Here are my notes
DESIGNING AN EFFECTIVE MARKETING MIX
The main influences on the marketing mix are considered, focusing on finance, technology and market research.
The marketing mix refers to all those element of marketing which help to meet identified customer needs. It is the combination of price, product, promotion and place that a business uses to meet the needs of its customers and implement a marketing strategy.
This refers to the features and functions of the product or service being offered. If a product has a USP, it means that one of these features or functions is not available anywhere else. The development of new or existing products should be based on market research which has identified the needs of consumers in the markets.
Promotion concerns communication with consumers. A new product could meet all needs of consumers, as identified in primary market research but unless the consumers are aware of the product it will not be purchased. Promotion is more than just advertising, it include other techniques to communicate and inform the market.
This is where the purchase can be made by the consumer. Traditionally retail outlets or catalogues but today, with the growth of e-commerce, an increasing number of purchases are made through the internet (both for B2C and B2B)
This refers to how much the customers are expected to pay for the products or services. The price gives an indication of the USP, quality of the product but also indicates where the product is sold in a competitive market.
PACKAGING AND PEOPLE
Often identified as important elements of any marketing mix because of their role in the buying decision.
For the launch of a product to be effective, all the elements of the marketing mix need to work well together to make sure the message is clear.
There are other factors which also need to be considered to make sure that marketing is integrated with other functions of the business.
The key question to ask is: how much money is available to spend on marketing? A multinational will have a large department will billions of pounds to spend, whereas small businesses may have a very limited marketing budget. The effectiveness of the marketing campaign is not always related to the size of the budget.
+ Cash flow – businesses with cash flow problem are likely to limit their advertising spend or may encourage business to reduce their prices to increase sales.
+ Discounts – large businesses are likely to benefit from economies of scale.
+ Cost effectiveness – some firms will look at the cost per thousand (CPT). A promotional campaign costing £60,000 and reaching 600,000 people would have a CPT of 10p per consumer.
This has had a significant impact over recent years with the internet and new computer software. It allows small firms to compete with larger organisations by being present (place) all over the world. It also allows firms to keep their costs low (no need for high street shops) and therefore reduces their prices. Mobile technology also helps to improve communication with customers.
Market research provides information to a business, which helps it to adapt its marketing mix on order to gain an advantage. Factors to consider are:
+ Consumer opinions
+ Market segments
+ Availability of substitutes
+ Niche or mass marketing
In a competitive market, firms must be able to react quickly to changes in consumer tastes but also to the actions of their competitors. This may involve changing pricing strategy, changing a feature of the product or even amending the advertising material.
MARKETING MIX – PROMOTION
Promotion is the element of the marketing mix concerned with ensuring that customers and potential customers are aware of the current and new products in a firms range. This should lead to an increase in sales.
Other aims of promotion tend to be:
+ To persuade people that one product is better than another
+ To remind people that the product is still available (maturity stage of PLC)
+ To raise the brand image of a firm
These are offers designed to increase short-term sales by giving consumers incentives to purchase one product or service rather than another. They will hopefully lead to longer-term loyalty.
+ Money-off-vouchers / discounts / loyalty cards / BOGOF
+ Competitions with prizes
+ Endorsements from respected personalities
+ Free gifts offers
Personal selling (face to face in shops, in the home or through catalogue). Use in B2B markets through sales representatives.
+ Product can be fully explained and questions answered
+ Feedback can be gathered directly
+ Can be expensive to employ a sales team
+ Some customers will dislike “cold callers”
Direct mailing (often referred to as “junk mail”) can be very successful for new and small businesses because of its lower costs (no need for a sales team)
This is the visual presentation of a product to consumers at the point of sales. It attracts the customers to buy a particular product in a shop. It is often targeted impulse buyers and uses techniques such as quality displays, full shelves, effective lighting and colours.
Advertising can be either persuasive (trying to convince consumers) or informative (raising awareness by providing details about a product).
