1. Marketing: An Introduction Lesson 7
The marketing mix – 4P’s
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2. The Marketing Mix - The 4P’s
Product
Price
Promotion and
Place
Note:
4P’s generally applied to products (7P’s applied to services)
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3. Marketing Mix - Definition
Philip Kotler defines the marketing mix as:
“The combination of four elements, called the 4P’s (Product, Price, Promotion and Place), that every company has the option of adding, subtracting, or modifying in order to create a desired marketing strategy.”
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4. Product
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5. The Marketing Mix - Product
Kotler defines a product as:
“Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or a need. It includes physical objects, services, persons, places , organisations and ideas”
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6. The Marketing Mix - Product
Services - intangible, do not result in ownership of anything e.g. an airline flight, a haircut, car insurance
Persons - celebrities are products as their image is managed to satisfy the needs of their customers (audience). They can reinvent themselves to meet the needs of a changing market or customer base e.g. Madonna
Places - e.g. Scotland is a “product” that can be marketed throughout the world
Organisations and Ideas - e.g. Greenpeace, political parties and churches are selling their “ideas” (products)
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7. Product Model Core Product Actual Product (Total Product)
Augmented Product
Refer to Product Model handout
References:
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8. Product Mix
A product mix is “the set of all product lines and items that a particular seller offers for sale”
(MBA Notes World)
Product Mix (Product Range)Handout
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9. Group Activity - Product Mix
Prepare a Product Mix Matrix for the case study organisation showing product mix width and product mix length for hand-made chocolate products
How does (or could) the organisation differentiate between hand-made chocolate products in terms of:
Quality
Consistency (how closely related the various products are in end use, production requirements, distribution channels or some other way)
Packaging (e.g. branding, logos, labels, support)
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10. Choice of Product Mix
Factors influencing choice of product mix include:
Market factors e.g.
Demand from consumers
Changes in availability or cost of materials
Shifts in location of customers
Recession
Government controls
Technology
Competition
Operating capacity
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11. Assessment Guidance - Introduction
Application of Marketing Theory
Define the marketing mix – use a formal definition!
Explain how each of the 4P’s would influence the marketing mix for Clare’s hand-made chocolate products (not the café/shop) using the assessment guidance slides
Note - a list of 4P’s not sufficient to meet standards - must be explained and applied to the case study organisation
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12. Assessment Guidance - Product
Clear explanation of the product element of the marketing mix
Explanation of the product model
In relation to Clare’s hand-made chocolate products:
Explain CC’s product mix
Width
Depth
Quality
Consistency
Packaging
Note: Give reasons why organisation has chosen its’ particular product mix
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13. Price
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14. Definition of “price”
Philip Kotler: “ Price is the amount of money charged for a product or service.” Note: Research other definitions!
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15. Pricing approaches Examples: Penetration pricing Price skimming
Premium pricing
Economy (Value) pricing
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16. Price - examples of pricing approach
Explanation
Penetration pricing
(New product)
The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased.
Price Skimming
Charge high price as you have a substantial competitive advantage. However, the advantage is not sustainable. The high price attracts new competitors into the market, and the price inevitably falls due to increased supply.
Price - examples of pricing approach
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17. Economy (Value) pricing
Pricing approach
Explanation
Premium pricing
(Luxury products)
Price kept artificially high to encourage favourable perceptions among buyers
Economy (Value) pricing
Used where external factors such as recession force companies to provide 'value' products to retain sales e.g. value meals at McDonalds.
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18. Importance of setting the “right” price
Vital to establish:
Production costs
What competitors charge
How much your target market will pay for your product or service – price is key determinant in decision making process customers use to purchase products/services
Price is a key element in determining profitability
Price is the most flexible element in the marketing mix
Creates first impressions
Important part of sales promotions
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19. Choice of pricing strategy
What factors may affect an organisation’s pricing strategy?
Expectations of customers and distributors e.g. supermarkets
Aligning pricing with business goals
Is the aim to maximize profits or quickly gain market share with a new product?
Production costs - labour, raw materials etc
Pricing approach being adopted by competitors
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20. Assessment Guidance - Price
Explanation of the price element of the marketing mix (research)
Explanation of the importance of setting the right price (research)
Explanation of at least two different pricing approaches (e.g. penetration pricing, price skimming, premium pricing)
In relation to Clare’s hand-made chocolate products:
Explain two factors that may affect CC’s choice of pricing strategy - explain why
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21. Promotion
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22. The Marketing Mix - Promotion
Promotion involves:
Communicating information concerning products and services, and
Trying to persuade customers to buy
Promotion methods include:
Advertising
Sales promotions e.g. BOGOF
Public relations/publicity
Personal selling
Direct marketing
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23. Choice of promotional methods
Cost of the promotional tool
Advertising particularly on TV and in national newspapers very expensive
Resource availability
The overall budget for a promotional campaign will determine which tools a business can afford to use
Market size and concentration
If a market is small and number of potential buyers is small, personal selling may be most cost-effective tool
Where markets are geographically dispersed or there are substantial numbers of potential customers, advertising usually most effective.
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24. Choice of promotional methods
Customer information needs
Some customers need detailed, complex information to help them evaluate a purchase (e.g. health service managers investing in latest medical technology) - in this situation, personal selling is almost always required - often using selling teams rather than just one individual
By contrast, few consumers need much information about baked beans or bread. Promotional tools such as brand advertising and sales promotion more effective
Source:
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25. Assessment Guidance - Promotion
Explain the promotion element of the marketing mix
Explain at least two promotional methods (e.g. advertising, sales promotions, PR/publicity, personal selling, direct marketing)
In relation to Clare’s hand-made chocolate products:
Explain two factors that may affect CC’s choice of promotional methods – explain why
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26. Activities that make the product or service available to the customer
Place
Activities that make the product or service available to the customer
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27. The Marketing Mix - Place
Place includes:
Retail stores, online shop or other place in which you sell your product or service, and
The movement of goods i.e. the chain of distribution
Physical transport - trucks, rail, sea, air
Distribution strategy - where the product will be available and how to ensure each location’s stock is replenished
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28. The Marketing Mix - Place
Distribution Channels
Wholesalers - usually purchase goods in order to resell them to other intermediaries, typically retailers
Retailers - sell directly to the consumer - may have purchased goods from a number of sources such as wholesalers, agents or directly from the manufacturer
Other Intermediaries
Agents and Brokers
Distributors
Franchisees
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29. The Marketing Mix - Place
Distribution Channels
Traditional Channel
M » W » R » C
Import/Export Channel
M » A » W » R » C
Modern Channel
M » I » C
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30. Choice of Distribution Channel
Factors that influence the choice of distribution channel by a business
Market factors - "buyer behaviour“ - how do buyer's want to purchase the product?
Producer factors - for example, a producer may not have the resources to recruit, train and equip a sales team. If so, the only option may be to use agents and/or other distributors
Product factors
Large complex products are often supplied direct to customers (e.g. complex medical equipment sold to hospitals).
Perishable products (e.g. bread) require relatively short distribution channels - ideally suited to using intermediaries such as retailers
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31. Assessment Guidance - Place
Explain the place element of the marketing mix
Describe at least two different types of distribution channels (e.g. retailer, wholesaler, agent)
In relation to Claire’s hand-made chocolate products:
Explain two factors that may affect CC’s choice of distribution channels – explain why
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32. Any Questions?
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