The Marketing Mix

The Marketing Mix

Product
CHARACTERISTICS
Primary characteristics (Standard)
Core benefits: in common with its competitors
Auxiliary characteristics (Optional)
features and benefits: unique to the product.
LEVELS OF PRODUCT
The core product benefits;
The actual product benefits;
The augmented product benefits.

Introduction phase:
- The products sales grow slowly
- The profit is small or negative
The growth stage:
- Sales increases rapidly
- Profits begin to grow, but
- Competition enters the market
The maturity phase:
- The promotional spend eases off
- Production economies of scale become
established
- Competitors have entered the market
The decline phase:
- The product is losing market share and
profitability rapidly.
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Question Marks

High growth, low share
Build into Stars or phase out
Require cash to hold
market share

Stars

High growth & share
Profit potential
May need heavy
investment to grow
Cash Cows

Low growth, high share
Established, successful
SBUs
Produce cash


Dogs

Low growth & share
Low profit potential
Relative Market Share
High Low
M
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G
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R
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H
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Analyzing Current SBUs:
Boston Consulting Group Approach
?
Product
Methods used to
improve/differentiate
the product and increase
sales or target sales more
effectively to gain
a competitive advantage e.g.
Extension strategies
Specialised versions
New editions
Improvements real or
otherwise!
Changed packaging
Technology, etc.

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Price
Setting Initial Product Prices







Market Skimming












Market Penetration
> Setting a High Price for
a New Product to Skim
Maximum Revenues
from the Target Market.
> Results in Fewer, More
Profitable Sales.
> Intels $1,000 Chip
> Setting a Low Price for
a New Product in Order
to Attract a Large
Number of Buyers.
> Results in a Larger
Market Share.
> Wal-mart

Minimizes
Price
Competition

What is Cost-Plus Pricing and Why
is it Popular?
Perceived
Fairness to
Both Buyers
and Sellers



Sellers Are More
Certain About
Costs Than
Demand


Adding a Standard Markup to the Cost of the Product.
Types of Cost Factors that
Affect Pricing Decisions

Total Costs
Sum of the Fixed and Variable Costs for a Given
Level of Production

Variable Costs

Costs that do vary
directly with the
level of production.

Raw materials

Fixed Costs
(Overhead)
Costs that dont
vary with sales or
production levels.

Executive Salaries
Rent

Product Line Pricing
Setting Price Steps
Between Product Line Items
i.e. Lawnmowers at $299 & $399
Optional-Product Pricing
Pricing Optional or Accessory Products
Sold With The Main Product
i.e. Car Options such as a CD player
Captive-Product Pricing
Pricing Products That Must Be
Used Along With The Main Product
i.e. Razor Blades, Film, Software
By-Product Pricing
Pricing Low-Value By-Products To
Get Rid of Them
i.e. From Chemicals, Lumber Mills, Zoos
Product-Bundle Pricing
Bundles Of Products Sold
Together at a Reduced Price
i.e. Season Tickets, Computer Makers
Product Mix Pricing Strategies
Product
Mix
Pricing
Strategies
Price-Adjustment Strategies
Adjusting Prices for
Psychological Effect.
Price Used as a Quality
Indicator.
Reference Prices i.e.
Clothing.

Temporarily Reducing Prices
to Increase Short-Run Sales.
i.e. Loss Leaders, for
Special-Events, Cash Rebates
Psychological Pricing
Promotional Pricing
Price
Pricing Strategy
Importance of:
knowing the market
elasticity
keeping an eye
on rivals
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Price Elasticity of Demand
P
r
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c
e

Quantity Demanded per Period
A. Inelastic Demand -
Demand Hardly Changes With
a Small Change in Price.
P
2
P
1
Q
1
Q
2
P
r
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e

Quantity Demanded per Period
P
2
P
1
Q
1
Q
2
B. Elastic Demand -
Demand Changes Greatly With
a Small Change in Price.
Promotion
14-22
The Promotion Mix
The promotion mix is the specific blend of advertising,
sales promotion, public relations, personal selling, and
direct-marketing tools that the company uses to
persuasively communicate customer value and build
customer relationships.
Major Promotion Tools
Advertising
Sales promotion
Public relations
Personal selling
Direct marketing
14-23
The Promotion Mix
Major Promotion Tools: Advertising
Advertising is any paid form of non-personal
presentation and promotion of ideas, goods, or services
by an identified sponsor.
Broadcast
Print
Internet
Outdoor
14-24
The Promotion Mix
Major Promotion Tools: Sales promotion
Sales promotion is the short-term incentives to
encourage the purchase or sale of a product or service.
Discounts
Coupons
Displays
Demonstrations
Samples
Cash refund
Price packs
Premium

14-25
The Promotion Mix
Major Promotion Tools: Public relations
Public relations involves building good relations with
the companys various publics by obtaining favorable
publicity, building up a good corporate image, and
handling or heading off unfavorable rumors, stories, and
events.
Publicity - Press releases
Sponsorships
Special events
Web pages

14-26
The Promotion Mix
Major Promotion Tools: Personal selling
Personal selling is the personal presentation by the
firms sales force for the purpose of making sales and
building customer relationships.
Sales presentations
Trade shows
Incentive programs
14-27
The Promotion Mix
Major Promotion Tools: Direct marketing
Direct marketing involves making direct connections
with carefully targeted individual consumers to both
obtain an immediate response and cultivate lasting
customer relationships by using direct mail,
telephone, direct-response television, e-mail, and the
Internet to communicate directly with specific
consumers.
Catalog
Telemarketing
Kiosks
Direct mail
Promotion
Strategies
to make the consumer
aware of the
existence of a product
or service
NOT just advertising

14-29
Promotion Mix Strategies
Push strategy involves pushing the product
to the consumers by inducing channel
members to carry the product and promote it
to final consumers.
Used by B2B companies

14-30
Promotion Mix Strategies
Pull strategy is when the producer directs its
marketing activities toward the final
consumers to induce them to buy the product
and create demand from channel members.
Used by B2C companies
Place
Place
The means by which products and services
get from producer
to consumer and where they can be
accessed by the consumer
The more places to buy the product and the
easier it is made to buy it, the better for the
business (and the consumer?)

33
Wholesaler Jobber Retailer Consumer

Consumer
Retailer Consumer

Producer
0-level channel Direct
Wholesaler Retailer Consumer

Producer
2-level channel
Producer
3-level channel
1-level channel
Producer
Number of Channel Levels
Channel Level - Each Layer of Marketing Intermediaries that Perform
Some Work in Bringing the Product and its Ownership Closer to the Final
Buyer.


2-37
SWOT is an acronym for strengths,
weaknesses, opportunities, and threats

A SWOT analysis is a method of
studying organizational resources and
capabilities to assess the firms
strengths and weaknesses and
scanning its environment to identify
opportunities and threats
2-38
SWOT
Analysis