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Commerce

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Published in: Management Subjects
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Marketing Mix.

Md T / Kolkata

14 years of teaching experience

Qualification: M.Com, B.Ed

Teaches: Accountancy, Business Studies, Commerce Subjects, Mathematics, Economics, Auditing, B.Com Tuition, Statistics

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  1. Marketers use different tools in order to get the desired response from the customers or best satisfy their needs. These tools are known as The Marketing Mix. Marketing Mix is probably the most famous term in marketinq. Marketing Mix Marketing Mix is a combination of marketing tools that a company uses to satisfy their target customers and achieving organizational goals. McCarthy classified all these marketing toolsunder four broad categories: Product Price Place Promotion These four elements are the basic components of a marketing plan and are collectively called4 P's of marketing. 4 P's pertain more to physical products than services. Below is an illustration for marketing mix. PRICE PRODUCT Target Customers PROMOTION PLACE The important thing to note is that all these four P's (variable) are controllable, subject to internal and external constraints of marketing environment. Marketers, using different blends of these variables, can target different group of customers having different needs. So, acustomer may call marketing mix "the offering" Product
  2. Product is the actual offering by the company to its targeted customers which also includes value added stuff. Product may be tangible (goods) or intangible (services). While formulating the marketing strategy, product decisions include: What to offer? Brand name Packaging Quality Appearance Functionality Accessories Installation After sale services Warranty Price Price includes the pricing strategy of the company for its products. How much customer should pay for a product? Pricing strategy not only related to the profit margins but also helps in finding target customers. Pricing decision also influence the choice of marketing channels.Price decisions include: Pricing Strategy (Penetration, Skim, etc) List Price payment period Discounts Financing Credit terms Using price as a weapon for rivals is as old as mankind. but it's risky too. Consumers are often sensitive for price, discounts and additional offers. Another aspect of pricing is that expensive products are considered of good quality. Place (Placement) It not only includes the place where the product is placed, all those activities performed by the company to ensure the availability of the product tot he targeted customers. Availability of the product at the right place, at the right time and in the right quantity is crucial in placement decisions. Placement decisions include: Placement Distribution channels Logistics
  3. Inventory Order processing Market coverage selection of channel members Promotion Promotion includes all communication and selling activities to pursuade future prospects to buy the product. Promotion decisions include: Advertising Media Types Message Budgets Sales promotion Personal selling Public relations Direct marketing As these costs are huge as compared to product price, So it's good to perform a break-even analysis before allocating the budget. It helps in determining whether the new customers are worth of promotion cost or not. It often takes time and requires market research to develop a successful marketing mix. You should not depend on one mix always try new mixes. While designing the mix, make changes to all mixes in such a way that all conveys the same message. Don't confuse your customers by just changing one variable and keeping the rest same. Limitation of Marketing Mix Marketing mix (4 P's) was more useful in early 19's when production concept ws in and physical products were in larger proportion. Today, with latest marketinq concepts, marketing environment has become more intergrated. So, in order to extend the usefulness of marketing mix, some authors introduced a fifth P and then seven P's (People, Packaging, Process). But the foundation of Marketing Mix still stands on the basic 4P's. Product Life Cycle (PLC) A new product passes through set of stages known as product life cycle. Product life cycle applies to both brand and category of products. Its time period vary from product to product. Modern product life cycles are becoming shorter and shorter as products in mature stages are being renewed by market segmentation and product differentiation.
  4. Companies always attempt to maximize the profit and revenues over the entire life cycle of a product. In order to achieving the desired level of profit, the introduction of the new product at the proper time is crucial. If new product is appealing to consumer and no stiff competition is out there, company can charge high prices and earn high profits. Stages of Product Life Cycle Product life cycle comprises four stages: Introduction stage Growth stage 2. Maturity stage 3. Decline stage 4. TIME Product Life Cycle (PLC) 1. Introduction stage Product is introduced in the market with intention to build a clear identity and heavy promotion is done for maximum awareness. Before actual offering of the product to customers, product passes through product development, involves prototype and market tests. Companies incur more costs in this phase and also bear additional cost for distribution. On the other hand, there are a few customers at this stage, means low sales volume. So, during introductory stage company's profits shows a negative figure because of huge cost but low sales volume.
  5. At introduction stage, the company core focus is on establishing a market and arising demand for the product. So, the impact on marketing mix is as follows: Product Branding, Quality level and intellectual property and protections are obtained to stimulate consumers for the entire product category. Product is under more consideration, as first impression is the last impression. price High(skim) pricing is used for making high profits with intention to cover initial cost in a short period and low pricing is used to penetrate and gain the market share. company choice of pricing strategy depends on their goals. Place Distribution at this stage is usually selective and scattered. Promotion At introductory stage, promotion is done with intention to build brand awareness. Samples/trials are provided that is fruitful in attracting early adopters and potential customers. Promotional programs are more essential in this phase. It is as much important as to produce the product because it positions the product. 2. Growth Stage In this stage, company's sales and profits starts increasing and competition also begin to increase. The product becomes well recognized at this stage and some of the buyers repeat the purchase patterns. During this stage, firms focus on brand preference and gaining market share. It is market acceptance stage. But due to competition, company invest more in advertisement to convince customers so profits may decline near the end of growth stage. Affect on 4 P's of marketing is as under: Product Along with maintaining the existing quality, new features and improvements in product quality may be done. All this is done to compete and maintain the market share.
