MARKETING MIX NOTES
The term marketing mix refers to the tactical elements of the marketing
strategy. It is the blending of product, price, promotion and place.
1. Product
Product refers to anything that can be offered to a market for attention, use, or consumption that might satisfy a want or need. It includes any tangible item, services, ideas, concepts, or a person.
Product classification
1. Tangible and intangible
A product can classified as tangible and intangible. Tangible product is
a physical product, such as mobile handset, cars and the TV set.
Intangible product is a product that cannot be touched or felt such
software, ideas, and services.
2. Consumer goods and industrial goods product
Industrial goods are consumed as raw materials or inputs by businesses
to produce other products, for example, wheat to produce flour. Consumer
products are consumed by final consumers for their own interests
(individuals and households), and not for commercial purposes like in
the industrial goods product case. Consumer goods generally can be
classified into four types, namely consumer goods, commercial goods, specialty goods, and
goods Unsought. This classification is based on buying habits of
consumers, as evidenced by the following three aspects (effort) of
consumers to reach a purchase decision, the attributes that consumers
use in a purchase, and the frequency of purchase.
3. Convenience Goods
Convenience products are goods that have generally high frequency of
purchase (often purchased), take the time soon, and require only minimal
effort (very small) in comparison and purchase. Examples include
cigarettes, soap, toothpaste, batteries, candy, letters and news.
Convenience products themselves can be further grouped into three
categories, namely, staples, impulse goods and goods emergencies.
4. Shopping Goods
Purchases of goods are goods that in the process of selection and
purchase by consumers in different alternatives that are available.
Comparison criteria include price, quality, and model of each item.
Examples are household equipment, clothing and furniture.
5.Specialty Goods
Specialist shops are goods which have characteristics and / or
identification of a single brand in which a group of consumers willing
to make a special effort to buy it. General types of specialized
products branded luxury products and a specific model, such as
Lamborghini cars, the clothes designed by famous designers
6. Unsought Goods
Unsouqht goods are goods that are not known to consumers or are already known, but are not generally
thought of buying it.
What is Product mix and Product Lines ?
A product mix (or product assortment) refers to all the product lines
and items that a particular firm offers for sale. Say, a manufacturing
firm may have a capacity to produce, kitchen appliances, cars, and
mobile handsets. These are examples of a product mix. Product mix
consists of a number of product lines. That is various models of cars,
mobile handsets and kitchen appliances produced by the firm. These
various models , for examples, various models under car, mobile handsets
and kitchen appliances are product lines. Product lines are group of
products manufactured by a firm that are closely related in use and in
production and marketing requirements. The depth of the product line
refers to the number of different products offered in a product line.
The manufacture’s product mix has four important dimensions: width,
length, depth, and consistency. Product mix width refers to the number
of different product lines the company carries. Product mix length
refers to the total number of items the company carries within its
product lines. Product line depth refers to the number of versions
offered of each product in the line. The consistency of the product mix
refers to how closely relate the various product lines are in end use,
production requirements, distribution channels, or some other way. The
three levels of a product this is a total product concept where a product is understood as a
bundle of physical, service, and symbolic attributes designed to satisfy
a customer’s wants and needs. For instance, if a product is a tangible
product, this product still can be understood as a product with three
levels. Let us say that product is a computer to be purchased for primary
school teaching. This computer , as a product, has three levels which
are a bundle of physical, service and symbolic attributes:
- Level one: Core product is the benefit the product gives as a value
such as convenience, speed and efficiency to the user. In this
sense, the core product is intangible. - Level two : Actual product is the physical product that comes as
branding, colour, quality, style and fashion - Level three: Augmented product is the non-physical part of a product
which includes installation, delivery, warranties, customer care and
finance.
New Product Development
New product development is a strategy for a firm growth by offering
modified or new product to a market segment. The process of new product
development has various steps:
- Idea generation looking for all possible ideas that may help to
develop a new - Idea screening is the step of eliminating unsound ideas prior to
devoting resources to them - Concept development and testing , the step of developing the
marketing and engineering details - Business analysis is the step estimating likely selling price, sales
volume, break-even point and profitability - Product development
- Market testing is the step of producing a physical prototype , making
adjustment where necessary and determining customer acceptance - Commercialization is the step of launching the product for market
Once the new product is launched for the market, the remaining main task
is the adoption of this new product, which is an innovation, by
customers. This will take us to the next topic.
New product adoption process
In adopting process of the new product, customers differ according to
the timing of their adoption of the innovation. One of the common models
used is the diffusion model. The model groups the adopters of the new
product as innovators, early adopters, early majority, late majority and
laggards. Innovators are understood as well-informed and risk-takers who
are willing to try the new
product. They represent the smallest percentage of the market.
