Marketing Mix
The marketing mix principles (also known as the 4 p's.) are used by business as tools to assist them in pursuing their objectives. The marketing mix principles are controllable variables, which have to be carefully managed and must meet the needs of the defined target group. The mix is apart of the organisations planning process and consists of analysing the defined:
* Product strategies
* Price strategies
* Place strategies
* Promotion strategies.
Product strategies
When an organisation introduces a product into a market they must ask themselves a number of questions.
. Who is the product aimed at?
2. What benefit will they expect?
3. How do they plan to position the product within the market?
4. What differential advantage will the product offer over their competitors?
We must remember that Marketing is fundamentally about providing the correct bundle of benefits to the end user, hence the saying 'Marketing is not about providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer' (P.Tailor 7/00)
Philip Kotler in Principles of Marketing devised a very interesting concept of benefit building with a product
For a more detailed analysis please refer to Principles of Marketing by P.Kotler.
Kotler suggested that a product should be viewed in three levels.
Level 1: Core Product. What is the core benefit your product offers?. Customers who purchase a camera are buying more then just a camera they are purchasing memories.
Level 2 Actual Product: All cameras capture memories. The aim is to ensure that your potential customers purchase your one. The strategy at this level involves organisations branding, adding features and benefits to ensure that their product offers a differential advantage from their competitors.
Level 3: Augmented product: What additional non-tangible benefits can you offer? Competition at this level is based around after sales service, warranties, delivery and so on. John Lewis a retail departmental store offers free five year guarantee on purchases of their Television sets, this gives their `customers the additional benefit of 'piece of mind' over the five years should their purchase develop a fault.
Product Decisions
When placing a product within a market many factors and decisions have to be taken into consideration. These include:
Product design - Will the design be the selling point for the organisation as we have seen with the iMAC, the new VW Beetle or the Dyson vacuum cleaner.
Product quality: Quality has to consistent with other elements of the marketing mix. A premium based pricing strategy has to reflect the quality a product offers.
Product features: What features will you add that may increase the benefit offered to your target market? Will the organisation use a discriminatory pricing policy for offering these additional benefits?
Branding: One of the most important decisions a marketing manager can make is about branding. The value of brands in today's environment is phenomenal. Brands have the power of instant sales, they convey a message of confidence, quality and reliability to their target market.
Brands have to be managed well, as some brands can be cash cows for organisations. In many organisations they are represented by brand managers, who have hugh resources to ensure their success within the market.
A brand is a tool which is used by an organisation to differentiate itself from competitors. Ask yourself what is the value of a pair of Nike trainers without the brand or the logo? How does your perception change?
Increasingly brand managers are becoming annoyed by 'copycat' strategies being employed by supermarket food retail stores particular within the UK . Coca-Cola threatened legal action against UK retailer Sainsbury after introducing their Classic Cola, which displayed similar designs and fonts on their cans.
Internet branding is now becoming an essential part of the branding strategy game. Generic names like Bank.com and Business.com have been sold for £m's. ( Recently within the UK banking industry we have seen the introduction of Internet banks such as cahoot.com and marbles.com the task by brand managers is to insure that consumers understand that these brands are banks!
Pricing
Is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organisation. The remaining 3p's are the variable cost for the organisation. It costs to produce and design a product, it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean a loss of sales for the organisation. Pricing should take into account the following factors:
* Fixed and variable costs.
* Competition
* Company objectives
* Proposed positioning strategies.
* Target group and willingness to pay.
Pricing Strategies
An organisation can adopt a number of pricing strategies. The pricing strategies are based much on what objectives the company has set itself to achieve.
Penetration pricing: Where the organisation sets a low price to increase sales and market share.
Skimming pricing: The organisation sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer.
Competition pricing: Setting a price in comparison with competitors.
Product Line Pricing: Pricing different products within the same product range at different price points. An example would be a video manufacturer offering different video recorders with different features at different prices. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximising turnover and profits.
Bundle Pricing: The organisation bundles a group of products at a reduced price.
