lecture 7 - the marketing mix

Question 1

what is the marketing mix?

Answer 1

Jobber and Ellis-Chadwick (2016) definition:

“A framework for the tactical management of the customer relationship, including product, place, price and promotion (the 4-Ps); in the case of services, three other elements to be taken into account are process, people and physical evidence”

Question 2

how has the marketing mix changed over time?

Answer 2

The 4-Ps for products
The 3-Ps for services
The 27-Ps including other P-s such as partners, permission, packaging.

Question 3

what is a product?

Answer 3

A product is an item that satisfies a need or a desire. This can be physical item, a service or a virtual offering

It is produced at a cost and is subsequently made available to the right audience at a price

Are usually represented by a brand

There are different components of a product, i.e., core, actual and augmented

Question 4

what are the components of products

Answer 4

augmented product:
delivery and credit
after-sale service
warranty
installation

actual product:
brand name
quality level
packaging
design
features

core benefit

Question 5

what are the features and value creation of products?

Answer 5

• every product should have certain characteristics that separate it from its competitors. These characteristics should be foremost inputs to the product’s marketing mix
• when a product is envisioned, it is an answer to an identified market need. This need is translated into a product with particular characteristics

these characteristics help determine all subsequent actions such as pricing, communication strategy and additional features or add-ons.

Question 6

what is a unique selling proposition?

Answer 6

a factor that is shown to be the basis of why one product is better than its competitors is called a unique selling proposition (USP)

this set of characteristics helps solidify a company’s market position and allows them to stand apart from competition

there are very few products that have no clear competition in the market. Most often, there are identical products with almost the same features. In this situation, differentiation becomes of the utmost importance for the success of any product.

the company needs not only to identify an USP, but also to clearly communicate this to the potential audience so that it is understood why the product is superior to other similar ones.

Question 7

what are the 3 main categories?

Answer 7

tangible products
intangible products
services

Question 8

what are tangible products?

Answer 8

these are items with an actual physical presence such as a car, an electronic device, and an item of clothing or a consumer goods

Question 9

what are intangible products?

Answer 9

these are items that has no physical presence but can be felt directly. An insurance policy is an example. Online items such as software, applications or even music and video files are also intangible products

Question 10

what are services?

Answer 10

services are also intangible, but they are the result of an economic activity that does not result in ownership. It is a process that creates benefits for customers. Services depend highly on who is performing them and remain difficult to reproduce exactly.

Question 11

what does the PLC show?

Answer 11

as time goes on sales increase to a certain point, after which they will decline or there will be a product extension where the sales increase but at a slower rate

Question 12

what are the benefits to PLC (strategies)

Answer 12

PLC can help you to define the strategies which can be used based on the life cycle stage. So, if a product is in growth stage, then naturally a lot of awareness strategies (advertising for example) and investments are needed to keep the product in the growth stage. Thus, strategising becomes easier with the PLC

Question 13

what are the benefits to PLC (decision making)

Answer 13

whenever you are presented with multiple options, you need more data to take a decision on which direction to move in. PLC helps managers with such decision making because it has the sales data as well as performance over time data. The combination of the two can help managers taken decisions faster.

Question 14

what are the benefits to PLC (forecasting)

Answer 14

sales become easier - with enough experience, it is easier to forecast a product will move through the PLC and therefore, what level of sales will it achieve.

Question 15

what are the benefits to PLC (competitive advantage)

Answer 15

marketers can also run the PLC of competitors products besides running their own (provided they have the sales data). This gives a good insight into the preparations the competitors must be going through. Accordingly, the firm doing this analysis has a competitive advantage as it can take one step ahead of the competitor.

Question 16

what is an example of competitive advantage as a benefit of the PLC?

Answer 16

competitors product is in the introductory stage whereas the company’s product is in the maturity stage. The mature product starts advertising and pulling customers so that the newer product never takes off. Or alternatively, the company can themselves introduce a new product which competes with the competitors product.

Question 17

what are the benefits to PLC (saying goodbye)

Answer 17

It’s hard saying goodbye especially to a product you launched with so many hopes. However, the PLC is the perfect measure of when to say goodbye to a product and it can help marketing managers with the decision to eliminate a product from their portfolio when the sales have declined far below the market average. Such products will demand investments, but the returns will be very poor.

Question 18

what is an example of saying goodbye as a benefit of the PLC?

