3.4 Using the marketing mix

Question 1

What is the marketing mix?

Answer 1

• The combination of marketing decisions that influence a customers decision to buy.
• The nature of the mix will depend on the positioning.

Question 2

What are the 7ps?

Answer 2

Price

Process

Place

Physical environment

People

Promotion

Product

Question 3

Price of the product

What does this include?

Answer 3

Prices charged for different versions of the product ( for example for different sized bottles) & payment terms, e.g. whether a customer can pay in installements.

Question 4

The product itself

What does this include?

Answer 4

• Physical features & specifications of the product (what does it do).
• What it looks like (its design).
• How reliable it is.
• How long it lasts,
• What guarantees are provided
• What after sales service is provided.

Question 5

Place

What is this known as ?

What does this include?

Answer 5

The distribution of the product.

• Distribution channel- how the ownership of a product moves from the producer of the product to the final customer, (so how product gets to the consumer.)

Question 6

The promotion of the product

What does this refer to?

Answer 6

The ways in which a business communicates about the product.

Question 7

What are the ways in which a business can promote a product?

Answer 7

Advertising: Involves paid for communications, e.g. newspapers/ billboards.

Public Relations: Try to get free coverage of activities e.g. if their chief executive gives an interview to the press.

• Sponsorship deals.

Sales promotions: They are special offers such as buy one get one free (BOGOF).

Sales teams: Many businesses have salesforces to contact potential customers or distributors.

Question 8

People

What does this include?

Answer 8

• People involved in the transaction.
• People who take your enquiry if you ring up about a product, the people who serve you in a shop.
• Their skills & attitudes affect your perception of the product.

Question 9

Process

What does it refer to/ include?

Answer 9

Refers to how you actually buy a product, e.g. using your mobile phone, online etc.

Question 10

What can process affect for a customer?

Answer 10

Their satisfaction.

E.g. bad satisfaction if website crashed when you want to make a booking.

Mobile phone payment has made paying for car parking a lot easier- improving customer service.

Question 11

The Physcial environment

What does this refer to?

Answer 11

Refers to the physical premises of a business

• How carefully it has been designed/ decor.
• Cleanliness.
• Design
• The signage
• Music

Question 12

The decisions made about the 7Ps and the way different elements of the marketing mix interrelate will affect what ?

Answer 12

Affect the customers overall perception of the product, whether they believe it represents good value for money & how they believe it is positioned relative to other products in the market.

Question 13

The relationship between the positioning of a business & the marketing mix can be seen by analysing Ryanair- how is this?

Answer 13

Product is basic- focus on short haul flights where it is cheap to land- uses a standardised fleet of planes.

Price- Low as a budget airline.

Promotion- low cost messages via inexpensive methods- saying outrageous things to get noticed.

Process: Focus on online bookings to keep the costs down. If customer makes a mistake- is their fault & they must pay necessary charges.

Staff undertake many tasks to keep the costs down.

Question 14

MontBlanc is a luxary brand that offers products such as watches & pens or ‘writing instruments’.

To match this luxury positioning, what does the marketing mix include?

Answer 14

• Product focussed on craftmanship.
• High prices- reflect the brand’s exclusivity.
• Limited distribution; the products are sold in premium outlets.
• Promotion that hilights quality, e.g. advertising in upmarket publications.
• Staff place a high level of importance on customer service.

Question 15

Is the positioning of a product fixed/ not fixed?

Explain your answer…..

Answer 15

Not fixed- may change as the internal or market conditions change.

Question 16

What are the internal influences on the marketing mix?

Answer 16

Changes to the financial position- (might affect investment in new product development/ promotion.)

Changes to staff: Bring about new marketing opportunities-e.g. new signings at Arsenal might improve the team.

Changes to operations: E.g. greater efficiencies might enable lower prices.

Changes to objectives: New managers/ owners may set new targets for the business.

Question 17

What are the external influences on the marketing mix?

Answer 17

Political & legal factors: (e.g. new European legilsation may affect how products have to be labelled.)

Economic factors: (E.g. if economy is growing, higher prices might be possible.)

