3.3.4 Making marketing decisions: using the marketing mix


    3.3.4 Making marketing decisions: using the marketing mix

    The elements of the marketing mix (7Ps)

    Marketing Mix = the combination of marketing elements used by a firm to enable it to meet the needs and expectations of the customer


    The 7 elements (P’s) of the marketing mix:

    • Product – the good or service that the customer buys
    • Price – how much the customer pays for the product
    • Place – how the product is distributed to the customer
    • Promotion – how the customer is found & persuaded to buy
    • People – the people who make contact with customers in delivering the product
    • Process – the systems and processes that deliver a product to a customer
    • Physical – the elements of the physical environment the customer experiences


    The influence on and effects of changes in the elements of the marketing mix

    Influences on the marketing mix:

    • Economic influence (e.g. trends; domestic and international trade)
    • Competitive influence (e.g. market structure; competitive strategy and position)
    • Social and demographic influence (e.g. demographic trends; multiculturalism; lifestyles; ecological concerns)
    • Technological influence (e.g. advances; research and development investment
    • Information technology (e.g. legal and regulatory influence; federal laws/regulations; provincial laws/regulations; self-regulation)


    Product decisions

    Product = the essence of what a business is trying to sell (it can be either a good or a service)


    The Boston Matrix = a portfolio of products is analysed using this as it categorises the products into one of four different areas based on market share and market growth

    Market Share = whether the product has a high or lower share of the industry

    Market Growth = the numbers of potential customers and whether this number is growing or not


    The four categories of the Boston Matrix:

    • Stars (high market growth and high market share)
      • Often need heavy investment
      • They will eventually become cash cows in investment isn’t retained and they lose their market share
    • Cash cows (low market growth and high market share)
      • Mature and successful products with little need for investment
      • Have to be managed for continued profits
    • Question marks (high market growth and low market share)
      • Have potential but need substantial investment to growth their market share
    • Dogs (low market growth and low market share)
      • Only really generate enough cash to breakeven
      • Rarely worth investing in


    The Product Life Cycle = this describes the stages a product goes through from when it was first thought of, until it is finally removed from the market

    Stages of the product life cycle:

    • Introduction – launching the developed product into the market place
    • Growth – when sales are increasing at their fastest rate
    • Maturity – sales are near their highest but the of growth is slowing down
    • Decline – the final state when sales begin to fall
    • Extension strategy – devised by a business to extend its life cycle


    Examples of extension strategies:

    • Advertising
    • Price reduction
    • Adding value
    • Exploring new markets
    • New packaging


    Pricing decisions

    Price = the money charged for a product or service


    Pricing strategies:

    • Penetration = aim to increase market share by setting an initial low entry price to attract new customers
      • For this to be successful, the process has to be price elastic
    • Cost Plus = aim to cover costs of production and then add a profit margin onto the price
    • Contribution = aim to make a gross profit and use this to contribute to fixed costs of running of the business
    • Elasticity = aim to use the PED calculation which is relevant to the product and raise or lower the price according to how it would improve revenue
      • If PED is <1 (inelastic), raise the price
      • If PED is >1 (elastic), lower the price
    • Marginal Cost = aim to set the price of a product above the marginal costs to produce it
    • Market Skimming = involves setting a high price before competitors come into the market
    • Premium = involves setting a high price to reflect the exclusive and luxury nature of the product
    • Loss Leader = prices are set deliberately below the cost of production in order to attract customers who will buy other, more profitable products
    • Psychological = prices are set with a view to perceive customers of the price
      • 99p instead of £1
    • Leadership = prices are set by the dominant leader in the market and all other smaller firms flow their price
      • Done to avoid price wars or to maintain market share


    Decisions about the promotional mix

    Promotion = the way a firm makes it products known to the customers, both current and potential


    Methods of promotion:

    • Advertising
    • Public relations and sponsorship
    • Personal selling
    • Direct marketing
    • Sales promotion


    Factors that influence which promotional method is used:

    • Stage in the product life cycle
    • Nature of the product
    • How much information is required by customers before they buy
    • Competition
    • Marketing budget
    • Marketing strategy
    • Other elements of the mix
    • Target market


    The targeting of promotion:

    • Above the line promotion – paid for communication in the independent media (e.g. advertising on TV or in the newspapers). Though it can be targeted, it could be seen by any one outside the target audience
    • Below the line promotion – promotional activities where the business has direct control (e.g. direct mailing and money off coupons)


    Distribution (place) decisions

    Place = this is about how a business gets its products to the customers


    Distribution is achieved by using one or more distribution channels, including:

    • Retailers
    • Distributors/sales agents
    • Direct (e.g. via e-commerce)
    • Wholesalers


    Decisions relating to other elements of the marking mix: people, process, and physical environment

    • People – all companies are reliant on the people who run them from front line Sales staff to the Managing Director. Having the right people is essential because they are as much a part of your business offering as the products/services you are offering.
    • Process – the delivery of your service is usually done with the customer present so how the service is delivered is once again part of what the consumer is paying for.
    • Physical Evidence – almost all services include some physical elements even if the bulk of what the consumer is paying for is intangible.


    The importance of and influences on an integrated marking mix

    Influences on an integrated marketing mix:

    • The position in the product life cycle
    • The Boston Matrix
    • The type of product
    • Marketing objectives
    • The target market
    • Competition
    • Positioning


    Understanding the value of digital marketing and e-commerce

    Impact of e-commerce on marketing:

    • Marketing strategy of differentiation increasingly effective (easier to reach niche markets online)
    • Product life cycles are shortened (note the link with technological disruption)
    • Greater use of digital promotion (much easier now to track effectiveness of promotion)
    • Brands and retailers increasingly using multiple distribution channels
    • Greater use of dynamic pricing (easier to maximise revenues, but is it fair for customers?)
    • Increased need for localisation (but on its own, not enough)
    • Ability to sell a much wider product range (the ‘long tail’)




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