Psychological pricing: The seller here will consider the psychology of price and the positioning of price within the market place. The seller will therefore charge 99p instead £1 or $199 instead of $200
Premium pricing: The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Harrods, first class airline services, porsche etc.
Optional pricing: The organisation sells optional extras along with the product to maximise its turnover. This strategy is used commonly within the car industry.
Marketing Research
Research is the only tool an organisation has to keep in contact with its external operating environment. Inorder to be proactive and change with the environment simple questions need to be asked:
* How are customer needs changing? Can you meet these changing needs? What do your customers think about existing products or services?
* How are competitors operating within the environment? Are their strategies exceeding or influencing yours? What should you do?
* How are macro and micro environmental factors influencing your organisation? Again how will you react?
As witnessed with the UK retail clothing group C&A , failure to react to the changing needs of its customers within its environment has resulted in C&A closing all their UK retail stores. Marks and Spencers also faces an uncertain future. Research tells them that customers feel that the stores and clothes are outdated. M&S are now rushing out new lines and experimenting with new concept stores to retain existing and attract potential new customers. In the world of credit it is just recently that M&S are excepting credit cards!
Market Research and Marketing Research a difference.
A common mistake by many students, lecturers and textbooks is that there is no understanding of the clear distinction between market research and marketing research.
Market Research: Involves researching specific industry's or markets. Researching the computer industry to discover the number of competitors and their market share will be an example of market research.
Marketing Research: Marketing Research goes further. Marketing Research analyses a given marketing opportunity or problem, defines the research and data collection methods required to deal with the problem or take advantage of the opportunity, through to the implementation of the project. In essence marketing research aims to discover the root cause for a specific problem within an organisation ( eg declining sales) and put forward solutions to that problem.
Data Types
There are two types of data to be collected:
Qualitative Data: Focuses on people's opinions and attitudes towards a product or service.
Quantitative Data: Focuses on collecting data for numerical analysis.
Research Types
Internal Research
Internally an organisation has access to a wealth of information, which can be a useful tool for decision making for managers. Information available may assist the organisation in discovering why sales are decreasing, why customers are not satisfied, customer usage rates and so on. Sources of internal research may include:
* National product sales.
* Regional product sales.
* Customer usage rates.
* Guarantee cards.
* Customer comments or complaints.
* Sales people, research and development staff.
* Past research conducted.
Clearly as this information can be generated internally the only cost implication will be of staff time obtaining the data.
Secondary Research
Is research already published, and is the cheapest form of research because the data already exists for your acquisition. Sources of secondary data include:
* Periodicals.
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* National product sales.
* Regional product sales.
* Customer usage rates.
* Guarantee cards.
* Customer comments or complaints.
* Sales people, research and development staff.
* Past research conducted.
Clearly as this information can be generated internally the only cost implication will be of staff time obtaining the data.
Secondary Research
Is research already published, and is the cheapest form of research because the data already exists for your acquisition. Sources of secondary data include:
* Periodicals.
* Specialist marketing reports i.e Mintel
* Industry magazines.
* Chamber of commerce.
* Government statistics.
* Internet.
* Professional bodies.
* Trade associations.
It is important that the validity of the data is checked and it is not out of date!
Primary Research
Primary research is research used to collect data for a specific task. Types of primary data collection methods include:
* Personal Observation: The observation of the respondent by a trained observer or by electronic equipment (camera). The aim is to observe consumer responses and behaviour to a product or customer service.
* Personal Interviews: Face to face interview between an interviewer and the respondent.
* Postal surveys: Mailing or distributing door to door a written questionnaire to a sample of buyers for their completion at home or at work.
* Telephone Surveys: Involves the interviewer contacting the target respondent and asking them questions and recording responses.
* Focus Groups: A discussion between six - eight individuals with the aim to produce qualitative data (opinions and attitudes) on the topic being discussed. The topic may be their opinions on a new product the organisation wishes to introduce.
Marketing Environment
There are many variables that operate within an organisations environment that have a direct or indirect influence on their strategy. A successful organisation is one which understands and can anticipate and take advantage off changes within their environment.