Answer 18

If Samsung launches a new mobile phone, it knows that the mobile will grow for 1 or 2 months, it will then reach maturity for 3 to 6 years months and then the model will start declining because consumers start searching for new models. On an average, a single product in the portfolio of samsung smartphones survives for 2-3 years at the max, even though product series like galaxy or note might survive longer

Question 19

what are the limitations of the PLC (fluctuations in sales data)

Answer 19

One major problem in the PLC is the graph is completely dependent on sales data. Thus, if there are fluctuations in sales data, then the graph is useless and cannot be used to predict precisely the movement of products or the overall product rise and decline. Such fluctuations can arise due to production issues, seasonal sales of the product or due to any other reason

Question 20

what are the limitations of the PLC (delay in sales data)

Answer 20

another limitation for the PLC is that there is delay in collecting and analysing the sales data. Sales is generally recorded after the movement of goods and besides this, the actual movement of one product from one life cycle to another might be recorded months down the line. Due to a delay in analytics

Question 21

what are the limitations of the PLC (varying market conditions)

Answer 21

there may be a variance in the sales data due to varying market conditions. Therefore, products which are hit in one place, might not be hit in other regions or territories due to the differences in consumption patterns of those territories

Question 22

what are the limitations of the PLC (effect of other elements)

Answer 22

There are various other elements which effect the product life cycle. Product itself is just one P amongst the 4P’s of marketing and there are three other elements such as Price, Place, promotion or even staff and packaging. Overall Marketing, Logistics, Price etc have an effect on the sales of the product and hence the stages and their length in the PLC might vary based on these elements.

Question 23

what are the limitations of the PLC (not applicable to brands or services)

Answer 23

PLC is generally applicable to products only and not applicable to brands or services. For example –Microsoft has so many products which have come and gone but this does not mean that the Microsoft is in Maturity stage or decline stage. Some products of the brand are growing whereas others are maturing or declining.

Question 24

what are other limitations of the PLC

Answer 24

The PLC does not predict the time that a product will take in each stage of the cycle. Sometimes it becomes difficult to distinguish one stage from another because very few people are keen to pay details of the flow of goods and services in the market. Some products decline even before reaching the maturity stage and thus the life cycle cannot be fully relied upon.

PLC can cause managers to betoo rigid in their strategies, as they expect the sales volumes of their products to follow a script written in stone.

Product life cycles can beself-fulfilling. Each stage has a set of recommended actions. Consequently, when a product begins to behave as if it is in a decline, managers might decide to discontinue that product, because that is the protocol. Meanwhile, it could be that the product was merely dipping in sales, as a result of economic externalisations, which will eventually lift.

Question 25

what is price?

Answer 25

price is the amount that consumers will be willing to pay for a product. Marketers must link the price to the product's real and perceived value, while also considering supply costs, seasonal discounts, competitors' prices, and retail markup. In some cases, business decision-makers may raise the price of a product to give it the appearance of luxury or exclusivity. Or they may lower the price so more consumer will try it

Question 26

what are the primary determinants influencing price

Answer 26

cost orientation - price to cost customer orientation - price to value competition orientation - price to compete

Question 27

according to Dubey, Moeller and Turner (2015) what are the other profit levellers apart from price?

Answer 27

- sales volume - variable costs (costs that vary by production levels) - fixed costs (overhead costs)

Question 28

what point is price set to?

Answer 28

a point between: - price floor - breakeven price which total costs are covered - price ceiling - the highest price the market is willing to pay

Question 29

what is price elasticity of demand?

Answer 29

price elasticity of demand is used to determine how a change in price affects consumer demand if consumers still purchase a product despite a price increase (cigarettes and fuel) the product is considered inelastic on the other hand, elastic products suffer from pricing fluctuations (such as movie tickets). Ideally you want your product to be inelastic - demand remains stable if prices do fluctuate

Question 30

what is the equation for price elasticity?

Answer 30

% change in quantity/% change in price = price elasticity of demand

Question 31

what are the objectives of pricing?

Answer 31

maximise profit - to maximise profit may involve setting high price in situations of weak competition and lowering costs maximise sales growth - set low price to capture market share maximise profit margin - increase the profit margin for each unit and do not focus on the total number of units sold encourage product trial - offer low or free initial trial price during trial period

Question 32

what are types of pricing strategies

Answer 32

- competition-based pricing - cost-plus pricing - dynamic pricing - freemium pricing - high-low pricing - hourly pricing - skimming pricing - penetration pricing - premium pricing - project-based pricing - value-based pricing - bundle pricing - psychological pricing - geographic pricing

Question 33

what is cost-plus pricing?