There are advantages and disadvantages to every type of advertising, but remember that not all methods are suitable for smaller businesses. The key factors to consider are:
+ The audience
+ Competitors’ actions
+ The law
+ Impact (sight, sound, motion)
+ Reach (measure how many people are exposed to it – national campaigns offer very high audiences)
+ Attention (when watching TV, the audience is captive and can absorb the information better)
+ High total costs
+ Clutter (too many channels and too many adverts can create an information overload for the viewers)
+ Low costs
+ Selectivity (provides access to specific target audiences)
+ Geographic segmentation (local radio for local businesses)
+ Single sense (only through hearing – limited creative impact)
+ Attention (radio often played in the background with low attention given to its contents)
+ Impact (size, colour, movement and sound from the big screen makes the impact second to none)
+ Control (unlike the TV audience has no control over the volume or the channels)
+ Audience size limited
+ Youth bias
+ Broad, targeted coverage – wide yet targeted coverage of customer groups
+ Permanence – magazine or newspapers can be read many times by many people
+ Responsive – coupons for direct response or telephone enquiry
+ Limited impact – readership may not be very high and the quality of the reproduction might also be poor compared to other medias
+ Fragmentation – the diversity of the press makes it harder for companies to select one magazine or newspaper
Posters / billboards:
+ Repeat exposure – exposed to the same message several times (bus stop every morning)
+ Low costs – low production and design cost
+ Low competition – sites are away from each others
+ Supportive – used to support other media
+ Creative limitations
+ Unselective – hard to target specific audiences
+ Access – tobacco and drink companies have long term rent agreement with many sites.
+ Relatively inexpensive to set up
+ Visitors to websites can be tracked to provide market information
+ Potential to reach a worldwide audience
+ Can be very creative
+ Often ignored because of junk mail
PR’s aim is to increase sales by enhancing the reputation of the business ad make sure that people have a good opinion of the organisation. This can be achieved through:
+ Press releases
+ Launch parties
+ Editorial features
+ Media events
+ Charity support
+ Sponsorship and competitions
It is the process of differentiating a product of service from its competitors through the names, sign, symbol, design or slogan linked to that of its product / service. Successful branding adds value to the business and helps to create brand loyalty. A small business with a good reputation can use its brand to support the launch of new products. Large companies like Coca-Cola can use their powerful brand when launching new drinks.
THE PROMOTIONAL MIX
All businesses will use a combination of these methods to make up the promotional element of the marketing mix. This is called the promotional mix and the combination chosen will depend on a number of factors, which could include the following:
+ Target market
+ The products (stage in the PLC)
+ Legal factors (alcohol)
+ External factors
MARKETING MIX – PRICE
Pricing strategies are the way in which a company plans to price a product for the medium to long-term future.
Price tactics are short-term measures which are introduced in response to particular issues or problems.
Price discrimination – when a company sells its product at different prices to different groups of consumers. E.g. rail tickets on/off peak. It allows companies to respond quickly to changes in demand. If demand is high at a particular time, prices rise.
Price leader – an existing brand that’s in such a powerful position within the market that it sets the price, and other businesses follow.
Price taker – in very competitive markets, buyers dictate the price, and sellers have to take whatever price the buyer is willing to pay. E.g. milk producers selling to supermarkets.
Predatory pricing – when a business deliberately lowers prices to force another business out of the market.
Competitive pricing – when companies monitor their competitors’ prices to make sure that their own prices are set at an equal or lower level.
Psychological pricing – bases the price on customers’ expectations about what to pay. E.g. a high price may make people think that the product is high quality, and £99.99 seems better than £100.
Loss leaders – products sold at or below cost price. These products may well lose money, but the idea is that they’ll make a profit for the business indirectly anyway.
Skimming/creaming – new/innovative products are often sold at high prices when they first reach the market. Prices are then dropped when the product has been on the market a year or so.
Penetration pricing – launching a product at a low price in order to attract customers and gain market share.
Several factors affect demand for a product:
+ Competitors’ prices
+ Customer income
Price elasticity of demand shows how demand changes with price.
Price elastic products have a large percentage change in demand for a small percentage change in price.