An organisations operating environment can be analysed by looking at:
* External forces (those factors that an organisation has no control over),
* Internal forces (factors that an organisation has direct control over)
The external environment of an organisation can be analysed by conducting a P.E.S.T analysis. This is a simple analysis of an organisation Political, Economical Social and Technological environment.
Political
Political factors can have a direct impact on the way business operates. Decisions made by government affect our every day lives and can come in the form of policy or legislation. The governments introduction of a statutory minimum wage affects all businesses, as do consumer and health and safety laws and so on. The current increase in global petrol prices is having a profound impact on major economies, it is estimated that £200bn has been added to the global fuel bill since the price increases started (BBC news 19/9/00).
The political decision as to whether the UK signs up to the Single European Currency is again having an impact on UK businesses. Firms like Nissan who have recently invested in the UK have signaled that they will withdraw their business from the UK if the government fails to sign up.
Economical
All businesses are affected by economical factors nationally and globally. Interest rate policy and fiscal policy will have to be set accordingly. Within the UK the climate of the economy dictates how consumer may behave within society. Whether an economy is in a boom, recession or recovery will also effect consumer confidence and behaviour.
An economy which is booming, is characterised by certain variables. Unemployment is low, job confidence is high, because of this confidence spending by consumers is also high. This has an impact on most businesses. Organisations have to be able to keep up with the increased demand if they are to increase turnover. An economy which is in a recession is characterised by high unemployment, and low confidence. Because of high unemployment spending is low, confidence about job security is also low. Businesses face a tough time, consumers will not spend because of low disposable income. Many businesses start cutting back on costs i.e. Labour, introduce shorter weeks and cut back on advertising to save money.
Case: In the early 1990's when the UK economy was in a slump, and businesses were folding repeatedly, a security company called 'Dreadlocks security' to combat falling sales embarked on strategy of cutting back on labour costs, and doubling advertising expenditure. The companies' theory was that not their entire target segment was affected by the recession and he had to fight for the customers that still had the income to spend on security products.
Economies globally also have an impact on UK businesses, cheaper labour abroad affects the competitiveness of UK products nationally and globally. An increase in interest rates in the USA will effect the share price of UK stocks or adverse weather conditions in India may affect the price of tea.
A truly global player has to be aware of economic conditions across all borders and ensure they employ strategies and tactics that their protects their business.
Social
Within society forces such as family, friends, media affect our attitude, interest and opinions. These forces shape who we are as people and the way we behave and what we ultimately purchase. For example within the UK peoples attitudes are changing towards their diet and health. As a result the UK is seeing an increase in the number of people joining fitness clubs and a massive growth for the demand of organic food. On the other end of the spectrum the UK is worried about the lack of exercise its youngster are obtaining. These 'fast food games console' children are more likely to experience health problems in their future because of the lifestyle they are living now.
Population changes also have a direct impact on all organisations. Changes in the structure of a population will effect the supply and demand of goods and services within an economy.
In Japan the fall in the birth rate has had a major impact on the sales of toys, as demand falls competition for the remaining market becomes very intense. If this trend continues it will have an impact on other sectors within the future affecting teen products, 20's products and so on.
As society changes, as behaviours change organisations must be able to offer products and services that aim to complement and benefit peoples lifestyle and behaviour.
Technological
Changes in technology is changing the way business operates. The Internet is having a profound impact on the marketing mix strategy of organisations. Consumers can now shop 24 hours a day comfortably from their homes. The challenge these organisation faces is to ensure that they can deliver on their promise. Those businesses, which are slow to react, will fall at the first few hurdles. This technological revolution means a faster exchange of information beneficial for businesses as they can react quickly to changes within their operating environment.
There is renewed interest by many governments to encourage investment in research and development and develop technology that will give their country the competitive edge. The pace of technological change is so fast that in the computer industry the average life of a computer chip is approximately 6 months. In the name of progression technology will continue to evolve organsiations that continue to ignore this will face extinction.