Early adopters are those, based on the positive response of innovators,
who begin to purchase the product. Early adopters tend to be educated
and opinion leaders. They are more in numbers than the innovators. Early
majority are careful consumers who tend to avoid risk; they adopt the
product once it has been proven by the early adopters. They rely on
recommendations from others who have experience with the product.
Late majority are skeptical and acquire a product only after it has
become commonplace. Laggards avoid change and may not adopt a new
product until traditional alternatives no longer are available.
The new product adoption process
The new product adoption process suggests the need for the firms to pay
attention to help customers so as to go through the stages smoothly and
adopt the new product. The potential buyer of the new product, from
first hearing the product to the final adoption it goes through the
following five stages of the adoption process:
- Awareness : getting information about the new product
- Interest : seeking more information about the product
- Evaluation : checking its benefits and cost
- Trial : based on the evaluation to buy to estimate the value of using
- Adoption : if the trial is favorable to adopt the new product to use
regularly
Product Life Cycle
With the change in marketing environment, intense competition,
customer’s preferences and tastes, product life also changes. Product
also passes through four product phases:
- Introduction
- Growth
- Maturity
- Decline
1. Introduction: in this stage product is relatively undifferentiated;
sales are low; price generally high; distribution is selective;
increasing brand awareness is the aim of promotion; almost no profit and
competitor on site. The strategy is to establish market.
2. Growth: in this stage there may be increase in sales growth; profit
begins to rise; there is differentiation in form of new product
features; distribution becomes intense; there is improvement in quality
of product; price can be maintained or reduced; competitors become
entering into the product production as to seize the opportunities. The
strategy is market penetration.
3. Maturity: in this stage, there is product differentiation and
modification; competition is intense; price reduction is likely; likely
there are new distribution channels; there is emphasis on building brand
loyalty; profit goes down ; market saturation is reached; the strategy
is differentiation , diversification and to maintain market share and
extend the product life.
4. Decline: in this stage, the approach is to reduce cost and to
harvest it; profits diminish; the option may include to discontinue the
product or to find new use for it.
Branding
Branding is the entire process involved in creating a unique brand for a
product.
Brand is the identity of a product; it is a product’s personality. A
name, sign, term, design, slogan, symbol or a combination these are
forms of a brand. Through brand, a firm intends to identify its goods
and services and differentiate itself and its product from those of
other sellers. Brand connects target segment emotionally; it delivers
the message clearly; it also confirms credibility; it motivates the
buyer; it consolidates user loyalty. Let us define these two concepts:
brand equity and brand evaluation. Brand equity is the positive
differential effect that knowing the brand name has on customer response
to the product. A measure of a brand’s equity is the extent to which
customers are willing to pay more for the brand. Brand evaluation is the
process of estimating the total financial value of a brand.
Major brand strategies
To build strong brand, here are major brand strategy decisions:
- Brand positioning: focusing on attributes, benefits, beliefs, and values
- Brand name selection: selection of the name; protection of the name
- Brand sponsorship: it can be manufacture’s , private, licensing or
co-branding
What is Service Marketing
Service is defined as any activity or benefit that one party can offer
to another that is essentially intangible and does not result in the
ownership of anything. Service marketing is influenced by the service
characteristics which are listed below:
- Intangibility , for example , the service of car repairers; doctors
consulting - Variability : depending on various factors, the service quality car
repairer varies - Inseparability: for example, the service of a haircut and a barber
- Perishability: example, a service of a seat booked to fly to Mombasa
tomorrow on local airlines, if not used will perish
Unlike the tangible product, service marketing also has a unique
marketing mix. The service mix includes: the common 4Ps (product, price,
promotion and place) and people, process, physical presence, and
productivity.
2. Price – Market Mix
Price is the sum of the values that consumers exchange for the benefits
of having or using the product or services.
Types of cost
Let us first look at the types of cost. Types of costs are fixed costs
the type of costs which occur at the establishment of the organization
and relatively not replenished routinely. The fixed costs are not
affected with the production or sales level. Variable costs that type of
costs which occur with each extra unit produce or sale. Variable costs
are directly related with the level of production. Total costs are the
sum of the fixed and variable costs.
Factors affecting pricing decision
These are the factors that affect pricing decision: Internal factors of
the firm such as marketing objectives; marketing mix strategy; cost ;
organizational consideration ; external factors such as the market ;
demand; competition, and environment.
