Marketing mix: product and price

Chapter 12

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 Marketing mix
• Marketing mix means four marketing
decisions needed for the effective marketing
of a product like product,price,place and
promotion.
• In marketing the right product at right price
and right place and right promotion are very
important.

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 The four parts of marketing mix
• Product
• What to sell?
• Should they produce range of products or one
product?
• Is quality important?
• Which production method to use?
• Is after sales services needed?
• How to package the product?
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 Price
• What price to sell the product?
• Is the market competitive?
• Which pricing method will they use?
• Is the product demand elastic or inelastic?
• What are the differences between luxury
goods price and necessity goods price?
• What are the firms objectives?

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 Place
• Where it is sold?
• How to sell the products?
• Should the product be widely available or sell
in the few places?
• Which channel of distribution method should
they use?
• How about transportation cost and trade
barriers?
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 Promotion
• How much can they afford to spend on
promotion?
• How often to advertise?
• Where to advertise?
• What sales promotion methods to use?
• Should we use below the line or above the
line promotion?
• Who are we advertising to?
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 Importance of product
• Good design
• Attractive color
• Good features
• Nice packaging
• Must fit what customer want

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 Extension strategies that business use
• As the product reach declining stage they must use
extension strategies.
• That is
• Sell the product to new market
• Target different market segment
• Add new features to improve the product
• Change packages for good image
• Encourage customers to buy goods more often
• Producing new product to attract customers or modify
existing products
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 Product life cycle
• It is the stages of product that will pass
through from introduction to the end.
• Introduction- Sales are low. Loss in this stage
because advertising and promotion is
important to have product recognition.
• Growth- Sales rise quickly .Business start to
make profit as costs covered by sales.

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 continue
• Maturity- Sales are no longer growing or
falling. The most profitable stage in PLC.
• Decline- Sales and profits fall. Need to decide
whether to keep or stop the business.
• At declining stage they must use extension
strategies like target market or launching new
products or finding new markets etc.

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 Product life cycle and marketing mix
• Product-
• Introduction----produce simple model
• Growth- listen to feedback and change
according to test market
• Maturity- use extension strategies
• Decline- no need to change

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 Price
• Introduction- low if they have competitors but
high if they don’t have competitors
• Growth- Price can be increased similar to
competitors
• Maturity-Price can be decreased as
competitors produce similar products
• Decline- price reduced to sell off

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 Place
• Introduction- test market
• Growth- Wider places
• Maturity- continue to wider distribution
network
• Decline- can sell at profitable outlets only

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 Promotion
• Introduction- high promotion and advertising
• Growth- promotion activity is still high
• Maturity- promotion used for short period
• Decline-promotion for discount sales

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 Role of packaging
• To protect the product
• To provide information about product
• To attract customers
• To be safe
• To create uniqueness
• To boost brand image
• Repackaging can extend product life cycle

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 Benefits of new product development
• Benefits
• Meet customer needs
• Can gain competitors
• Increase sales, revenue and profit
• Economies of scale
• Spreading risk

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Costs of new product development
• Expensive for market research
• Need large expenditure
• No guarantee for success
• If business borrows money and there is no
success then business cannot survive

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 Brand Image
• A brand is a name given by business to its
products so that it can separate from
competitors brand.
• Benefits of good brand image are---
• Consumers recognize the product
• Consumers loyalty
• Firms increase sales and more profit
• Firms can sell with higher price
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 Pricing methods
• Market skimming
• Penetration pricing
• Cost-plus pricing
• Competitive pricing
• Promotional pricing

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 Why price is important
• Influence on consumers demand
• If product quality are same and price are
difference they will buy from lower price
sellers
• Some buy from high price sellers because of
high status or they think quality is good for
some products
• Products become scarce then price will rise

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 Price skimming
• Setting a high price for a new product that is
unique or very different from other products
• Maximize profits
• Benefits- High quality and can spend for
research and development cost
• Costs- Less demand for some buyers because
of high price and competitors enter the
market

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 Penetration pricing
• Setting a low price to attract customers to buy
new product
• When business build up customers they can
increase the price again same as competitors
• Benefits- increase market share
• Costs- loss of revenue for lower price and
sometimes cannot cover costs

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 Competitive pricing
• Setting a price similar to that of competitors
products
• Used for new products and existing products
• Benefits- Firms can produce best quality or
good customer services
• Costs- They need to find ways to gain
competitors or if there is a market leader the
price have to be followed

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 Cost-plus pricing
• Price is set by adding the cost and profit %.
• Retailers often use this method
• Benefit-Quick and easy to work out
• Cost- Price must set above all cost so
sometimes customers cannot afford to pay

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 Promotional pricing
• Give discount
• Buy one get one free
• 25% discount
• Loss leader pricing is used by retailers
• This method is used to create brand
awareness and customer loyalty
• Benefit- good to sell out-of-date good
• Costs- Profits may be lower
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 Choosing a pricing method
• Is it a new or existing product?
• Is the product unique?
• Is there a lot of competitor in the market?
• Does the business have well known brand
image?
• What are the marketing objectives increase
market share or maximize profit?
• What are the costs of making and selling the
products?
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 Price elasticity of demand
• It measures responsiveness of quantity
demanded to price changes.
• For elastic demand percentage change in
demand is greater than percentage change in
price
• For inelastic demand percentage change in
demand is less than percentage change in
price

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 For elastic demand
• Price increase and total revenue decrease
• Price decrease and total revenue increase
• For elastic demand
• Price increase less and quantity demand
decrease more so total revenue falls
• Price decrease less and quantity demand
increase more so total revenue increase

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 For inelastic demand
• Price increase and total revenue increase
• Price decrease and total revenue decrease
• For inelastic demand
• Price increase more and quantity demand
decrease less so total revenue increase
• Price decrease more and quantity demand
increase less so total revenue decrease

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end

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