SWOT Analysis
A tool used by organisations to help the firm establish its Strengths, Weaknesses, Opportunities and Threats (SWOT). A SWOT analysis is used as a framework to help the firm develop its overall corporate, marketing, or product strategies. Note:Strengths and Weaknesses are internal factors which are controllable by the organisation. Opportunities & threats are external factors which are uncontrollable by the organisation.
Strenght examples could include:
* A strong brand name.
* Market share.
* Good reputation.
* Expertise and skill.
Weaknesses could include:
* Low or no market share.
* No brand loyalty.
* Lack of experience.
Opportunities could include:
* A growing market.
* Increased consumer spending.
* Selling internationally.
* Changes in society beneficial to your company.
Threats could include:
* Competitors
* Government policy eg taxation, laws.
* Changes in society not beneficial to your company.
A SWOT analysis is an excellent tool to use if the organisation wants to take a step back and assess the situation they are in. Issues raised from the analysis are then used to assist the organisation in developing their marketing mix strategy. A SWOT analysis must form the part of any prudent marketing strategy.
Ansoffs Matrix
A common tool used within marketing was developed by Igor Ansoff in 1957. His model gives organisation five strategic business options.
. Market Penetration: This involves increasing sales of an existing product and penetrating the market further by either promoting the product heavily or reducing prices to increase sales.
2. Product Development: The organisation develops new products to aim within their existing market, in the hope that they will gain more custom and market share. For Example Sony launching the Playstation 2 to replace their existing model..
3. Market Development: The organisation here adopts a strategy of selling existing products to new markets. This can be done either by a better understanding of segmentation, i.e who else can possibly purchase the product or selling the product to new markets overseas.
4. Diversification: Moving away from what you are selling (your core activities) to providing something new eg Moving over from selling foods to selling cars.
5. Consolidation: Where the organisation adopts a strategy of withdrawing from particular markets, scaling back on operations and concentrating on its existing products in existing markets.
Boston Consultancy Group (BCG Matrix)This product portfolio matrix classifies product lines into four categories. The BCG models suggests that organisations should have a healthy balance of products within their range. The Boston Consultancy Group classified these products as following:
Dogs These are products which have low market shares and low market growth rates. The options for many companies is to phase these products out, however some organisation do go for the strategy of re-inventing and injecting new life into the product. (see Heinz Case Study)
Question Mark/Problem Child These are products with low market share but operate in high market growth rates. The company puts a lot of resources in this product in the hope that it will eventually increase market share and generate cash returns in the future.
Star Stars have high market shares that operate in growing markets. The product at this stage should be generating positive returns for the company.
Cash Cow Cash Cow are products at the mature stage of the lifecycle, they generate high amounts of cash for the company, but growth rate is slowing. There are chances that the product may slip into decline, appropriate marketing mix strategies should be employed to try to prevent this from happening.
Product strategies
When an organisation introduces a product into a market they must ask themselves a number of questions.
. Who is the product aimed at?
2. What benefit will they expect?
3. How do they plan to position the product within the market?
4. What differential advantage will the product offer over their competitors?
We must remember that Marketing is fundamentally about providing the correct bundle of benefits to the end user, hence the saying 'Marketing is not about providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer' (P.Tailor 7/00)
Philip Kotler in Principles of Marketing devised a very interesting concept of benefit building with a product
For a more detailed analysis please refer to Principles of Marketing by P.Kotler.
Kotler suggested that a product should be viewed in three levels.
Level 1: Core Product. What is the core benefit your product offers?. Customers who purchase a camera are buying more then just a camera they are purchasing memories.
Level 2 Actual Product: All cameras capture memories. The aim is to ensure that your potential customers purchase your one. The strategy at this level involves organisations branding, adding features and benefits to ensure that their product offers a differential advantage from their competitors.
Level 3: Augmented product: What additional non-tangible benefits can you offer? Competition at this level is based around after sales service, warranties, delivery and so on. John Lewis a retail departmental store offers free five year guarantee on purchases of their Television sets, this gives their `customers the additional benefit of 'piece of mind' over the five years should their purchase develop a fault.
