Bus 12

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BUSINESS UNIT 12

The marketing mix

The marketing mix is a team which is used to describe all the activities which go into marketing products
(goods and services). The producer might need to find out through market research what customers want
from the product, then they may adapt the product to meet customers’ wants. Once this is achieved, the
producer will aim to convince the consumers that their product is the one that they want and that it meets
their needs better than any of their competitors’ products. Producers often do this by branding their product.
This involved giving a product a unique name and packaging. It is then advertised to make consumers
believe that it is different to any of the competitors’ brands. The product also has to be sold in places that
reinforce the brand image.
All of these activities are part of the marketing mix for a product. They are often summarized as the ‘four
Ps’.

The four Ps of the marketing mix


- Product. This applies to the good or service itself – its design, features and quality.
- Price. The price at which the product is sold to the customer is a key part of the marketing mix. A
comparison must be made with the prices of competitor’s products. Price should, in the long run,
cover costs.
- Place. This refers to the channels of distribution that are selected. That is, what method of getting
the product to the market and to the customer is to be used? Will the manufacturer sell its product
to shops that sell to the public, or to wholesalers, or direct to the customers?
- Promotion. This is how the product is advertised and promoted. What types of advertising media
will be used? It includes discounts that may be offered or any other types of sales promotion, such
as money-off vouchers or free gifts.

Some people also talk about packaging as being a ‘fifth P’, but it can be included as part of both product
and promotion.

Each part of the marketing mix has to be considered carefully to make sure that it all fits together and one
part does not counteract another. For example, a high-priced perfume should be wrapped in expensive-
looking packaging and advertised by glamorous people and should not be sold in small food stores.

The role of product decisions in the marketing mix

The product itself is probably the most important element in the marketing mix – without a product that
meets customer needs, the rest of the marketing mix is unlikely to be able to achieve marketing success.
After deciding on the product and appropriate market segment, the other parts of the marketing mix – price,
place and promotion – will be determined.
Large companies often have a department which spends all its time developing new products.

Types of products

There are several types of product. Some products are sold to consumers and some can be sold to other
business (that is, to other producers). In addition to physical goods, services are also sold to consumers and
to other producers. Products are usually group into the following types:
Consumer goods Goods that are bought by consumers for their own
use. They ca be goods that do not last long, such as
food and cleaning materials. Some goods last a
relatively long time and give enjoyment over a long
time, such as furniture and computers.
Consumer services Services that are bought by consumers for their
own use. Examples include repairing cars,
hairdressing and education.
Producer goods Services that are bought by other businesses to use.
They are bought to help with the production
process. Examples include trucks, machinery and
components.
Producer services Services that are produced to help other businesses.
Examples include accounting, insurance and
advertising agencies.

Defining the type of product the business is producing is important when deciding how the product will be
developed and marketed.
Promotion of a producer good will be quite different to promotion of a consumer good. Producing the right
product at the right price is an important part of the marketing mix.
- The products needs to satisfy consumer wants and needs. If it does not then it will not sell
- The product also needs to be of the right quality so consumers are willing to pay the price for it
- The product must not be so difficult to make that the costs of production are greater than price
charged for it – as this will mean the business makes a loss
- Design of the product is important. The quality needs to be appropriate for the brand image. For
example, a high brand image means a high price, but quality must be high too.

What makes a product successful?


1. Satisfies existing needs and wants of consumers
2. Design – performance, reliability, quality should all be consistent with the product’s brand image
3. Capable of stimulating new wants from the consumer
4. Not too expensive to produce (relative to the price that could be charged)
5. The first business to produce the new product or introduce new changes to the original product
before its competitors
6. Has something very distinctive that makes it appear different

Product development

Large businesses are trying to develop new products all the time. Smaller businesses are also trying to stay
competitive and therefore need to keep their products up to standards of competitors. When developing a
new product, most businesses go through the process below.
1. Generate ideas: from Customer suggestions, Employees, Research and Development department,
Sales department, Competitors’ products
2. Select the best ideas for further research: need to decide which ideas to abandon and which to
research further. Some products may be too expensive to manufacture, other products would
probably not sell well.
3. Decide if the company will be able to sell enough for the product to be a success: The marketing
department now looks in detail at the remaining ideas. It assesses how large it think the sales would
be and the likely size of the market share.
4. Develop a prototype: A prototype allows the Operations department to see how a product could
be manufactured. It also allows them to foresee any problems with the manufacturing process.
Many large companies use computer simulations for part of this process.
5. Launch the product in one area to test the market: The product is launched on to one small part
of the market. This allows the company to see how well the product sells without committing large
amounts of money for a national launch. If the product does not sell well, it can be altered or
scrapped without too much harm to the company.
6. Go to a full launch of the product to the whole market: The product is launched on to the main
market. This will probably be the national market to begin with. Later it could be exported.