  6. price Price is maintained or may increase as company gets high demand at low competition or it may be reduced to grasp more customers. Distribution Distribution becomes more significant with the increase demand and acceptability of product. More channels are added for intensive distribution in order to meet increasing demand. On the other hand resellers start getting interested in the product, so trade discounts are also minimal. Promotion At growth stage, promotion is increased. When acceptability of product increases, more efforts are made for brand preference and loyalty. 3, Maturity stage At maturity stage, brand awareness is strong so sale continues to grow but at a declining rate as compared to past. At this stage, there are more competitors with the same products. So, companies defend the market share and extending product life cycle, rather than making the profits, By offering sales promotions to encourage retailer to give more shelf space to the product than that of competitors. At this stage usually loyal customers make purchases. Marketing mix decisions include: product At maturity stage, companies add features and modify the product in order to compete in market and differentiate the product from competition. At this stage, it is best way to get dominance over competitors and increase market share. price Because of intense competition, at maturity stage, price is reduced in order to compete. It attracts the price conscious segment and retain the customers. Distribution New channels are added to face intense competition and incentives are offered to retailers to get shelf preference over competitors.
  7. Promotion Promotion is done in order to create product differentiation and loyalty. Incentives are also offered to attract more customers. 4.Decline stage 1. 2. 3. Decline in sales, change in trends and unfavorable economic conditions explains decline stage. At this stage market becomes saturated so sales declines. It may also be due technical obsolescence or customer taste has been changed. At decline stage company has three options: Maintain the product, Reduce cost and finding new uses of product. Harvest the product by reducing marketing cost and continue offering the product to loyal niche until zero profit. Discontinue the product when there's no profit or a successor is available. Selling out to competitors who want to keep the product. At declining stage, marketing mix decisions depends on company's strategy. For example, if company want to harvest, the product will remain same and price will be reduced. In case of liquidation, supply will be reduced dramatically. Limitations of Product Life Cycle (PLC) Product life cycle is criticized that it has no empirical support and it is not fruitful in special cases. Different products have different properties so their life cycle also vary. It shows thatproduct life cycle is not best tool to predict the sales. Sometimes managerial decisions affect the life of products in this case Product Life Cycle is not playing any role. product life cycle is very fruitful for larger firms and corporations but it is not hundred percent accurate tool to predict the life cycle and sales of products in all the situations. Types of Pricing Strategy Pricing Definition Strategy Example
  8. Penetration Pricing Skimming Pricing Competition Pricing Product Line Pricing Bundle Pricing Here the organisation sets a low price A television satellite company sets a low to increase sales and market share. price to get subscribers then increases Once market share has been captured the price as their customer base the firm may well then increase their increases. price. The organisation sets an initial high A games console company reduces the price and then slowly lowers the price price of their console over 5 years, to make the product available to a charging a premium at launch and lowest wider market. The objective is to skim profits of the market layer by layer. Setting a price in comparison with competitors. Really a firm has three options and these are to price lower, price the same or price higher Pricing different products within the same product range at different price points. The organization bundles a group of products at a reduced price. Common methods are buy one and get one free promotions or BOGOF's as they are now known. Within the UK some firms are now moving into the realms price near the end of its life cycle. Some firms offer a price matching service to match what their competitors are offering. An example would be a DVD manufacturer offering different DVD recorders with different features at different prices eg A HD and non HD version.. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximising turnover and profits. This strategy is very popular with supermarkets who often offer BOGOF strategies. of buy one get two free can we call this BOGTF i wonder? The seller will therefore charge 99p instead El or $199 instead of $200. The reason why this methods work, is The seller here will consider the Psychological because buyers will still say they psychology of price and the positioning Pricing purchased their product under €200 of price within the market place pounds or dollars, even thought it was a pound or dollar away. My favourite pricing strategy.
  9. Premium Pricing Optional Pricing Cost Based Pricing Cost Plus Pricing The price set is high to reflect the exclusiveness of the product. The organisation sells optional extras along with the product to maximise its turnover. T An example of products using this strategy would be Harrods, first class airline services, Porsche etc. This strategy is used commonly within the car industry as i found out when purchasing my car. If a firm operates in a very volatile The firms takes into account the cost of industry, where costs are changing production and distribution, they then regularly no set price can be set, decide on a mark up which they would therefore the firm will decide on their like for profit to come to their final mark up to confirm their pricing pricing decision. decision. For example it may cost €100 to produce Here the firm add a percentage to costs a widget and the firm add 20% as a as profit margin to come to their final profit margin so the selling price would pricing decisions. be €120.00

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