Product Decisions
When placing a product within a market many factors and decisions have to be taken into consideration. These include:
Product design - Will the design be the selling point for the organisation as we have seen with the iMAC, the new VW Beetle or the Dyson vacuum cleaner.
Product quality: Quality has to consistent with other elements of the marketing mix. A premium based pricing strategy has to reflect the quality a product offers.
Product features: What features will you add that may increase the benefit offered to your target market? Will the organisation use a discriminatory pricing policy for offering these additional benefits?
Branding: One of the most important decisions a marketing manager can make is about branding. The value of brands in today's environment is phenomenal. Brands have the power of instant sales, they convey a message of confidence, quality and reliability to their target market.
Brands have to be managed well, as some brands can be cash cows for organisations. In many organisations they are represented by brand managers, who have hugh resources to ensure their success within the market.
A brand is a tool which is used by an organisation to differentiate itself from competitors. Ask yourself what is the value of a pair of Nike trainers without the brand or the logo? How does your perception change?
Increasingly brand managers are becoming annoyed by 'copycat' strategies being employed by supermarket food retail stores particular within the UK . Coca-Cola threatened legal action against UK retailer Sainsbury after introducing their Classic Cola, which displayed similar designs and fonts on their cans.
Internet branding is now becoming an essential part of the branding strategy game. Generic names like Bank.com and Business.com have been sold for £m's. ( Recently within the UK banking industry we have seen the introduction of Internet banks such as cahoot.com and marbles.com the task by brand managers is to insure that consumers understand that these brands are banks!
Market Segmentation An organisation cannot satisfy the needs and wants of all consumers. To do so may result in a massive drain in company resources. Segmentation is simply the process of dividing a particular market into sections, which display similar characteristics or behaviour. There are a number of segmentation variables that allow an organisation to divide their market into homogenous groups. These variables will be discussed briefly below
Demographic Segmentation Demographics originates from the word 'demography' which means a 'study of population'. The population can be divided into age, gender, income, and family lifecycle amongst other variables.
As people age their needs and wants change, some organisations develop specific products aimed at particular age groups for example nappies for babies, toys for children, clothes for teenagers and so on. Gender segmentation is commonly used within the cosmetics, clothing and magazine industry. All Bar One within the UK have developed their bars to attract the female audience, taking opportunity of the rise in the number of women who now enjoy 'social drinking'. In the UK we have also seen the introduction of Maxim, (www.maxim-magazine.co.uk) a male lifestyle magazine covering male fashion, films, cars, sports and technology. We have also seen the introduction of unisex cosmetic products like CK1 which works on the similarities between the two genders.
Age & lifecycle segmentation: As people age their needs and lifestyles change.
Income segmentation is another strategy used by many organisations. Stores like Harrods, Harvey Nicohals are predominantly aimed at the affluent market. Daewoo aim their vehicles at price sensitive buyers who require a bundle of benefits for the price. In today's globally competitive environment brands are specifically developed and positioned within particular income segments inorder to maximise turnover.
Products and services are also aimed at different lifecycle segments. Holidays are developed for families, the 18-30's singles, and for those in their 50's.
Pyschographics Segmentation
Although demographic segmentation is useful, marketers can use alternative segmentation variables which aim to develop more accurate profiles of their target segments. Pyschrographics segmentation can be broken down into lifestyle, social class, and personality characteristics.
Lifestyles segmentation
The Oxford English dictionary defines a lifestyle 'as a way of life' and lifestyle segmentation aims to examine the way people live.
Our lifestyle, our every days activities, our interest, opinions and beliefs on certain issues dictates who we are. Marketers refer to these as AIO's (Activities, Interest and Opinions), and our AIO's dictate our everyday behaviour from where we shop to what we buy. Marketers develop and aim products/services at particular lifestyle groups and develop lifestyle profiles on their target market. If we understand the lifestyle of a particular group we can sell them a product/services on the basis that it will enhance their lifestyle. A lifestyle group is a particular segment defined by the organisation that is marketing a product or service. This lifestyle segment is labeled because individual within it display similar characteristics. For example in the early 1980s within the UK as the economy was booming the City of London were increasingly employing young independent staff on very high salaries. The media termed this group as YUPPIES, they were young upwardly mobile professionals, associated with mobile phones, money, expensive cars, and prestigious city jobs.