The costs and benefits of developing new products

There are various benefits for the business when developing new products. These are as follows:
- Unique Selling Point (USP) will mean the business will be first into the market with the new
product
- Diversification for the business, giving it a broader range of products to sell
- It allows the business to expand into new markets
- It may allow the business to expand into existing markets

However, there are also costs for the business when developing new products. There are as follow:
- The costs of carrying out market research and analyzing the findings
- The costs of producing trial products, including the costs of wasted materials
- The lack of sales if the target market is wrong
- The loss of company image if the new product fails to meet customer needs

The importance of brand image


Selling a product directly to the customer makes it easy to inform the customer of the product’s qualities
and good points. The salesperson can persuade the customer to buy the product.
Today, the manufacturers of most products do not sell directly to the customer – products are sold to other
businesses or retailers, who sell them on to the customer. This means that the product‘s unique features and
the reasons for buying it must be conveyed in different wat. This is done by creating a brand for the product.
It will have a unique name, a brand name. Advertising and other promotion will constantly refer to this
brand name and will make consumers aware of the qualities of the product to try to persuade them to buy
it.
Business use brands for their products to encourage consumers to keep buying their products and not those
of their competitors. Consumers may have brand loyalty, which means they will keep buying the same
brand of a product instead of trying other similar products.
Brand image is important. The brand is more than just an assurance of quality. By careful use of promotion
and public relations, a business will try to create a complete image for the product based around the brand
name.

Brand name: the unique name of a product that distinguishes it from other brands.
Brand loyalty: when consumer keep buying the same brand again and again instead of choosing a
competitor’s brand.
Brand image: an image or identity given to a product which gives it a personality of its own and
distinguishes it from its competitors’ brands.

So, what is branding? What is the advantages of doing branding?

The role of packaging

Packaging is the physical container or wrapping for a product. It is also used for promotion ad selling
appeal. Packaging has to be suitable for the product to be put in. It has to give protection to the product ad
not allow it to spoil. It has to be suitable for transporting the product from the factory to the shops, so
preferably the packaging should not be too delicate or the product can be easily damaged.
Packaging is also used for promoting the product. It has to appeal to the consumer, therefore colour and
shape of the container is very important.
The labels on some products must, as a legal requirement, carry vital information about the product. For
example, most labels on food products sold in supermarkets must explain how to store it and for how long,
and what ingredients it contains.
So, packaging is used to protect the product. It should be easy to transport the product, suitable for the
product to fit in, easy to open the container and use the product, eye-catching, carries information of the
product and promotes the brand image.

The product life cycle


Product do not last forever. A typical cycle for a product is as follows.
1. First, a product is developed. The prototype is tested and market research carried out before the
product is launched on to the market. There are no sales at this time.
2. It is then introduced or launched on the market. Sales grow slowly at first because most consumers
are not aware of its existence. Informative advertising is used until the product becomes known.
3. Sales start to grow rapidly. The advertising is changed to persuasive advertising to encourage brand
loyalty. Prices are reduced a little as new competitors enter the market and try to take some
customers. Profits start to be made as the development costs are covered.
4. Maturity. Sales now increase only slowly. Competition becomes intense and pricing strategies are
now competitive and promotional pricing. A lot of advertising is used to maintain sales growth.
Profits are at their highest.
5. Sales reach saturation point and stabilize at their highest point. Competition is high but there are
no new competitors. Competitive pricing is used. A high and stable level of advertising is used, but
profits start to fall as sales are static and prices have to be reduced to be competitive.
6. Sales of the product decline as new product is usually come along or because the product has lost
its appeal. The product is usually withdrawn from the market when the sales becomes so low and
prices have been reduced so far that it becomes unprofitable to produce the product. Advertising is
reduced and then stopped.

The exact length of the life cycle, in terms of time, varies a great deal from product to product. It is affected
by the type of product, for example, fashionable items will go out of fashion whereas food products may
last a very long time.

How stages of the products life influence marketing decisions


Knowing the stage of the life cycle that a product is in can help a business with pricing and promotion
decisions.
Pricing
- A branded product is likely to be sold at a high price when it is first introduced to the market – as
a low price could give the wrong message about quality.
- Prices are likely to be relatively higher than those of competitors in the growth stage as the product
may still be ‘newer’ than those of rivals.
- In the saturation or maturity stage, when the business will want to try to stop sales declining, the
price is likely to be reduced as competitors may have launched newer versions of their own products
- Some substantial price discounts might be offered during the decline stage – especially if the
business does not plan to ‘extend its life’.

Promotion
- Spending on promotion will be higher at the introduction stage than in other stages as the business
has to inform consumers of the product. Also, if it is a completely new brand, a clear identity will
need to be established for it.
- Advertising would probably be reduced in later stages, either because the product is already well
known or because the business wants to use its marketing budget on other, newer, products.
- Promotion spending might be increased again if the business decides to adopt an extension strategy
– customers will need to be informed about this and ‘convinced’ that the product is worth buying
once more.

Extending the product life cycle

When a product reaches the maturity stage of its product life cycle, a business may stop sales starting fall
by adopting extension strategies. These are ways that sales may be given a boost.
Some of the ways to extent product cycle:
1. Introduce new variations of the original product, e.g. a children’s version
2. Sell into new markets, e.g. export the product to another country
3. Make small changes to the product’s design, colour or packaging
4. Use a new advertising campaign
5. Introduce a new, improved version of the old product
6. Sell through additional, different retail outlets

If the extension strategies are effective, the maturity phase of the product life cycle will be prolonged.

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