Social factors: (Greater environmental concerns might affect how the product is produced.)

Technological factors: (More people using the internet might make online promotion more effective.)

Competition: (Greater competition might mean the benefits of the product have to be enhanced to match what they are offering.)

Question 18

What are consumer products?

Answer 18

Bought by customers (B2C)

Question 19

What are industrial products?

Answer 19

Products sold to businesses which use them in their own processes.

(B2B)

Question 20

Types of consumer products can be divided into what categories?

Answer 20

• Convenience items.
• Shopping goods.
• Speciality products.

Question 21

What are convenience products?

Answer 21

• Products such as milk & newspapers which are widely distributed!
• Customers will not travel very far to buy these products & if they are not available at one store, customers will usually buy another brand.
• Ensuring the products are widely available = important part of the success of these products!

Question 22

What are shopping goods?

Answer 22

• Products where customers compare features & price between different options & may take some time before deciding which one to buy!
• They are the products where you might visit several stores before deciding what to buy (i.e. when out shopping/ online) - e.g. buying a microwave.

Question 23

What are speciality products?

Answer 23

• Products such as a sports car/ Rolex watch.
• Customers may have been thinking about buying these for several months/ years.
• Customers will be willing to travel to buy this product & the brand may be very important- as will the physical environment where it is sold.

Question 24

The product lies at the heart of the marketing mix.

What does a product consist of?

Answer 24

• The core benefit.
• The tangible product.
• The augmented product.

Question 25

What does the ‘tangible product’ refer to?

Answer 25

Features such as its specifications, its reliability and its design.

Question 26

What does the ‘augmented product’ refer to?

Answer 26

Refers to the ‘extras’ such as the brand name, the delivery and any guarantee & after-sales service provided.

Question 27

Managers will want to decide not only the features of a given product- but also what products to offer (which markets to compete in) and how many versions to offer (e.g. what sizes, with what forms of packaging.

What will managers want to do?

Answer 27

• Monitor progress of individual products over time to decide whether to change the marketing-mix- can be analysed using product life cycle model.
• Take an overview of how all the products fit together to decide whether some need more investment or whether some are no longer viable- analysed using product portfolio analysis.
• Decide whether to develop new products as markets change (new product development).
• How to develop the brand of a product.

Question 28

KT: product lifecycle?

Answer 28

It shows the sales of a product over its life. Usually involves stages such as introduction, growth, maturity and decline.

Question 29

What does product portfolio analysis examine?

Answer 29

Examines the market position of all of the products of a business, for example in terms of market share or market growth.

Question 30

What are the different stages in the product lifecycle?

Answer 30

Development

Introduction

Growth

Maturity

Decline

Question 31

What happens in the development stage of the product lifecycle?

Answer 31

• Stage where the product is being developed.
• Investment into research & development, products will be tested & assessed to see if they are worth launching.
• Means money is being invested into product development but given that there are no sales- cashflow is negative.

Question 32

What happens in the introduction stage of the product lifecycle?

Answer 32

• When a product is launched into the market.
• Sales may be relatively low as awareness can take time to build.
• High levels of investment may be aquired to promote the new product.
• Cashflow may still be negative.

Question 33

What happens in the growth stage of the product lifecycle?

Answer 33

• Sales begin to increase at a relatively fast rate!
• Customers are increasingly aware of product & sales are building.
• Managers will still be investing to keep sales growing but by this stage- cashflow should be becoming positive!
• Products such as latest iphone- at this stage.

Question 34

What happens in the maturity stage of the product lifecycle?

Answer 34

When the rate of growth of sales begins to slow; this could be because competitors are entering the market taking away potential sales.

Question 35

What happens in the decline stage of the product lifecycle?

Answer 35

• This is when sales are falling ( the growth rate is negative), perhaps because new and better products are now on the market.

Question 36

When does an extension strategy occur?

Answer 36

Occurs when a business attempts to prevent sales of a product from falling & avoid or delay the decline stage of the product lifecycle.

Question 37

Give some examples of extension strategies that a business might use?