Third agers are another group termed and identified by the marketing industry. They are people in their 50's retired from a profession, and have a high disposable income with time on the hand.
Many of these third-agers are adventurous and experimenters, as they have spent their past lives working hard and they seek enjoyment from their remaining years and have the income to spend on luxury items. In the United States there are 70 million third-agers who are the fastest growing users of the internet, spending more time on the internet then their younger counterpart. www.thirdage.com has a hit rate of 500,000 per month.
Lifestyle groups
Personality Characteristics.
Products and brands can also be aimed at particular personalities. Pigaio motorcycles are aimed at young 18-25 outgoing, independent persons. Often marketers try to develop personalities for their brands and products that mimic that of their target market. Ask yourself if Nike or Levi's was a person, what type of person would they be?
Social Class Segmentation
Divides society into 6 distinct groups based solely on occupation.
A Professional staff
B Middle management
C1 Junior management
C2 Skilled manual
D Semi-skilled and unskilled workers.
E Those dependent on the state.
Social class segmentation works on the assumption that the higher your profession the more you will earn. Thus the more affluent lifestyle you will lead. Marketers use this type of information to sell products and services based on lifestyle behaviour, and your profession does have an impact on the way you behave.
Behavioural Segmentation
Refers to why people purchase a product or service. Behavioural segmentation can be broken down into the benefit a consumer seeks from purchasing a product. How will the product enhance their overall lifestyle. When purchasing a computer the benefit sought maybe of 'ease of use' to the 'need for speed'. Occasion is another variable. When should a product be purchased? The demand for turkeys increases during Christmas, flowers and chocolates on mothers day and so on. Occasion segmentation aims to increase the 'reason to buy factor' and thus increase sales. Usage rate divides customers into light, medium and heavy users. Heavy users obviously contribute more to turnover then light or medium users, the objective of an organisation should be to attract heavy users who will make a greater contribution to company sales.
Targeting
After the process of segmentation the next step is for the organisation to decide how it is going to target these particular group(s). There are three targeting options an organisation can adopt.
Option 1.
Undifferentiated marketing - Sometimes referred to as mass marketing the firm may decide to aim its resources at the entire market with one particular product. Coca Colas original marketing strategy was based on this form. One product aimed at the mass market in the hope that a sufficient amount of buyers would be attracted., although there are now changes in their product line to cater for growing dietary and caffeine free needs of consumers.
Option 2
Differentiated marketing strategy - Where the firm decides to target several segments and develops distinct products/services with separate marketing mix strategies aimed at the varying groups. An example of this would be airline companies offering first, business (segment 1) or economy class tickets (segment 2) , with separate marketing programmes to attract the different groups.
Option 3
Concentrated Marketing: Where the organisation concentrates its marketing effort on one particular segment. The firm will develop a product that caters for the needs of that particular group. For example Rolls Royce cars aim its vehicles at the premium segment, same as Harrods within the UK.
Positioning.
After an organisation has selected its target market the next stage is to decide how it wants to position itself within that chosen segment. Positioning refers to 'how organisations want their consumers to see their product'. What message about the product or service is the company trying to put across. Daewoo cars has successfully positioned themselves as the family value model. The Skoda brand which has been taken over by Volkswagen has been re-positioned as a vehicle which had negative brand associations, to one which regularly wins car of the year awards. The positive comments from the industry and attributes of this vehicle is slowly changing the perception of consumers about the Skoda brand.
Developing a positioning strategy
Developing a positioning strategy depends much on how competitors position themselves. Do organisations want to develop 'a me too' strategy and position themselves close to their competitors so consumers can make a direct comparison when they purchase, or does the organisation want to develop a strategy which positions themselves away from their competitors. Offering a benefit which is superior depends much on the marketing mix strategy the organisation adapts. The pricing must reflect the benefit offered, the promotion strategy must communicate this benefit.
