Chapter5/Week5 – Elements of the Marketing Mix

Overview
Chapter 5 is our last marketing chapter whereby we examine key components of the Marketing Mix -
Product, Price, Promotion and Place, as well as People, Price and Physical evidence. Do Entrepreneurs
apply Innovation & Creativity when creating, communicating and delivering Products?  A BIG Yes!

Be it in the way Product are designed, their added features, ...etc, in their Pricing strategies e.g. offering

discounts, delayed payments’. Etc in their Promotion effort e.g. create an enticing TV commercial, or
YouTube strategy or in their Place effort such as their retail store and with their Service elements
of People, Process and Physical Evidence.

We conclude this part of our Textbook journey from chapter 1 to 5 by demonstrating a story with a
theme based on Innovation and Creativity needs Marketing and Marketing needs Innovation and
Creativity.

Chapter 5 Learning Objectives:

LO 5.1 - Explain the elements of the marketing mix
LO 5.2 - Define 'Product', and understand product classification, product differentiation and branding
LO 5.3 - Understand the concept of price and customer perception of value
LO 5.4 - Understand the integrated marketing communications (IMC) approach to marketing promotion
and the major elements of the promotion mix
LO 5.5 - Understand the concept of place and how distribution channels connect producers and consumers
LO 5.6 - Describe how to develop and manage an effective marketing mix based on the unique
characteristics of services
Course Learning Outcome 'CLO':
CLO 3 Critical Thinking: Think Critically
3.1 Identify logical connections and use of evidence in well-formulated ideas and arguments

LO 5.1 Explain the elements of the marketing mix - The 4Ps & 7Ps

A set of variables that a marketer can exercise control over in creating an offering for exchange.
Traditionally The 4 Ps:

PLUS: people, process, physical evidence = (7Ps)

Remember*** That Marketing, whatever marketing mix framework (4Ps, 7Ps) you apply or consider, is
ultimately about a total focus on servicing the needs and wants of the target market.

LO 5.2 Product
Product: can be a good, service or idea offered to the market for exchange.
• Good: a physical (tangible) offering capable of being delivered to a customer, e.g. Fridge.
• Service: intangible offering that does not involve ownership, e.g. a taxi ride.
 • Idea: concept, issue or philosophy offered to the market, e.g. ‘Clean up Australia Day’.

Total Product Concept

Total Product Concept - Describes the 4 levels; core product, expected product, augmented product and
potential product in order to analyse how the product creates value for the customer.

Product Relationships
Product item
• A version of a product.
Product line
• A set of product items related by characteristics such as end use, target market,
technology or raw materials.
Product mix
• The set of all products that an organisation makes available to customers.

Product Classifications
1- Consumer products: Purchased by households and
individuals for their own private consumption.
2- Business-to-business products: Purchased by
individuals and organisations for use in the
production of other products or for use in their daily
business operations.

Consumer Product
1- Shopping products: moderate to high engagement in the decision-making process, with the purchase
decision based on features, quality and price. Clothing, camera…
2- Convenience products (fast-moving consumer goods): Inexpensive, frequently purchased, products
bought with little engagement in the decision-making process. Milk, magazine…...
3- Specialty products: Highly desired products with unique characteristics that consumers will make
considerable effort to obtain. Car - BMW, overseas holiday….
4- Unsought products: To meet a sudden, unexpected need.

Product Differentiation
-The creation of products and product attributes that distinguish one product from another.
-Characteristics that customers may perceive to be differentiators include design, brand, image, style,
quality, features and price.

Branding
• Brand
A collection of symbols such as a name, logo, slogan and design intended to create an image in the
customer’s mind that differentiates a product from competitors’ products.
• Brand image
The set of beliefs that a consumer has regarding a particular brand.
• Brand name
Part of a brand that can be spoken, including words, letters and numbers.
• Brand mark
The part of a brand not made up of words — it often consists of symbols or designs.
• Trademark
A brand name or brand mark that has been legally registered so as to secure exclusive use of the brand.
• Brand equity
Added value that a brand gives a product.
• Brand loyalty
Customer’s highly favourable attitude and purchasing behaviour towards a brand.
• Brand metrics
Measure the value of brands and include brand assets, stock price analysis, replacement cost, brand
attributes, and brand loyalty.

LO 5.3 Price

• Price is a measure of value for buyers and sellers

• Sellers need prices to cover their costs (short and long term) and to provide sufficient returns to
justify the risk of business and invested capital.
• Buyers need prices that reflect what they think the product is worth and what they can pay.
• Prices generally need to appeal to target customers, yield acceptable profit margins and provide a
competitive market offer.

The Psychology of Pricing

• Consumer purchasing behaviour is usually based on a rational evaluation of value.