Answer 37

• Increase promotional expenditure to renewed interest in the product or to increase usage of the product.
• Revamp the product in some way e.g. new packaging, new flavours.
• Find new target market segments for the product, for example new countries to sell it in or target a new age group with the product.
• Find new usage occasions for the product. E.g. cereal companies are keen to try and increase consumption at other times in the day apart from breakfast.

Question 38

What does the product lifecyle show?

Answer 38

• Shows the progress of one product over time- but most businesses have sereral products.
• This means they will want to analyse the overall position of the collection (or portfolio) of products before deciding what to do next; this is known as ‘portfolio analysis’.

Question 39

What is a well known method of portfolio analysis?

Answer 39

the Boston Matrix

Question 40

What are the axis on the Boston Matrix?

Answer 40

Market growth ( vertical)

Relativve market share (horizontal)

Question 41

Dogs? Boston Matrix

Market share & market growth?

What can managers choose to do?

Answer 41

Low market share & low growth.

Managers can choose to either invest to revitalise these products or let them decline & eventually remove them.

Question 42

Cash cows ? Boston matrix

Growth & market share?

Why?

Answer 42

Products that are well established- high market share but low market growth.

• May be due to it being mature and therefore not growing fast anymore.
• Products- do not need promoting as heavily as others as well known & given high amount of sales- they generate high funds for business.

Question 43

Problem children/ question marks

Growth/ market share?

What may managers choose to do with them?

Answer 43

• Products in fast growth (and therefore appealing) markets- however not yet established & only have relatively small market share.
• Problem children as may turn out to do well- but equally may not!
• Managers may want to invest to protect & grow these products.

Question 44

Stars- Boston Matrix

Growth/ share?

What may managers choose to do?

Answer 44

• Products that are in fast growth markets and are doing well in terms of market share.
• It could be the leading brand in a new type of app for example.
• Managers- need to keep investing in, promoting & gaining more distribution for these products to ensure they remain stars!

Question 45

What is the value of the Boston Matrix?

Answer 45

Helps managers categorise their products & take a view on what they should do next.

E.g. if all products of business = cash cows, manager might worry about the future success of the organisation because sales growth = slow. In this case- managers may decide to invest to build some question marks and stars to help ensure future sales.

If all products of business = dogs, managers will worry as they have low market shares in slow growth markets. Drastic action = needed!

Question 47

Boston Matrix

What will managers aim for?

Answer 47

• Well established products (cash cows) to help fund the development & success of new products (question marks & stars) .
• They will want a balanced portfolio in which the mature, established products help prepare the business for the future.

Question 48

Boston matrix

What does the size of the circle drawn to illustrate each product hilight?

Answer 48

Hilights the size of its turnover.

Question 49

Marketing mix

What does new product development involve?

Answer 49

Involves investment to modify an existing product or replace it with a new one.

• It may take several months (e.g. new computer game) or several years ( e.g. new model of car).

Question 50

Why may new product development be required?

Answer 50

• The existing products are coming to the end of their life cycle.
• New opportunities are opening up due to changes in the market.
• There is a desire to build on the strengths of the brand.
• It is a way of achieving growth.
• To match what competitors are doing.

Question 51

How does new product development involve risk?

Answer 51

• Many product ideas do not make it to actual production. This is because the idea proves not to be viable in terms of producing it & making a profit or because of technical problems along the way.
• Many products do not sell well and are withdrawn. This may be because the market has not yet been understood properly, promotional problems or competitor actions.

Question 52

When deciding whether to invest in a new product- what will managers consider?

Answer 52

The likely time it will take to recover the initial spending ( this is called payback) and the rate of return on the investment.

Question 53

What are the influences on pricing decisions?

Answer 53

Stage of the products life cycle

Costs

Price elasticity of demand.

Positioning

Other elements of the marketing mix.

Competitiveness of the

Question 54

Analysing pricing decisions

why will businesses consider the price elasticity of demand before making price changes?

Answer 54

If demand in price is inelastic- then it is possible to increase revenue by increasing price, (due to price increase causing a smaller % fall in quantity demanded).

• If demand is price elastic- it is possible to increase revenue by reducing price (this is because % increase in quantity demanded is greater than the cut in price in percentage.)