Ultimately positioning is about how you want consumers to perceive your products and services and what strategies you would adopt to reach this perceptual goal.
Pricing
Is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organisation. The remaining 3p's are the variable cost for the organisation. It costs to produce and design a product, it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean a loss of sales for the organisation. Pricing should take into account the following factors:
* Fixed and variable costs.
* Competition
* Company objectives
* Proposed positioning strategies.
* Target group and willingness to pay.
Pricing Strategies
An organisation can adopt a number of pricing strategies. The pricing strategies are based much on what objectives the company has set itself to achieve.
Penetration pricing: Where the organisation sets a low price to increase sales and market share.
Skimming pricing: The organisation sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer.
Competition pricing: Setting a price in comparison with competitors.
Product Line Pricing: Pricing different products within the same product range at different price points. An example would be a video manufacturer offering different video recorders with different features at different prices. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximising turnover and profits.
Bundle Pricing: The organisation bundles a group of products at a reduced price.
Psychological pricing: The seller here will consider the psychology of price and the positioning of price within the market place. The seller will therefore charge 99p instead £1 or $199 instead of $200
Premium pricing: The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Harrods, first class airline services, porsche etc.
Optional pricing: The organisation sells optional extras along with the product to maximise its turnover. This strategy is used commonly within the car industry.
Promotion Strategies -
A successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market. An organisations promotional strategy can consist of:
Advertising: Is any non personal paid form of communication using any form of mass media.
Public relations: Involves developing positive relationships with the organisation media public. The art of good public relations is not only to obtain favorable publicity within the media, but it is also involves being able to handle successfully negative attention.
Sales promotion: Commonly used to obtain an increase in sales short term. Could involve using money off coupons or special offers.
Personal selling: Selling a product service one to one.
Direct Mail: Is the sending of publicity material to a named person within an organisation. There has been a massive growth in direct mail campaigns over the last 5 years. Spending on direct mail now amounts to £18 bn a year representing 11.8% of advertising expenditure ( Source: Royal Mail 2000). Organisations can pay thousands of pounds for databases, which contain names and addresses of potential customers.
Direct mail allows an organisation to use their resources more effectively by allowing them to send publicity material to a named person within their target segment. By personalising advertising, response rates increase thus increasing the chance of improving sales. Listed below are links to organisation who's business involves direct mail.
Message & Media Strategy -
An effective communication campaign should comprise of a well thought out message strategy. What message are you trying to put accross to your target audience?. How will you deliver that message? Will it be through the appropiate use of branding? logos or slogan design?. The message should reinforce the benefit of the product and should also help the company in developing the positioning strategy of the product. Companies with effective message strategies include:
Nike: Just do it.
Toyota: The car in front is a Toyota.
Media strategy refers to how the organisation is going to deliver their message. What aspects of the promotional mix will the company use to deliver their message strategy. Where will they promote? Clearly the company must take into account the readership and general behaviour of their target audience before they select their media strategy. What newspapers do their target market read? What TV programmes do they watch? Effective targeting of their media campaign could save the company on valuable financial resources.
Push & Pull Strategies -
Above a pull strategy (left) push strategy (right).
Communication by the manufacturer is not only directed towards consumers to create demand. A push strategy is where the manufacturer concentrates some of their marketing effort on promoting their product to retailers to convince them to stock the product. A combination of promotional mix strategies are used at this stage aimed at the retailer including personal selling, and direct mail. The product is pushed onto the retailer, hence the name. A pull strategy is based around the manufacturer promoting their product amongst the target market to create demand. Consumers pull the product through the distribution channel forcing the wholesaler and retailer to stock it, hence the name pull strategy. Organisations tend to use both push and pull strategies to create demand from retailers and consumers.