General pricing approaches
This can be cost -based price, cost-plus pricing, adding a standard
markup to the cost of the product and breakeven pricing. The other
approach is value -based pricing: setting price based n buyers
perceptions of value rather than on the seller’s cost. There is also
another approach: competition-based pricing. This is setting prices
based on the prices that competitors charge for similar products.
New Product Pricing Strategies
This are market skimming pricing and market penetration pricing .Market
skimming pricing is setting a high price for a new product to skim
maximum revenues from the segments willing to pay the high price. Market
penetration pricing is setting a low price for a new product in order to
attract a large number of buyers and a large market share.
Product Mix Pricing Strategies
This includes product line pricing, optional product pricing, captive
product pricing, and product bundle pricing
Price Adjustment Strategies
Discount and allowance pricing which includes cash discount for those
customers who pay their bills punctually or in advance; quantity
discount for those customers who purchases in bulk Quantity; functional
discount for the member of the trade channel who performs certain
function for seller, such as selling, storing, and record keeping;
seasonal discount for those buyers, who purchase merchandise or services
out of season; allowance , the promotional money paid by the
manufacturers to the retailers against a performance or as per agreement.
Segmented pricing is selling a product or service at two or more prices,
where the difference in prices is based on the differences in the
environment of the segment. Another adjustment strategy is psychological
pricing; price is based on the perceptions of the consumer for the
product. Reference price is price that buyers carry in their minds and
refer to when they look at a given Product
Promotional pricing is temporarily pricing products below the list
price, and sometimes even below cost, to increase short-run sales.
Geographical Pricing is in which goods are placed free on board a
carrier and the customer pays the actual freight from the factory to the
destination. Uniform-delivered pricing is a geographical pricing
strategy, in which the company charges the same price plus freight to
all customers, regardless of their location. Zone zoning is a
geographical pricing strategy, in which the firms divide their clients’
location in different zones as per distance with the production house
and fix charges for each zone. All customers within a zone pay the same
price.
Basing point pricing is a geographical pricing strategy in which the
seller designates some city as a basing point and charges all customers
the freight cost from that city to the customer location, regardless of
the city far from the production house. Freight-absorption pricing is
also a geographical pricing strategy in which the company absorbs all or
part of the actual freight charges in order to get the business.
3 . Promotion-Market Mix
Promotion refers to communicating with the public in an attempt to
influence them toward buying a product. Promotion is also coordination
of individual methods of promotions such as advertising, personal
selling and sales promotion.
Promotion Mix
Promotion mix consists of these elements:
- Advertising
- Personal selling
- Sales promotion
- Public relations
Advertising is any paid form of non-personal presentation and promotion
of ideas, goods, or services by an identified sponsor.
Advertisement is important for standardized products; products aimed at
large markets; products that have easily communicated features; products
low in price; and products sold through independent channel members
and/or are new products.
Use of advertising is for promoting products or organizations;
stimulating primary and selective demand; offsetting competitor
advertising; making salespersons more effective; increasing use of
product; reminding and reinforcing customers; and, reducing sales
fluctuations.
Personal selling refers to personal presentation by the firm’s sales
force for the purpose of making sales and building customer relationship.
Types of Advertising Agencies
The objective of advertising is to create awareness within a specific
target audience during a specific period of time. Types of the
advertising agencies that carry out the objectives of advertising are
creative Agency; Media Buying Houses; Public Relation s; Off Line
Advertising Agency and Production Houses
Personal selling
Personal selling is a persuasive communication between a representative
of a firm and one or more potential buyer for a sale. It is a face to
face communication with an aim to sell a product.
The advantages of personal selling are freedom to adjust a message to
satisfy customers informational needs, dynamic; precision, enabling
marketers to focus on most promising leads; give more information; two
way flow of information, interactivity; Discover the strengths and
weaknesses of new products and pass this information on to the marketing
department. Its minus is high cost.
