5.4 Marketing mix Flashcards
(23 cards)
Marketing mix (4 P’s).
- Product
- Price
- Place
- Promotion
Law of demand
If prices go up, demands go down and vice versa. But, question to what extent? (e.g. if price went up by 10% and demands dropped by only 1% - yes demands dropped, but only by 1% so you will have more revenue than before).
Pricing methods
- Price skimming: starting at high initial price and reducing overtime.
- Price penetration: start at low price and increase overtime.
- Competitive pricing: set similar prices to rivals (common in oligopolies).
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Loss leader: set prices to the cost of production or lower.
-Cost-plus strategy: adding a markup onto the cost to produce product.
Advantages and disadvantages of each pricing methods.
- Price skimming: recoup R&D costs; alienates customers, slows growth and first customers may feel cheated.
- Price penetration: allows growth of awareness and market share, attracts rival customers; poor quality leads to struggling to maintain demand when increasing price.
- Competitive pricing: maintains market share; same pricing means dependancy on other factors to be competitive (e.g. USP, differentiation - more R&D costs).
- Loss leader: increased sales volume, opportunity to upsell; costly and inefficient if other products aren’t bought.
- Cost-plus pricing: profitable; lack of competitiveness, deter customers so decreased demands.
Factors that influence pricing decisions.
- Product lifecycle: what stage are you in (e.g. maturity = competitive pricing; introduction w/ no awareness = price penetration; decline = loss leader)
- Competition levels: many rivals = competitive pricing; no rivals = price skimming.
- Research and development costs: high R&D costs = premium pricing method (e.g. price skimming) to recoup costs.
- Nature of the market
Benefits of developing new products.
- Increased customer satisfaction - customers like the product/development.
- Increased sales.
- Increased market share.
- Improve brand image.
Drawbacks of developing new products.
- High costs (e.g. research and development costs).
- Customer dissatisfaction - customers don’t like the product/development - lack of market research?
Factors that are important when designing new products.
- Product design
- Product image
- Needs of target market
Ways to fulfill product differentiation
- USP
- brand image
Benefits of product differentiation.
- Improved brand image/awareness.
- Improved customer loyalty.
- Increased sales
- Reduce marketing costs?
Product life cycle
- Research and development: high market research and development costs.
- Introduction: likely low sales, advertisement costs.
- Growth: increased sales, competition and more promotion.
- Maturity: hit peak sales (saturation).
- Decline: decreases sales, can be avoided using extension strategies.
Extension strategies
- Improve packaging: costs? aiming for segmentation change?
- More/new features: costs? Appeal to target market? Higher pricing - integrated marketing mix? collabs?
- New target market: new segmentation? geographical expansion?
- Advertisement: BMINT (billboards, magazines, internet research, newspapers, TV) or discounts (BOGOF)
- Price reduction: costs? law of/reaction in demand (more than price reduction - higher revenue).
Product portfolio
Range of products a business offers to customers.
Product portfolio in terms of Boston Matrix
-Cash cow: slow market growth, high market share (able to invest time into other products).
- Star: fast market growth, high market share (more competition - growth stage).
- Problem child: fast market growth, low market share (invest in advertisement to increase market share or give up and leave).
- Dog: slow market growth, low market share.
Reasons for promotion
- Inform/remind customers about product.
- Create or increase sales.
- Create or change image/perception of product.
- Persuade customers to buy product.
Types of promotion
- Advertising: billboards, magazines, internet research, newspapers, tv)
- Sales promotion: point of sale, BOGOF, coupons, competition, free gifts, samples.
- Sponsorship: brand awareness; costs, risk of damaged reputation due to sponsors actions.
- Social media: easier to track results (quantitative data), wider and more specific/tailored audience; potential costs, time consuming, need of skills to implement.
- Public relations (PR): brand awareness; lack of control, risk of bad publicity, trustworthiness of outlet?
Factors influencing the selection of promotional mix.
- Finance available (e.g. TV adverts expensive, social media can be free).
- Competitors actions (e.g. increased use of technology to raise competitiveness).
- Nature of product (e.g. luxury product shouldn’t be in tesco).
- Nature of market (e.g. teenagers less likely to read newspapers).
- Target market (e.g. bougé section of magazine may attract richer individuals).
Place
Channels of distribution - how customers can buy products, for example:
- On website (e-commerce)/via mobile (m-commerce)
- In personal store
- In a retailer store (who you sold the product to).
- Via a wholesaler (who bulk-bough from you and distributes in a vast network)
- Via phone (telesales)
E-commerce
The act of buying and selling a product online using the internet.
M-commerce
The act of buying or selling a product on an app using a handheld device.
Advantages of using e-commerce and m-commerce.
- Convenience: don’t have to spend money on physical store.
- Accessibility: access wider market, more potential sales.
- Personalisation: you collect the data and can personalise the display and prices.
Disadvantages of using e-commerce and m-commerce.
- Customers may want to try before buying.
- More international competitors.
- Delivery and shipping costs.
- Security risk.
Integrated nature of the marketing mix
- All the P’s should work together and be aligned for the segment that you target (e.g. high quality product may be higher price so promotion and the retailers who sell the product will be selective to protect brand and product image).
- It’s important that the mix is dynamic and evolves overtime (e.g. high quality may mean more competition, so you may move to second stage of price skimming, to increase competitiveness you may try new segments of promotional methods, you may try new stores or multi channels of distribution)