Communication Model - AIDA
AIDA is a communication model which can be used by firms to aid them in selling their product or services. AIDA is an Acronym for Attention, Interest, Desire, Action.. When a product is launched the first goal is to grab attention. Think, how can an organisation use it skills to do this? Use well-known personalities to sell products? Once you grab attention how can you hold Interest, through promoting features, clearly stating the benefit the product has to offer? The third stage is desire, how can you make the product desirable to the consumer? By demonstrating it? The final stage is the purchase action, if the company has been successful with its strategy then the target customer should purchase the product.
Promotion through the Product lifecycle. - Click here if you want Edward to read this bit.
As products move through the four stages of the product lifecycle different promotional strategies should be employed at these stages to ensure the healthy success and life of the product .
Stages and promotion strategies employed.
Introduction When a product is new the organisations objective will be to inform the target audience of its entry. Television, radio, magazine, coupons etc may be used to push the product through the introduction stage of the lifecycle. Push and Pull Strategies will be used at this crucial stage.
Growth As the product becomes accepted by the target market the organisation at this stage of the lifecycle the organisation works on the strategy of further increasing brand awareness to encourage loyalty.
Maturity At this stage with increased competition the organisation take persuasive tactics to encourage the consumers to purchase their product over their rivals. Any differential advantage will be clearly communicated to the target audience to inform of their benefit over their competitors.
Decline As the product reaches the decline stage the organisation will use the strategy of reminding people of the product to slow the inevitable
Internet promotion.
The development of the world wide web has changed the business environment forever. Dot com fever has taken the industry and stock markets by storm. The e-commerce revolution promises to deliver a more efficient way of conducting business. Shoppers can now purchase from the comfort of their home 24 hours a day 7 days a week. However, particularly in the UK the e-commerce revolution is hindered by two factors. Firstly the cost of logging on to the net. Consumers are still weary of the time-spent surfing, the high cost is slowing down the take-up. The number of homes that are linked to the web in the UK is only 25% of all house owner. If e-commerce businesses are to succeed the home penetration rate of internet access must also increase. Secondly, most homes are linked to modems of 56K. As the growth of people signing on-line grows the access speed slows down. In America most consumers only spend 10 seconds browsing on a web page, before they change sites, within the UK it is 2 minutes. The future seems to be with ADSL networks which will speed up access to the Internet dramatically running at 512K per second. However, again whether this format is adapted depends much on the cost.
Owning a website is a now a crucial ingredient to the marketing mix strategy of an organisation. Consumers can now obtain instant information on products or services to aid them in their crucial purchase decision. Sony Japan took pre-orders of their popular Playstaion 2 console over the net, which topped a 1 million after a few days, European football stars are now issuing press releases over the web with the sites registered under their own names. Hit rates are phenomenal.
Marketing Mix: Place
Place strategies
Refers to how an organisation will distribute the product or service they are offering to the end user. The organisation must distribute the product to the user at the right place at the right time. Efficient and effective distribution is important if the organisation is to meet its overall marketing objectives. If organisation underestimate demand and customers cannot purchase products because of it profitability will be affected.
What channel of distribution will they use?
Two types of channel of distribution methods are available. Indirect distribution involves distributing your product by the use of an intermediary. Direct distribution involves distributing direct from a manufacturer to the consumer e.g. For example Dell Computers. Clearly direct distribution gives a manufacturer complete control over their product.
Above indirect distribution (left) and direct distribution (right).
Distribution Strategies
Depending on the type of product being distributed there are three common distribution strategies available:
. Intensive distribution: Used commonly to distribute low priced or impulse purchase products eg chocolates, soft drinks.
2. Exclusive distribution: Involves limiting distribution to a single outlet. The product is usually highly priced, and requires the intermediary to place much detail in its sell. An example of would be the sale of vehicles through exclusive dealers.
3. Selective Distribution: A small number of retail outlets are chosen to distribute the product. Selective distribution is common with products such as computers, televisions household appliances, where consumers are willing to shop around and where manufacturers want a large geographical spread.
If a manufacturer decides to adopt an exclusive or selective strategy they should select a intermediary which has experience of handling similar products, credible and is known by the target audience.
