Marketing mix refers to the different elements involved in the marketing

of a good or service- the 4 P’s- Product, Price, Promotion and Place.

Product
Product is the good or service being produced and sold in the market.
This includes all the features of the product as well as its final packaging.

Types of products include: consumer goods, consumer services, producer

goods, producer services.

What makes a successful product?

● It satisfies existing needs and wants of the customers

● It is able to stimulate new wants from the consumers

● Its design – performance, reliability, quality etc. should all be

consistent with the product’s brand image

● It is distinctive from its competitors and stands out

● It is not too expensive to produce, and the price will be able to cover
the costs

New Product Development: development of a new product by a business.

The process:

1. Generate ideas: the firm brainstorms new product concepts, using

customer suggestions, competitors’ products, employees’ ideas,
sales department data and the information provided by the research
and development department

2. Select the best ideas for further research: the firm decides which
ideas to abandon and which to research further. If the product is too
costly or may not sell well, it will be abandoned

3. Decide if the firm will be able to sell enough units for the product
to be a success: this research includes looking into forecast sales,
size of market share, cost-benefit analysis etc. for each product idea,
undertaken by the marketing department

4. Develop a prototype: by making a prototype of the new product,

the operations department can see how the product can be
manufactured, any problems arising from it and how to fix them.
 Computer simulations are usually used to produce 3D prototypes on
screen

5. Test launch: the developed product is sold to one section of the

market to see how well it sells, before producing more, and to
identify what changes need to be made to increase sales. Today a lot
of digital products like apps and software run beta versions, which is
basically a market test

6. Full launch of the product: the product is launched to the entire

market

Advantages:

● Can create a Unique Selling Point (USP) by developing a new

innovative product for the first time in the market. This USP can be
used to charge a high price for the product as well as be used in
advertising.

● Charge higher prices for new products (price skimming as explained

later)

● Increase potential sales, revenue and profit

● Helps spreads risks because having more products mean that even if
one fails, the other will keep generating a profit for the company

Disadvantages:

● Market research is expensive and time consuming

● Investment can be very expensive

Why is brand image important?

Brand image is an identity given to a product that differentiates it from

competitors’ products.
Brand loyalty is the tendency of customers to keep buying the same
brand continuously instead of switching over to competitors’ products.

● Consumers recognize the firm’s product more easily when looking

at similar products- helps differentiate the company’s product from
another.

● Their product can be charged higher than less well-known brands –

if there is an established high brand image, then it is easier to charge
high prices because customers will buy it nonetheless.
 ● Easier to launch new products into the market if the brand image is
already established. Apple is one such company- their brand image
is so reputed that new products that they launch now become an
immediate success.

Why is packaging important?

● It protects the product

● It provide information about the product (its ingredients, price,

manufacturing and expiry dates etc.)

● To help consumers recognize the product (the brand name and logo
on the packaging will help identify what product it is)

● It keeps the product fresh

Product Life Cycle (PLC)

The product life cycle refers to the stages a product goes through from it’s
introduction to it’s retirement in terms of sales.

At these different stages, the product will need different marketing

decisions/strategies in terms of the 4Ps.
Extension strategies: marketing techniques used to extend the maturity
stage of a product (to keep the product in the market):

● Finding new markets for the product

● Finding new uses for the product

● Redesigning the product or the packaging to improve its appeal to

consumers

● Increasing advertising and other promotional activities

The effect on the PLC of a product of a successful extension strategy:

Price
Price is the amount of money producers are willing to sell or consumer are
willing to buy the product for.

Different methods of pricing:

● Market skimming: Setting a high price for a new product that is

unique or very different from other products on the market.

Advantages:

● Profit earned is very high

● Helps recover/compensate research and development costs

Disadvantage:

● It may backfire if competitors produce similar products at a

lower price

● Penetration pricing: Setting a very low price to attract customers to

buy a new product

Advantages:

● Attracts customers more quickly

● Can increase market share quickly

Disadvantages:

● Low revenue due to lower prices

 ● Cannot recover development costs quickly

● Competitive pricing: Setting a price similar to that of competitors’

products which are already available in the market

Advantage:

● Business can compete on other matters such as service and

quality

Disadvantage:

● Still need to find ways of competing to attract sales.

