Marketing Mix – 4 Ps

• Marketing professionals and specialist use many

tactics to attract and retain their customers.
These activities comprise of different concepts,
the most important one being the marketing mix.
There are two concepts for marketing mix: 4P
and 7P. It is essential to balance the 4Ps or the
7Ps of the marketing mix. The concept of 4Ps
has been long used for the product industry
while the latter has emerged as a successful
proposition for the services industry.
 Marketing Mix- 4Ps
Marketing decision generally fall into the following four controllable
categories :
• Product
• Price
• Place ( Distribution)
• Promotion
The term “ marketing Mix” became popularized by Neil H. Borden, when
he published his 1964 article ‘the concept of marketing mix’. His mix
ingredients included
-------product,planning,pricing,branding,display,distribution channels,
personal selling,advertising,promotions,packaging,servicing,physical
handling.
E. Jerome McCarthy later grouped these ingedients into four categories
which today are known as 4Ps of marketing.
These 4Ps are parameters that marketing managers can control subject
to internal and external constraints of marketing environment
 4 Ps – Marketing Mix
• Product – Brand name, Functionality, styling,
Quality,safety,Packaging,Repair& support, Warranty and
accessories
• Price – Pricing strategy,suggested retail price,Volume
discount and wholesale price,cash/early payment
discount, seasonal price,Flexibility
• Place(Distribution) – Distribution Channel, Market
coverage,Specific channel member,Inventory
management, warehousing,transportation,order
processing
• Promotion – Promotional strategy, Advertising, Personal
selling & sales force, sales promotions, public relations &
publicity, marketing communications budget
 Marketing Mix – 7Ps
• Booms & Bitner expanded the marketing
mix by adding three more Ps :
• People
• Process –( Packaging)
• Physical Evidence- ( Positioning)
 Product Life Cycle
• Product life cycle
• The product life cycle goes through multiple phases, involves many
professional disciplines, and requires many skills, tools and
processes. Product life cycle (PLC) has to do with the life of a
product in the market with respect to business/commercial costs
and sales measures; whereas product life cycle management (PLM)
has more to do with managing descriptions and properties of a
product through its development and useful life, mainly from a
business/engineering point of view. To say that a product has a life
cycle is to assert four things:
• that products have a limited life,
• product sales pass through distinct stages, each posing different
challenges, opportunities, and problems to the seller,
• profits rise and fall at different stages of product life cycle, and
• products require different marketing, financial, manufacturing,
purchasing, and human resource strategies in each life cycle stage.
 Product Life Cycle
• The different stages in a product life cycle are:
1. Market introduction stage
• costs are high
• slow sales volumes to start
• little or no competition - competitive manufacturers watch for acceptance/segment
growth losses
• demand has to be created
• customers have to be prompted to try the product
• makes no money at this stage
2. Growth stage
• costs reduced due to economies of scale
• sales volume increases significantly
• profitability begins to rise
• public awareness increases
• competition begins to increase with a few new players in establishing market
• increased competition leads to price decreases
 Product Life Cycle
3. Mature stage
• costs are lowered as a result of production volumes increasing and
experience curve effects
• sales volume peaks and market saturation is reached
• increase in competitors entering the market
• prices tend to drop due to the proliferation of competing products
• brand differentiation and feature diversification is emphasized to
maintain or increase market share
• Industrial profits go down
4. Saturation and decline stage
• costs become counter-optimal
• sales volume decline or stabilize
• prices, profitability diminish
• profit becomes more a challenge of production/distribution efficiency
than increased sales
PLC – In terms of Marketing Mix
• Introductory Stage – Product : branding, Quality level, Patent etc
established, Pricing: Low,Distribution :Selective, and Promotion :
aimed at early adopters with launching characterstics,educating
customers
• Growth Stage – Product :Quality maintained, additional feature and
sevice added, Pricing: is maintained as demand generates,
Distribution : More channels added, Promotion :aimed at broader
audience
• Maturity Stage – Product :Features may be enhanced or
differentiate,Pricing : May be reduced, Distribution : More intensive