• The relative importance of price varies between individual customers, market segments
and product categories.
• Perceptions of price also vary with time, especially over economic cycles between booms
and recession.

Managing Customers’ Perception of Value and Price

Customer Value Perceptions

• Internal reference price: The price expected by consumers, largely based upon their
actual experience with the product.
• External reference price: A price comparison provided by the manufacturer or retailer.
• Buyers sensitivity to price fall into three categories; value-conscious, price-conscious,
prestige-sensitive.
• Product-line pricing: An approach to pricing that sets prices for groups of products in a
product line rather than for individual products.

LO 5.4 Promotion
• Promotion
Is the creation and maintenance of communication with target markets. Comprises a strategic mix of
advertising, Public relation, sales promotion and personal selling.
• Marketing communication
A term for promotion that refers to communicating a message to the marketplace.

Integrated marketing communications (IMC)

 • Integrated marketing communications (IMC)
The coordination of promotional efforts to maximise the communication effect.
• Promotion mix
⁻ Combinations of methods used to promote a product or idea
⁻ The four main elements of a promotion mix are:
⁻ advertising
⁻ public relations
⁻ sales promotion
⁻ personal selling
Advertising
• The transmission of paid messages about an organisation, brand or product to a mass
audience.
• Worth over $12 billion/year in Australia
• Benefits: Reaches many people at relatively low cost per person
• Limitation: Difficult to measure effectiveness

Public Relations
• Communications aimed at creating and maintaining relationships between the marketing
organisation and its stakeholders.
• Effective PR messages are timely, engaging, accurate and in the public interest.
• Benefits: Credibility, resulting word-of-mouth, low- or no-cost, effectively combat
negative perceptions or events.

Sales Promotion
• Offers of extra value to resellers, salespeople and consumers in a bid to increase sales.
• Used irregularly to smooth demand
• Rewards the sale of company’s products
• Limitations: Can lose effectiveness if overused, easily copied, public becoming
increasingly cynical about whether they offer real value.

Personal Selling
• Personal communication efforts that seek to persuade consumers to buy products.
• Expensive, high-involvement or industrial products favour personal selling
• Benefits: Can be specifically tailored to individuals, so has greater influence than
advertising, sales promotions and PR strategies.
• Limitations: Expensive, limited reach, labour intensive, time-consuming.

Integrating Promotion Mix Elements

• Marketing organisations have different promotional needs and finite financial and other
resources, so must choose from options in the promotion mix.
• Those with large promotion budgets usually use multiple strategies.
• Small budgets will rely on fewer, simpler strategies.
• Best promotion mix will change over time.

Push and Pull Policies

• Push policy - A product is promoted to the next organisation down the distribution channel. E.g.
Producer promotes its product to wholesaler. Generally, B2B
• Pull policy- A product is promoted by the producer directly to consumers to create demand to
‘pull’ goods through the marketing channel. Generally, B2C.

LO 5.5 Place
• Marketing intermediaries are individuals or organisations that act in the distribution
chain between the producer and the end user (e.g. industrial buyers, wholesalers, agents
and brokers and retailers).
 • The distribution channel involves a group of individuals and organisations directing
products from producers to end users.

Market Coverage strategies

• Market coverage decisions consider the nature of the product and the target market. Generally,
marketers will choose from:
• intensive distribution which distributes products via every suitable intermediary
• exclusive distribution which distributes products through a single intermediary for any
given geographic region
• selective distribution which distributes products through intermediaries chosen for some
specific reason.

Benefits of using distribution channel and intermediaries

5 Consumer product distribution channels

LO 5.6 The services marketing mix

• Combined with the traditional 4 Ps of the marketing mix, People, Process & Physical
evidence make up the 7 Ps marketing framework, also known as the ‘Extended services
marketing mix’.
• Focus on ‘the delivery of the promise’.
• Heavy focus on the People who deliver the service.
4 Characteristics that distinguish services from goods
1- Intangibility
2- Inseparability
3- Heterogeneity
(variability)
4- Perishability

People
Create and deliver the service and affect value for the customer as they are directly involved in the service
experience.
Staff is the most controllable factor in service delivery. Must choose staff who are:
- technically competent
- deliver high standards of service
- promote products through personal selling.

Process
• All the systems and procedures used to create, communicate, deliver and exchange an
offering that exceeds the customer’s expectation.
• Functional expectations: Expectations of the technical delivery of the service transaction
• Customer service expectations: Relate to the service experience.

Physical Evidence
• Tangible cues that can be used to evaluate service quality prior to purchase.
• The physical environment includes architectural design, floor layout, furniture, décor,
shop or office fittings, colours, background music and even smell.