Question 55

Price elasticity of demand.

If a 5% increase in price was to cause households to reduce their demand by more than 5%- what would demand be?

Answer 55

Demand = elastic!

Question 56

Price elasticity of demand

If a 5% increase in price was to cause households to reduce their demand by less than 5% what would demand be?

Answer 56

Demand = inelastic

Question 57

What is the equation for price elasticity of demand?

Answer 57

% change in qd / % change in price

Question 58

What is cost-plus?

Answer 58

• Cost-plus pricing is a pricing strategy in which the selling price is determined by adding a specific amount markup to a product’s unit cost.
• E.g. cup of tea- working out the cost of making the tea then adding a certain amount on top.*

Question 59

What is price skimming?

Answer 59

• This occurs if a relatively high price is charged when a product is first launched.
• As the demand of the first customers is satisfied, the firm lowers the price to attract another, more price-sensitive segment.
• Most appropriate when demand is price inelastic; e.g. if the product is heavily branded.

Question 60

Penetration pricing?

Answer 60

• Occurs when a business charges a low price to gain market share.
• Most suitable when demand is sensitive to price (price elastic).
• Low price- can gain high sales & enable the business to benefit from producing on a large scale, (e.g. may be able to gain lower prices from suppliers if it is buying materials on a large scale.

Question 61

What is dynamic pricing?

Answer 61

• Occurs when prices are changing rapidly in response to changing demand conditions.
• E.g. airlines & hotels can track the number of enquiries at any moment and the number of seats or rooms left and change the price accordingly.*
• This means there is no ‘one’ price for a ticket or room- it depends when you enquire and make the booking.*

Question 62

What is premium pricing?

Answer 62

• Premium pricing: practice of keeping the price of the product / service artificially high in order to encourage favorable perceptions among buyers, based solely on the price.

E.g. Harrods/ Rolls Royce & Bentley.

Question 63

What is psychological pricing?

Answer 63

• A pricing & marketing strategy based on the theory that certain prices have a psychological impact.
• Retail prices are often expressed as “odd prices”: a little less than a round number, e.g. $19.99 or £2.98

Question 64

What are some examples of promotional methods?

Answer 64

Advertising.

Sponsorship.
Merchandising.

Direct marketing.

Public Relations.

Personal selling.

Packaging.

Branding.

Displays.

Sales promotion.

Loyalty cards.

Question 65

What affects what promotional method a business may use?

Answer 65

• The target audience.
• The promotional budget.
• The message (e.g. Red Bull- associate itself with sports & high energy activities.)
• Technology- (social media & viral marketing have become more prevalent.)
• Positioning.
• Competitive environment.

Question 66

What is viral marketing?

Answer 66

Marketing technique, uses social media & networks to raise brand awareness & boost sales by getting users to recommend the promotional campaign (such as a blog/advert) to others.

Question 67

What is a brand?

Answer 67

• Brand: A promise to deliver certain benefits and services.
• It can be identified via a recognisable name, symbol, slogan, logo or anything that is used to identify & distinguish a product or business from competitors in the market.

Question 68

What does a strong brand mean?

Answer 68

• Demand is more likely to be price inelastic.
• Customers may become brand ambassadors- telling others about the brand & convincing them to try it.
• Customers may be more open to other products launched under the same brand name.
• It may be difficult for other brands to enter the market or gain market share.

Question 69

Place is concerned with how a business can get the products to the customers or how they can distribute it.

When making distribution decisions, what will a manager look at?

Answer 69

• The degree of coverage, (does business intend to target customers globally/ nationally.)
• The costs of different distribution strategies. (The costs of setting up own distribution network may be expensive & take time- however online opportunities make being global easier.)
• The nature of the product. (Convenience items need to be widely distributed whereas speciality items can be focused on fewer outlets that reinforce the brand.
• The control over the products price & promotion. (Rolex & Gucci keep very close control over the outlets that sell their products to protect the brand.
• Customers expectations. ( Increasingly shoppers are expecting multichannel distribution- meaning they want to assess a product in many different ways.