Knowt
The marketing mix
a model to help firms develop an effective marketing strategy
+4Ps:
Product - the design mix
Promotion
Place - distribution method
Price
Product:
economic manufacture combined with the overall design of a product
needs to take into consideration social trends:
→ the ways society as a whole behaves and the values that determine that behaviour
e.g., health issues, being environmentally healthy, ethical sourcing, waste minimisation, scarce resource depletion (sustainability)
4Rs:
rethink - consider need vs want
reuse - buy second-hand
recycle - become materials for new products
recover - energy from waste
landfill - materials are buried
basic ethical sourcing principles:
creating opportunities for economically disadvantaged producers
integrity
capability building
fair payments
working conditions
gender equality + children’s rights
the environment
Benefits of adapting the product to meet social trends:
benefits to firms:
cuts back on costs
stands up to competition
wider audience
benefits to consumers:
healthier/more sustainable etc
confidence + trust in products
cheaper prices
range in what you can buy
Promotion:
the part of the marketing mix that focuses on persuading people to buy the product
branding - the skill of giving a product its distinctiveness
brand names - create an identity for products and highlight the ways they are different from competition
brand loyalty - refers to the way how customers will make many repeat purchases
types of branding:
individual brands (e.g., Unilever has Marmite)
umbrella (family brands) (e.g., Cadbury)
corporate brand (e.g., Nestle)
own label brand (e.g., Waitrose economy)
personal brand (e.g., the Beckenham’s)
objectives of promotion:
to tell customers about a new product
remind customers about an existing product
research a widely dispersed target audience
to show consumers that rival products aren’t as good
to persuade potential customers to buy it
to improve and develop brand image
types of promotion:
advertising
celebrity endorsements
sponsorship/donations
logo
press releases/events/donations
below the line
BOGOF
displays
gift cards/loyalty cards
competitions
The type of promotion that is best, will rely upon:
price range - budget availability
target demographic
product
legal requirements
competition
advertising:
Television adverts (3 types)
informative advertising - features of the product
main aim: designed to increase awareness of a product by focusing on the features of the product
persuasive advertising - better than the competition
main aim: adverts designed to put pressure on a customer often to buy their product rather than the competition’s, often appeals to emotions
reassuring advertising - existing customers bought the right choice
main aim: adverts aimed at existing customers and that they were right to buy the product
+ seen by large numbers of people
+ a quick way of reaching out to potential customers in a given area
+ informs and persuades so as to increase sales
+ can be tailored to suit the needs and size of the market
- with so much advertising about, it can be difficult for an advert to get noticed
- can be very expensive
- no way to assess how many people saw it/reacted to it
- many fast forward through the adverts, as so much is no longer live
Digital promotion
Facebook pages, online advertising, advergaming, social marketing, viral marketing
main aim: aimed to attract customers from online users
+ it is cheap and has the potential to reach a large number of people
+ the internet never sleeps so reaches potential customers at all times all over the world
+ once started a campaign can develop a life of its own without any need for the firm to be involved
- there is a lot of competition
- customers can easily ignore it - scroll past/skip
Sales promotions
gifts, coupons, BOGOF, loyalty cards, competitions
main aim: to increase sales by making the product cheaper
+ tempt customers to buy now and so save money
+ hopefully leads consumers to ignore rival more expensive options
+ some offers will develop customer loyalty
- some customers will take advantage of the cheap offer and stock up, leading to reduced profit margin for the firm
Public relations
press releases, press conferences, sponsorship, donations
main aim: to increase sales by improving the company’s image
+ reaches a wide range of people
+ enhances a firm’s reputation leading to greater sales or customer loyalty
- can be expensive
- no guarantee it will have any effect on customers
- sponsorships etc can backfire
Merchandising and packaging
product layout, display material, well-stocked shelves, nice looking store, mood lighting and music etc
main aim: to increase sales by making the product eye catching
+ placing products by the checkout increases compulsive buys