Price inelastic products are the opposite – there’s a small percentage change in demand for a big percentage change in price.
Price elasticity of demand = % change in demand / % change in price
The answer is always negative so ignore the minus sign.
If it is greater than 1 the product is elastic
If it is less than 1 the product is inelastic
Price elasticity affects revenue and profit
If demand is price elastic, a price increase will make sales revenue go down.
If demand is inelastic, a rise in price will make revenue go up.
It can be hard to work out price elasticity of demand because price isn’t the only thing affecting demand. E.g. an increase in demand for ice-cream could be partly down to hot weather and a good advertising campaign.
Price elasticity of demand depends on ease of switching brands. If a consumer can easily switch to a competitor product, the demand will be price elastic.
Product types tend to be price inelastic, but individual brands tend to be price elastic. E.g. petrol sales are inelastic because all cars need petrol. However, the sales of an individual company’s petrol are elastic because motorists can easily go to a cheaper filling station.
Income elasticity of demand
When people earn more money there’s more demand for some products.
Income elasticity of demand = % change in demand / % change in real incomes
Normal goods have a positive income elasticity of demand that’s less than 1. This means that as income rises, the demand for normal goods rises – but at a slower rate than the increase in income.
Luxury goods have a positive income elasticity of demand which is more than 1. This means that the demand for luxury goods grows faster than the increase in income.
Value goods have a negative income elasticity of demand – demand falls when income rises, demand rises when income falls.
MARKETING MIX – PRODUCT
A product can be any one of 4 things:
- People (football players, politicians, pop stars)
Different products will needs different marketing strategies.
- Chocolate bar: wrapping might be important
- Computer: performance is essential
ELEMENTS OF A SUCCESSFUL PRODUCT
+ Appearance: how do the consumers view the product? It includes the colour, design
+ Functions / convenience of use
+ Financial factors
+ Reliability / durability
THE PRODUCT DEVELOPMENT PROCESS
Creativity > Defining the concept > Developing the concept > Testing and finalising the concept > Full product launch > Managing the product cycle
Product development will be influenced by various factors:
+ Advances in technology
+ The actions of competitors
+ The entrepreneurial skills of managers / owners
+ The finance available
WHAT THE PRODUCT MEANS TO THE CUSTOMER
Products provide both tangible benefits and intangible benefits
- Tangible benefits: measurable (car industry – performance, comfort)
- Intangible benefits: cannot be measured (pleasure – satisfaction – peace of mind) e.g. Haagen Daas’s advertising is based on the image / brand and not on the nutritional aspects
Tangible goods are often further sub-divided
- Durable goods: goods that survive many uses and are not replaced frequently. “White goods”, “Brown goods”
- Non-durable: consumed within a short period of time (FMCG)
THE USP AND PRODUCT DIFFERENTIATION
Product development is also important because it helps businesses create USP or at least product differentiation. It is very important for businesses to be competitive and convince customers to distinguish between products.
MAKING THE PRODUCT FIT THE MARKET
A successful product will be designed to meet customer requirements. These requirements will have been identified through market research.
Businesses use market research to tailor their products to the customer’s requirements. It provides information on:
+ Who the customer is
+ How they decide on their purchases
+ What they expect / want from the products
+ Whether there is a gap in the market
Companies will also use market research to modify their products or produce new ones.
NEW PRODUCTS VS EXISTING PRODUCTS
New products give a competitive advantage and bring new customers
Existing products need regular modifications to remain competitive (design, performance, service level)
THE PRODUCT PORTFOLIO
Most firms have more than one product. The range of products and services is known as the product portfolio.
Because businesses plan for the future, they need to understand the position of the products in their markets. This is known as portfolio analysis.
The Boston Matrix shows the market share against the rate of growth within that market.
A product with high market share in a low growth market.
They operate in a mature market / slow growing. For example, Heinz has a 50% market share and generates high profits and cash because sales are high and the promotional costs per unit are low.
Also high brand awareness reduces the need for promotion and allow companies to invest in R&D for new products.
QUESTION MARK / PROBLEM CHILD
A product in a high growth market but with a low market share.
