Chapter 5

Elements of the marketing mix

 Learning objectives
5.1 explain the elements of the marketing mix
5.2 define ‘product’, and understand product
classification, product differentiation and branding
5.3 understand the concept of price and customer value
perceptions
5.4 understand the integrated marketing
communications (IMC) approach to marketing
promotion and the major elements of the promotion
mix
 Learning objectives
5.5 understand the concept of place and how
distribution channels connect producers and
consumers
5.6 describe how to develop and manage an effective
marketing mix based on the unique characteristics of
services.
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.
Figure 5.1
 Product relationships
Product item
•A particular 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.
 Branding
• 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.

• Trade mark
A brand name or brand mark that has been legally registered
so as to secure exclusive use of the brand.
 Branding
• 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 Table 5.2
Managing customers’ perception of
value and price ……… Table 5.1
 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 take into account 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
Figure 5.3
channel and intermediaries
5 Consumer product distribution
channels
Channel 1

Channel 2

Channel 3

Channel 4

Channel 5
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 of 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 as a means 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.
The end