+ can often be cheap as all you are doing is moving merchandise around
+ enhances the shopping experience so can build customer loyalty
- designing new packaging can take time and expense
Direct mailing and direct selling
cold calling
main aim: creates direct contact between the salesperson and the customer
+ message can be adapted to suit the customer and any queries can be handled so increasing the success rate
- people dislike cold callers which can damage the firm’s reputation
- can be very costly to employ and train a skilled sales force
Exhibitions and trade fares
main aim: enables the firm to do face-to-face sales to both commercial buyers and consumers
+ products can be tested out on consumers before a full launch
+ products can be demonstrated and questions answered
+ often attracts media interest which gives free advertising
- can be expensive
- if don’t have skilled staff can result in few sales
reasons to create a recognisable brand:
USP → recognition → build reputation → brand loyalty
be able to sell the brand (if you create a good one)
help to make them stand out in markets
create an image suitable for target demographic
stand out in the market
USP
enable them to charge a higher price
brand loyalty leads to:
trust
habit purchasing
easier when shopping, knowing you can trust the company for quality
identify with brand/image (status symbol) (like what the brand says about them)
social trends:
traditional advertising is dead
the way forward is:
social media
viral marketing
emotional branding
Place:
distribution - getting products to the right place at the right time for consumers
it is so important because:
it can be the biggest barrier to entry for a new firm
can’t sell anything if you can’t get the product from A to B
a distribution channel is the route taken by the product as it moves from the producer to the consumer
choosing the right channel depends on:
the nature of the product
the market
the nature and size of the firm
distribution channels:
2 stage distribution channel (producer → customer)
+ allows to sell at higher price
+ you can keep all profits
- lower customer base
- you have to pay for storage (+delivery if online)
- more expensive for customer may steer them away
3 stage distribution channel (producer → retailer → customer) RETAILER IN CONTROL
+ allows to spread product further
+ trustworthy retailer makes customers feel product is trustworthy
- can be very expensive to pay retailer
3 stage distribution channel (producer → retailer → customer) PRODUCER IN CONTROL
+ no storage costs
+ don’t have to worry about making sales → can focus more on the product
- if the retailers are rude etc, it ruins the firm’s reputation
4 stage distribution channel (producer → wholesaler → retailer → customer)
+ don’t need storage (no storage costs)
+ able to focus on the products
+ paying for wholesaler expertise in managing and selling product
- have to rely on the wholesaler to distribute goods
- less profit
Price:
price x quantity = revenue
revenue - costs = profit
4 main pricing types:
cost plus pricing
competitive pricing
psychological pricing
predatory pricing
cost + % mark up = price
is simple but doesn’t take into account the competition (focus on product vs competition)
often used in the food industry and retail stores
setting prices in line with or slightly below the competition
ideal in a highly competitive market, often high volume, low margin, but it costs money; you need to undertake research
often used in the supermarket industry, cars, phones, holidays, airlines
setting a price designed to put notions of value/exclusiveness into the minds of customers
e.g., 99p vs £1
often used in retail stores
setting prices at below-cost prices so that you put the competition out of business
usually leads to the victor raising their prices once the competition dies
illegal under UK, EU+ US laws but hard to prove → only predatory if the pricing lasts 6 months+
e.g., Tesco avoided the law by making the pricing lower for just under 6 months
factors to take into account for pricing:
cost of raw materials
cost of labour
income
cost of production
price of competition
quality of product
2 main pricing strategies:
price skimming
setting an initial high price when launching a new product, aimed at getting extra revenue + testing the market to see what price it will take
penetration pricing
setting an initial low price when launching a new product, with limited short term profit, in order to build market share before switching to a more profitable price
usually in the form of an ‘introductory offer’
choosing the right pricing strategy:
have to take into account:
the level of competition
the costs of the company relative to its revenue
where a product is on its product life cycle