Forms of personal selling (types of sales persons): These are the types
of sales persons: order taker seeks to have repeat sales; order getter
identifies potential customers who will buy a product;
The sales management process
- Sales plan formulation – setting the objectives; organizing sales force
- Sales plan implementation – sales force recruitment, selection,
training , motivation and compensation - Evaluation and control of the sales force , including quantitative
and behavioral assessment
Sales plan formulation
- Setting objectives – this is specifying what to achieve
- Organizing the sales force – taking into consideration various
organizing structure : geographical structure, customer structure,
product structure,
Steps in Personal Selling Process
Prospecting and qualifying: this identify potential customers and
screening them
- Pre-approach : learning about a customer before making a call
- Approach : knowing how to meet the buyer
- Presentation : showing the product benefits
- Handling objections: overcoming buyer objections
- Closing : ask the buyer for order
- Follow-up : ensuring customer satisfaction and repeat business
Types of Sales Force Structure
- Territorial : in this case the sales force can have exclusive
territory to sell the product line of the firm - Product : the sales force is structured along the product lines
- Customer : the sales force is structured along the customers’ type
- Complex : it can combine territory, product and customer
Sales promotion is defined as the short-term incentives, to encourage
the purchase or sale of a product or service. Public Relations is
building good relations with the firm’s various publics and corporate
clients by publicity and interacting in favorable moods and media, as
well as handling unfavorable rumors, stories and events are also the
part of public relations. To achieve its objectives, public relations
make use of methods that include the press conference, press release,
event sponsorships, publicity event, letter to editor, media tours, articles
Steps to develop public relations strategy, to
- Define objectives for publicity and media plan
- Define the specific, measurable, actionable, realistic and time-bound
objectives - Determine the target audience
- Develop a schedule for public relations campaign
- Develop plan of “attack”
- Put to measure to track the results of the campaign
Direct marketing can also be understood as part of promotion mix. Direct
marketing is communications with targeted individual consumer to obtain
an immediate response and development of long-term relationship. Direct
marketing involves direct communications with targeted individual
consumers to achieve an immediate response and develop long lasting
customer relationships. Direct marketing can be done through E-mail,
Direct mail, Telephone, Catalogues, and Fax. That is, forms of Direct
marketing includes face to face marketing; telemarketing; direct mail
marketing; Catalog marketing; direct response television marketing and
kiosk marketing.
How To Develop Effective Communication
To facilitate the objectives of the promotion, effective communication
needs to be developed.
To develop effective communication,
Identify the target audience
Define objective
Design a message
Determine message contents
Determine message structure
Choose Media
Decide on personal communication channel
Decide on non-personal communication channel
Select the message source.
Sales Promotion
Sales promotion is the short-term incentives to encourage the purchase
or sale of a product or service for a limited time period. The main
objective of sales promotion is to build relationship between consumer
and the brand as well as creating short term sales or temporary brand
witching. To carry out the objectives of sales promotion, the
salesperson is a representative of a firm, who performs one or more
works in terms of vision, communicating, servicing, and information
gathering.
Types of Sales promotion tools
The salesperson has various sales promotion tools such as consumer
promotion tools ; sample – small amount of a product offers free to the
consumer for trial; coupon; cash refund offer; price pack; premium;
advertising specialties – items printed with an advertiser’s name, given
as a gift to consumers; patronage reward; point of purchase display of
products; contests and games.
Promotion Mix Strategies
There are push strategy and pull strategy
Push strategy is a promotion strategy in which the seller pushes the
product through distribution channels to final consumer.
Pull strategy is in which the seller directly hit the final consumer to
induce them to buy the product. Consumer will demand the product from
channel members, if the pull strategy effect successfully.
Public Relations
Public relations is building good relations with the company’s various
publics and corporate clients by publicity and interacting in favorable
moods and media, as well as handling unfavorable rumors, stories and
events . The tools of public relations use: press release; product
publicity; public affairs; lobbying and investors.
4. Place (Distribution channels)– Market Mix
Place , which is also known as the distribution channels, is a set of
interdependent organizations involved in the process of making a product
or service available for use or consumption by the consumer or business
user. The distribution channels can be
- Direct channel ( from producer to a consumer)
- Indirect channel ( from producer through intermediaries to a consumer)
Through distribution producer’s (manufacture’s) product can pass to a
wholesaler, then to a retailer before finally reaching a consumer. Or it
may go first to a retailer finally to reach a consumer. In these cases,
there are intermediaries between the producer and the finally consumer.
But the producer can sell directly to the final consumer. In this case,
there is no an intermediary. The intermediaries may be short or long. It
is long, for instance, when the product passes through an agent, a
wholesaler, retailer, and short when it only passes through a retailer
to reach a consumer. Intermediaries, such as retailers and wholesalers,
tend to add efficiency because they can do specialized tasks better than
the consumer or the manufacturer.
Intermediaries add efficiency by
- Breaking bulk – the final consumer buys only the small quantity;
quantities are gradually broken down to reach a consumer - Intermediaries move goods efficiently
- Consolidation and distribution – the final consumer can access a
product easily as in the supermarket - Carrying inventory less costly to the holding of inventory
- Financing – wholesaler and retailer may negotiate for lower prices
Determining on need and the nature of distribution channel involves
making decisions on location of the consumer, cost of distribution, type
of product and the strategy of distribution.