Answer 33

relatively straightforward pricing strategy that first identifies exactly how much it costs to manufacture a product or deliver a service, that adds what a business wants to make in profit For example, if it costs a business £100,000 to manufacture a batch of a particular product, and they aim to make a 20% profit, they simply 'mark-up' the product by 20%.

Question 34

how do you evaluate pricing potential?

Answer 34

you want to make a strategy that is optimal for your unique business. To begin, you need to evaluate your pricing potential. This is the approximate product or service pricing your business can potentially achieve in regard to cost, demand and more. some factors that can affect your pricing potential include: - geographical market specifics - operating costs - inventories - demand fluctuations - competitive advantages and concerns - demographic data

Question 35

how do you determine your buyer personas?

Answer 35

you must price your product on the type of buyer persona that's looking for it. When you look at your ideal customer you'll have to look at their: - customer lifetime value - willingness to pay - customer pain points to aid in this process, interview customers and prospects to see what they do and like, and ask for your sales team's feedback on the best leads and their characteristics

Question 36

how do you analyse historical data?

Answer 36

Take a look at your previous pricing strategies. You can calculate the difference in closed deals, churn data, or sold product on different pricing strategies that your business has worked with before and look at which were the most successful.

Question 37

how do you strike a balance between value and business goals?

Answer 37

When developing your pricing strategy, you want to make sure the price is good to your bottom line and your buyer personas. This compromise will better help your business and customer pool, with the intentions of: Increasing profitability Improving cash flow Market penetration Expanding market share Increasing lead conversion

Question 38

how do you look at competitor pricing?

Answer 38

You can’t make a pricing strategy without conducting research on your competitors’ offerings. You’ll have to decide between two main choices when you see the price difference for your same product or service: Beat your competitors’ price - If a competitor is charging more for the same offering as your brand, then make the price more affordable. Beat your competitors’ value - Also known as value-based pricing, you can potentially price your offering higher than your competitors if the value provided to the customer is greater. To see the competition’s full product or service offering, conduct a full competitive analysis so you can see their strengths and weaknesses, and make your pricing strategy accordingly.

Question 39

what is a digital product pricing model?

Answer 39

Digital products, like software, online courses, and digital books, require a different approach to pricing because there’s no tangible offering, or unit economics (production cost) involved. Instead, prices should reflect your brand, industry, and overall value of your product.

Question 40

what is the ecommerce pricing model?

Answer 40

Ecommerce pricing models are how you determine the price at which you’ll sell your online products and what it'll cost you to do so. Meaning, you must think about what your customers are willing to pay for your online products and what those products cost you to purchase and/or create. You might also factor in your online campaigns to promote these products as well as how easy it is for your customers to find similar products to yours on the ecommerce sites of your competitors

Question 41

how to conduct a pricing analysis?

Answer 41

1. determine the true cost of your product or service to calculate the true cost of a product or service that you sell, you'll want to recognise all of your expenses including both fixed and variable costs. Once you've determined these costs, subtract them from the price you've already set or plan to set for your product or service 2. understand how your target market and customer base respond to the pricing structure surveys, focus groups, or questionnaires can be helpful in determining how the market responds to your pricing model. You'll get a glimpse into what your target customers value and how much they're willing to pay for the value your product or service provides 3. analyse the prices set by your competitors there are two types of competitors to consider when conducting a pricing analysis: direct and indirect direct competitors are those who sell the exact same product that you sell. These types of competitors are likely to compete on price so they should be a priority to review in your pricing analysis indirect competitors are those who sell alternative products that are comparable to what you sell. If a customer is looking for your product, but it's out of stock or it's out of their price range, they may go to an indirect competitor to get a similar product. 4. review any legal or ethical constraints to cost and price There’s a fine line between competing on price and falling into legal and ethical trouble. You’ll want to have a firm understanding of price-fixing and predatory pricing while doing your pricing analysis in order to steer clear of these practices. Analyzing your current pricing model is necessary to determine a new (and better!) pricing strategy. This applies whether you're developing a new product, upgrading your current one, or simply repositioning your marketing strategy.