● Cost plus pricing: Setting price by adding a fixed amount to the cost
of making the product

Advantages:

● Quick and easy to work out the price

● Makes sure that the price covers all of the costs

Disadvantage:

● Price might be set higher than competitors or more than

customers are willing to pay, which reduces sales and
profits

● Loss leader pricing/Promotional pricing: Setting the price of a few

products at below cost to attract customers into the shop in the
hope that they will buy other products as well

Advantages:

● Helps to sell off unwanted stock before it becomes out of

date

● A good way of increasing short term sales and market share

Disadvantage:

● Revenue on each item is lower so profits may also be lower

Factors that affect what pricing method should be used:

● Is it a new or existing product?

If it’s new, then price skimming or penetration pricing will be most
suitable. If it’s an existing product, competitive pricing or
promotional pricing will be appropriate.

● Is the product unique?

If yes, then price skimming will be beneficial, otherwise competitive
or promotional pricing.

● Is there a lot of competition in the market?

If yes, competitive pricing will need to be used.

● Does the business have a well-known brand image?

If yes, price skimming will be highly successful.

● What are the costs of producing and supplying the product?

If there are high costs, costs plus pricing will be needed to cover the
costs. If costs are low, market penetration and promotional pricing
will be appropriate.

● What are the marketing objectives of the business?

If the business objective is to quickly gain a market share and
customer base, then penetration pricing could be used. If the
objective is to simply maintain sales, competitive pricing will be
appropriate.

Price Elasticity

The PED of a product refers to the responsiveness of the quantity

demanded for it to changes in its price.

PED (of a product) = % change in quantity demanded / % change in price

When the PED is >1, that is there is a higher % change in demand in

response to a change in price, the PED is said to be elastic.
When the PED is <1, that is there is a lower % change in demand in
response to a change in price, the PED is said to be inelastic.

Producers can calculate the PED of their product and take suitable action
to make the product more profitable.

If the product is found to have an elastic demand, the producer can

lower prices to increase profitability. The law of demand states that a fall
in price increases the demand. And since it is an elastic product (change in
demand is higher than change in price), the demand of the product will
increase highly. The producers get more profit.
If the product is found to have an inelastic demand, the producer can
raise prices to increase profitability. Since quantity demanded wouldn’t
fall much as it is inelastic, the high prices will make way for higher revenue
and thus higher profits.

Place
Place refers to how the product is distributed from the producer to the
final consumer. There are different distribution channels that a product
can be sold through.

Distribution
Explanation Advantages Disadvantages
Channel

– Delivery
– All of the
costs may be
profit is
high if there
earned by
are customers
the producer
over a wide
area
The product is sold to the – The
consumer straight from producer
– All storage
the manufacturer. A good controls all
Manufacturer costs must be
example is a factory outlet parts of the
paid for by the
where products directly marketing
to Consumer producer
arrive at their own shop mix
from the factory and are
sold to customers. – All
– Quickest
promotional
method of
activities must
getting the
be carried out
product to
and financed
the
by the
consumer
producer
 – The retailer
– The cost of takes some of
holding the profit away
inventories from the
of the producer
The manufacturer will sell product is
its products to a retailer paid by the – The producer
(who will have stocks of retailer loses some
products from other control of the
Manufacturer manufacturers as well) – The retailer marketing mix
to Retailer who will then sell them to will pay for
customers who visit the advertising – The producer
to Consumer shop. For example, brands and other must pay for
like Sony, Canon and promotional delivery of
Panasonic sell their activities products to
products to various the retailers
retailers. – Retailers
are more – Retailers
conveniently usually sell
located for competitors’
consumers products as
well

–
The manufacturer will sell Wholesalers – Another
large volumes of its will advertise middleman is
products to a wholesaler and added so more
Manufacturer (wholesalers will have promote the profit is taken
to Wholesaler stocks from different product to away from the
manufacturers). Retailer retailers producer
to Retailer will buy small quantities of
the product from the – – The producer
to Consumer wholesaler and sell it to the Wholesalers loses even
consumers. One good pay for more control
example is the distribution transport of the
of medicinal drugs. and storage marketing mix
costs
 The manufacturer will sell
their products to an agent
who has specialized
Manufacturer
information about the
– Another
market and will know the – The agent
to Agent middleman is
best wholesalers to sell has
added so even
them to. This is common specialised
to Wholesaler more profit is
when firms are exporting knowledge
taken away
their products to a foreign of the
to Retailer from the
country. They will need a market
producer
to Consumer knowledgeable agent to
take care of the products’
distribution in another
country

What affects place decisions?

● The type of product it is: if it’s sold to producers of other goods,

distribution would either be direct (specialist machinery) or
wholesaler (nuts, bolts, screws etc.).