and Promotion : Emphasizes product differentiation
• Decline stage – Three options : Maintain or Rejuvinate / Harvest or
Discontinue the product and the marketing mix decision will depend
upon the option e.g. if rejuvinate then Product will add more feature,
Similarily Price may be drastically reduced if it is being discontinued
or maintained if harvested.
 Products Levels / Consumer Hierarchy
• a product is more than physical. A product is anything that can be offered to a market for attention, acquisition, or
use, or something that can satisfy a need or want. Therefore, a product can be a physical good, a service, a retail
store, a person, an organisation, a place or even an idea. Products are the means to an end wherein the end is the
satisfaction of customer needs or wants.
•  
• Kotler distinguished three components:
• need: a lack of a basic requirement;
• want: a specific requirement for products or services to match a need;
• demand: a set of wants plus the desire and ability to pay for the exchange.
•  
• Customers will choose a product based on their perceived value of it. Satisfaction is the degree to which the actual
use of a product matches the perceived value at the time of the purchase. A customer is satisfied only if the actual
value is the same or exceeds the perceived value. Kotler defined five levels to a product:
•  
• 1. Core Benefit
• the fundamental need or want that consumers satisfy by consuming the product or service.
•  
• 2. Generic Product
• a version of the product containing only those attributes or characteristics absolutely necessary for it to function.
•  
• 3. Expected Product
• the set of attributes or characteristics that buyers normally expect and agree to when they purchase a product.
•  
• 4. Augmented Product
• inclusion of additional features, benefits, attributes or related services that serve to differentiate the product from
its competitors.
•  
• 5. Potential Product
• all the augmentations and transformations a product might undergo in the future.
•  
Products Levels / Consumer Hierarchy
• Kotler noted that much competition takes place at the
Augmented Product level rather than at the Core Benefit
level or, as Levitt put it: 'New competition is not between
what companies produce in their factories, but between
what they add to their factory output in the form of
packaging, services, advertising, customer advice,
financing, delivery arrangements, warehousing, and
other things that people value.'
• Kotler's model provides a tool to assess how the
organisation and their customers view their relationship
and which aspects create value.
 Products Levels / Consumer Hierarchy
• Consumer Needs for a Products:
• Functionality
• Usability
• Pleasure
• Take a chair for example. How many different types of chairs have you seen? A lot. They range from the very
basic to the extravagant. What do you look for in a chair when shopping? Is it the bright, attractable colors? How
about the cool cup-holder feature? Maybe the shape and feel are what you like. Chances are that you’ll return the
product back or abandon all use of it if it doesn’t meet at least 2 out of the 3 consumer needs levels.
• Functionality
• Level 1 refers to the core basics of a product. Can it perform basic functions of what it is designed to do? In our
example, a chair simply needs to support the person’s weight. Also, it’s good to point out that functionality may
include the endurance of a product. Can it perform basic functions over a long period of time? Depends on
the quality.
• Usability
• Level 2 refers to the functionality in relation to the consumer. Do the functions appeal to me? If so, how? I want a
chair that not only supports my weight, but rocks too! I would also like a cup holder when drinking a cold beverage
and enjoying my comfortable chair. Those are features that would appeal to me. Usability is a tough one because
the designer of the product attempts to appeal to their intended audience as best as they  can.
• Pleasure
• Level 3 refers to the emotions that a consumer endures with a product. Does the product look aesthetically-
pleasing to me? If I were trying to match furniture (which I know my fiancé would expect me to) I would want the
color, shape, texture, etc. to coordinate with what I am trying to match.
• Pleasure-based approaches are about really understanding people and respecting and celebrating human
diversity. They are about understanding the benefits that people want from a product and understanding what is
required in order to deliver these benefits. Above all, pleasure-based approaches are about designing products
that can bring a real joy into people’s lives.
 Market Analysis
• market size :

