Having built-in solar panels in the lorries to provide power needed for internal lifting mechanisms

Promotion of McCain products Are the following promotional methods used by McCain above-the-line or below- the-line? TV advertisements Discount vouchers Advertisements on supermarket trolleys E-mail newsletter Leaflet drops TV adverts – above Discount vouchers – below Trolley adverts – above Email newsletter – below Leaflet drops - below

Useful resources Marketing mix lesson suggestions and activities (The Times 100) McCain case study (The Times 100) McCain website