It may provide high profits in the future because the market is growing fast but it has insufficient market share for the time being. Problem child products need high level of investment to keep going. It includes high level of promotion.
A product with a high market share and a high market growth.
The product is very attractive and is selling well in a successful market. However, stars may need to fight their competitors with advertising campaigns to maintain their position.
A product with a low share of a low growth market.
Unless a firm can revive the product, there is no appeal to be in that category.
Once a company has identified the position of its product on the Boston Matrix, it can start to plan what to do next. There are 4 strategies involved.
1) Building – invest in promotion and distribution to boost sales
2) Holding – use marketing to maintain sales level (stars)
3) Milking – take whatever profit you can without much investment (cash cow)
4) Divesting – this involves selling off the product (dog)
The strategy chosen will depend on the position of the firm’s portfolio of products.
- Cash cow products will lead to new product development
- For problem child products the key is to become a star
- For dogs the key will be to invest in R&D or buy new brands
THE PRODUCT LIFE CYCLE
1) Product development
This is the stage when the organisation should have prepared a marketing plan. Initial investments in R&D are likely to be high with no return on investment at this stage. This will create a large negative cash flow
2) Launch / introduction
Sales = low
Cost per unit = high (no economies of scale)
Competitors = few (they will notice your product)
Product = one basic model
Promotion = build awareness
Distribution = limited
Price = skimming / penetration
Sales = growing rapidly
Cost per unit = falling (economies of scale)
Competitors = growing (copycat products)
Product = product modifications + improvements
Promotion = target new market segments (establish brand loyalty)
Distribution = growing number of outlets
Price = may keep penetrating or pushing price up
Sales = at their highest (slower growth)
Cost per unit = low
Competitors = high
Product = diversify (introduce new products)
Promotion = high level
Price = may use competitive pricing
Sales = falling
Cost per unit = low
Competitors = falling (substitutes appear)
Products = remove weaker items
Distribution = reduce unprofitable channels
Price = may increase to exploit loyal customer
6) Extension strategy
+ Redesign logo + Constant advertising targeted at different audiences
+ New packaging + Competitors / special offers on a reg
MARKETING MIX – PLACE
Place is the element of the marketing mix concerned with the distribution of the product to the purchaser, whether it is another business of the final consumer. The aim is to get the product to the right place at the right time.
An important part of “place” is making sure that you operate in the right location – this involves several elements:
+ Cost of access
+ Reputation (Covent garden – oxford street)
Market research into groceries indicates that 70% of buying decisions are made in-store and that a shopper is exposed to 1.6 pieces of in-stores marketing every second.
+ Similar products are placed together to allow comparisons
+ Fresh products such as fruits and vegetables are arranged to be attractive
+ Popular products are given greater shelf space
+ Impulse buys are placed by the tills where people are likely to queue
+ Special offers are scattered throughout the store to encourage shoppers to walk around the whole store
+ Complementary products are placed in close proximity
Stores often rearrange the layout of their shop to force customers to look around. This can have a negative effect and upset the shoppers.
The way the products are distributed depends on the types of customers. They can be local or international but also consumers or businesses.
Traditional = Producer >> Wholesaler >> Retailer >> Consumer
Modern = Producer >> Retailer >> Consumer
Direct = Producer >> Consumer
Traditional methods: Used by firms whose customers are geographically dispersed or who need to reduce the quantity sold in smaller units. This method is often used by large businesses supplying small businesses who cannot afford to buy large quantities of stock. The wholesaler will be used as an intermediary.
Direct methods: This allows businesses to reduce the number of people taking a cut of their sales. Methods can include:
+ Mail order
+ Direct selling
+ Internet / e-commerce
Business to business markets: Wholesaling is used by many small and medium sized businesses. It creates a link between manufacturers and retailers and it allows for goods to be brought in manageable quantities.
Businesses will take several factors into consideration when selecting the best outlets or distributors for their products:
+ Volume of sales
+ Marketing mix
+ Market coverage
+ Target market
There's probably spelling mistakes, but I hope this helps