• The number of buyers and sellers in a particular market. This is especially

important for companies that wish to launch a new product or service,
since small markets are less likely to be able to support a high volume of
goods. Large markets could bring in more competition.

• The size of market can be evaluated based on present sales and on

potential sales, if the use of the product were expanded.

• In developing their business plans, companies of all sizes face the

challenge of determining the size of their markets. To begin,
companies must present the size of their "relevant market" in their
plans. The relevant market equals the company's sales if it were to
capture 100% of its specific niche of the market.
 Market Analysis
Potential Market Analysis :
• Determine the buyer profile.
Define the profiles into segments
Size the segments using demographic data from the national census body
for the country in question.
Research the market to determine the propensity to buy factor for each
segment.
Market size = Sum of all (segment size * propensity to buy)
• Might not be 100% accurate because stated intention (propensity) to buy
always differs from actual buying behaviour
• The challenge that many firms face is their inability to size their relevant
markets, particularly if they are competing in new or rapidly evolving
markets. On one hand, the fact that the markets are new or evolving is the
reason why there may be a large opportunity to establish them and become
the market leader. Conversely, investors, shareholders and senior
management are often skeptical to invest resources because, since the
markets do not yet exist, the markets may be too small, or not really exist at
all.
 Market Potential calculation
• If you are a baby seat manufacturer, you need to understand the total market
potential of infant car seats in both units and Rupees. In this case, the entire
population of infants is your market. If two million babies are expected in a year, the
market for infant seats is 2m units. However, some of the households may be two car
households and decide to buy two seats. If 50% of the households buy two seats,
then the market is really 3m units.
• Now what is the market potential for infant car seats in Value terms? It depends on
the price segments of car seats. There may be different types of car seats with
different features commanding varying prices. Let us assume that there are two kinds
of seats one being a simple no-frills car seat and the other a fancier seat with
additional features like a cup holder, sun shade, diaper holder, etc. Different
consumer segments may demand these car seats at different price ranges.
• We can apply several market analysis techniques to understand price points and
calculate the average price of these two market segments. Let us say our studies
show the average prices to be Rs250 for the basic seat and Rs500 for the fancy seat.
• The total market potential in value term is the sum of the basic seat segment and the
fancy seat segment. Suppose the basic seat segment is 2m units. At a price of
Rs250, this potential is Rs500m. The fancy seat has 1m units at a price of Rs500 and
a market potential of Rs500m. The total Rupees market potential is then Rs1000m.
 Market Growth
   Definition
• An increase in the demand for a particular product or service over time. Market growth can
be slow if consumers do not adopt a high demand or rapid if consumers find the product
or service useful for the price level. For example, a new technology might only be
marketable to a small set of consumers, but as the price of the technology decreases and
its usefulness in every day life increases, more consumers could increase demand. The
measurement of market growth is quite simple if you are dealing with a market that you
have been tracking regularly over a period of years. This is rarely the case. The great
majority of companies have not (to date) been taking regular measurements of market
size, so calculation becomes more difficult.

Market Growth Rate

• Annual increase in product sales or population within a given market. The market growth
rate is a factor to be considered when evaluating the performance of a particular product
in a particular market. Market growth rates are a key indicator of the health of your
company. Going back to our aircraft pilot analogy, market growth rates can be likened to a
tail wind. The tail wind can create a large difference between ground speed and air speed.
If the pilot were to use air speed alone he would miss his destination. Assume your
revenues are growing at 15 percent per year. On the surface, this appears impressive. If,
however, market revenues are expanding at an average of 25 percent per annum, you have
a serious problem. Relative to the "speed" of the overall market, you are foundering.
Obviously, you are missing out on the benefit of some "tail wind" that your competitors
are enjoying.
 Market Profitability
In neoclassical economics, economic profit, or profit, is the difference between a firm's total
revenue and its opportunity costs. In classical economics profit is the return to the employer of
capital stock (machinery, factory, a plow) in any productive pursuit involving labor.

• Market profitability is based primarily on two key factors. First, the target market must have plenty
of disposable income. No income means no sales. It’s as simple as that. Secondly, the market
must be known to buy. Your product could be perfectly designed and marketed, but if the market
you are selling to does not possess these two key factors, then your efforts will be in vain.

• While different firms in a market will have different levels of profitability, the average profit
potential for market can be used a guideline for knowing how difficult it is to make money in the
market. Michael Porter devised a useful framework for evaluating the attractiveness of an
industry or market.

• This framework, known as Porter’s Five Forces, identifies five factors that influence the market
profitability-
• Buyer Power – The customers
• Supplier Power – The Suppliers of raw materials
• Barriers to entry – Potential new companies
• Threat of substitute products – Sustitue products offered in the market
• Rivalry among firms in the industry – Existing firms
 High Growth Market and Market Risks
• Growth Risk
• Stagnation of operations and the complacency that naturally occurs as firms
age and reach maturity stage
• Mature companies often forget or forsake the thing that made them
successful in the first place: a customer-centric business model. They lose
focus on the customer and start focusing on the bottom line and quarterly
results. They look for ways to cut costs or increase revenues, often at the
expense of the customer. They forget that satisfying customer needs and
continuous value innovation is the only path to sustainable growth. This
creates opportunities for new, smaller companies to emulate and improve
upon what made their bigger competitors successful in the first place and
steal their customers.
• Resistance to change at both individual and organizational level
• Detailed long term planning is difficult due to volatility of the market situation
• Management left with little space for innovation due to the need to achieve
short-term, yearly and quarterly results