● The technicality of the product: as lots of technical information

needs to be passed to the customer, direct selling is usually
preferred.

● How often the product is purchased: if the product is bought on a

daily basis, it should be sold through retail stores that customers can
easily access.

● The price of the product: if the products is an expensive, luxury

good, it would only be sold through a few specialist, high-end outlets
For example, luxury watches and jewellery.

● The durability of the product: if it’s an easily perishable product like

fruits, it will need to be sold through a wide amount of retailers to be
sold quickly.

● Location of customers: the products should be easily accessible by

its customers. If customers are located over the world, e-commerce
(explained below) will be required.

● Where competitors sell their product: in order to directly compete

with competitors, the products need to be sold where competitors
are selling too.
Promotion
Promotion: marketing activities used to communicate with customers
and potential customers to inform and persuade them to buy a business’s
products.

Aims of promotion:

● Inform customers about a new product

● Persuade customers to buy the product

● Create a brand image

● Increase sales and market share

Types of promotion

● Advertising: Paid-for communication with consumers which uses

printed and visual media like television, radio, newspapers,
magazines, billboards, flyers, cinema etc. This can be informative
(create product awareness) or persuasive (persuade consumers to
buy the product). The process of advertising:

● Sales Promotion: using techniques such as ‘buy one get one free’,
occasional price reductions, free after-sales services, gifts,
competitions, point-of–sale displays (a special display stand for a
product in a shop), free samples etc. to encourage sales.

● Below-the-line promotion: promotion that is not paid for

communication but uses incentives to encourage consumers to buy.
Incentives include money-off coupons or vouchers, loyalty reward
schemes, competitions and games with cash or other prizes.

● Personal selling: sales staff communicate directly with consumer to

achieve a sale and form a long-term relationship between the firm
and consumer.

● Direct mail: also known as mailshots, printed materials like flyers,

newsletters and brochures which are sent directly to the addresses
of customers.
 ● Sponsorship: payment by a business to have its name or products
associated with a particular event. For example Emirates is Spanish
football club Real Madrid’s jersey sponsor- Emirates pays the club to
be its sponsor and gains a high customer awareness and brand
image in return.

What affects promotional decisions?

● Stage of product on the PLC: different stages of the PLC will require
different promotional strategies; see above.

● The nature of the product: If it’s a consumer good, a firm could use
persuasive advertising and use billboards and TV commercials.
Producer goods would have bulk-buy-discounts to encourage more
sales. The kind of product it is can affect the type of advertising, the
media of advertising and the method of sales promotion.

● The nature of the target market: a local market would only need
small amounts of advertising while national markets will need TV
and billboard advertising. If the product is sold to a mass market,
extensive advertising would be needed. But niche market products
such as water skis would only need advertising in special sports and
lifestyle magazines.

● Cost-effectiveness: the amount of money put into promotion (out of

the total marketing budget) should be not too much that it fails to
bring in the sales revenue enough to cover those costs at least.
Promotional activities are highly dependent on the budget.

Technology and the Marketing Mix

It is also worth noting that the internet/ e-commerce is now widely used to
distribute products. E-Commerce is the use of the internet and other
technologies used by businesses to market and sell goods and services to
customers. Examples of e-commerce include online shopping, internet
banking, online ticket-booking, online hotel reservations etc.

Websites like Amazon and e-Bay act as online retailers.

Online selling is favoured by producers because it is cheaper in the
long-run and they can sell products to a larger customer base/ market.
However there will be increased competition from lots of producers.
Consumers prefer online shopping because there are wider choices of
detailed products that are also cheaper and they can buy things at their
own convenience 24×7. However, there is no personal communication
with the producer and online security issues may occur.
However, e-commerce means an entire new type of marketing strategy
is also required – online promotions, new channel of distribution, new
pricing strategies (since price competition in e-commerce is very high and
demand is very price elastic). It requires a lot of money to set up – online
websites, promotions, web developers and technicians to run and maintain
the system etc.

The internet is also used for promotion and advertising of products in the
form of paid social media ads and sponsors, pop-ups, email newsletters
etc. It helps reach target customers, is relatively cheap and helps the
firm respond to market changes quicker (since online ads can be easily
altered/updated rather than billboards and TV ads). But it can alienate and
chase customers away if they see it too frequently and find it annoying.
There is also the risk of the adverts being publicised negatively if it has
annoying or offensive content that customers quickly criticise (since
content is more easily shareable online).