“The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” DrukerThe aim of marketing is to.

“The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.

” Druker

Thought for the day:

• L/O: Identify and explain the elements of the marketing mixShow knowledge and awareness of the four main elements ofthe marketing mix [product, price, place and promotion]

To see how much you know already

• Pre-Quiz – you are NOT expected to get these all right!

• http://www.bbc.co.uk/schools/gcsebitesize/business/marketing/

• Do each of the tests –Product, Price, Place, Promotion only

• When marking indicate which you go correct or incorrect on the handout

• Hand in to teacher with your name

• A company needs to consider the marketing mix in order to meet their consumers' needs effectively.

• Elements of the marketing mix• The marketing mix is the combination of

product, price, place and promotion for any business venture.

Marketing mix·

• The marketing mix is probably the most famous marketing term. Its elements are the basic, tactical components of a marketing plan.

• No one element of the marketing mix is more important than another – each element ideally supports the others.

• Firms modify each element in the marketing mix to establish an overall brand image and unique selling point that makes their products stand out from the competition.

Marketing mix·

• Product• Place • Price• Promotion

PRODUCT

• Demonstrate an understanding of the product life cycle• Knowledge and understanding of the importance of packaging

• Awareness of the concept of a brand name in influencing sales

• Knowledge of the stages of a product life cycle• Draw and interpret a product life cycle diagram• Understanding of the significance of the four main stages of theproduct life cycle• Show awareness of extension strategies

What is a product?• A business can adjust the features, appearance and packaging of a

product to create competitive advantage.• Brands use packaging and logos to create a brand image• A product is a good or a service that is sold to customers or other

businesses. Customers buy a product to meet a need. • This means the firm must concentrate on making products that best meet

customer requirements. • Pg 143 ‘Stages in creating a product’• A business needs to choose the function, appearance and cost most likely

to make a product appeal to the target market and stand out from the competition. This is called product differentiation.

• Awareness of the concept of a brand name in influencing sales• Knowledge and understanding of the importance of packaging

How product differentiation is created:

• Establishing a strong brand image (personality) for a good or service.

• Making clear the unique selling point (USP) of a good or service, for example, by using the tag line quality items for less than a pound for a chain of discount shops.

• Offering a better location, features, functions, design, appearance or selling price than rival products.

• Having a brand image helps products to stand out in a competitive market

• Packaging

How product differentiation is created:

• Firms face a dilemma if they choose to launch a premium brand. Improving the quality or appearance of a product adds to the cost of making it. In turn, this means that the business must charge higher prices if they are to make a profit.

• An alternative marketing strategy is to produce a budget brand. If a mobile phone has limited functions and a standard design then it can be manufactured cheaply. The low production costs allow for discount pricing.

• -pg 143• Define branding• What is the benefit?• How does packaging help market and sell a

product?

The Product Life-Cycle• These are:• Introduction (launch)• Growth• Maturity• Saturation• Decline

• Pg 144

• In the launch and growth stages sales rise. In the maturity stage, revenues flatten out.• Getting a product known beyond the launch stage usually requires costly promotion activity. • At some point sales begin to decline and the business has to decide whether to withdraw the item or use an extension strategy to bolster sales. Extension strategies include

updating packaging, adding extra features or lowering price.

The Product Life-Cycle• Activity 25.2 • pg 145

MARKETING MIX

PRODUCT PRICE

PROMOTION PLACEPP

PP

MarketingMix

Product Price Promotion

AppearanceFunction

Cost

Cost basedCompetitor basedConsumer based

AdvertisingSales promotionPersonal selling

Place

RetailersWholesalersDistribution

Product

• Brand loyalty – what makes customers stick to a particular brand?

• Product differentiation created by:– Unique design– Unique product function e.g. iphone– Unique taste e.g. Dr Pepper– Superior performance e.g. Dyson

Product Life Cycle

Shows the different stages in the life of a product and sales that can be expected at each stage.

Sales

TimeIntroduction Growth Maturity DeclineDevelopmen

tSaturation

• Similar products enter the market

•Price lowered

•Some businessesmy be forcedout of the market

• Sales falling• Profits continue to fall

•Sales reach its highest point

•Rate of growth Slows

•Competitors enterthe market

• Sales increasingrapidly

• Profits will reach their highest at the end of this stage

• Sales are low

• Profits will be negative

• Product may be unknown

• Product is being designed

Use of the PLC

• Illustrate the broad trends in sales revenue

• Identify points at which the business may need to consider launching new products as older ones are in decline

• Help business identify when and where spending is required e.g. advertising

Different life cycles

• Products with long life cycle?

• Products with short life cycle?

Extension Strategies

• Find new uses for the products

• Finding new markets for existing products

• Develop a wider product range

• Aiming the product towards specific target markets

• Changing appearance or packaging

Boston Matrix• Star products have a high market share in a

fast growing market.• Cash Cows have a high market share in a

slow growing market.• Question marks or problem children

products have a low market share in fast growing markets.

• Dogs are products with a low market share in slow growing markets.

Firms with just a few items in their product portfolio – or who have all their products at the same stage in the product life cycle – are in the dangerous position of having ‘all their eggs in one basket’. Such firms may prioritise broadening their product range.

Not on syllabus, but useful

ACTIVITY TASK

• Describe your product, the tangible things eg. Design, Size, colour, packaging

• Why have these been chosen? (AO4)

• Extra features – after sales service, customer care policy.

• Additional features, what is your unique selling point (USP)

•L/O Apply the elements of the marketing mix to given situations.

PRODUCT QUIZ

• QUIZ: http://www.bbc.co.uk/schools/gcsebitesize/business/marketing/brandingandpackaging/quiz/q23590578/

PRICE

Understand how pricing decisions are made• Understand the main methods of pricing: cost plus, competitive,

psychological, penetration, price skimming• Show awareness of the implications of the methods

PRICE• A business must take many factors into account before deciding on the price of a product. Pricing strategies• Remember there is a big difference between costs and price. Costs are the expenses of a

firm. Price is the amount customers are charged for items.• Firms think very carefully about the price to charge for their products.

• There are a number of factors to take into account when reaching a pricing decision:• Customers. Price affects sales. Lowering the price of a product increases customer demand.

However, too low a price may lead customers to think you are selling a low quality ‘budget product’.

• Competitors. A business takes into account the price charged by rival organisations, particularly in competitive markets. Competitive pricing occurs when a firm decides its own price based on that charged by rivals. Setting a price above that charged by the market leader can only work if your product has better features and appearance.

• Costs. A business can make a profit only if the price charged eventually covers the costs of making an item. One way to try to ensure a profit is to use cost plus pricing. For example, adding a 50% mark up to a sandwich that costs £2 to make means setting the price at £3. The drawback of cost plus pricing is that it may not be competitive.

• There are times when businesses are willing to set price below unit cost. They use this loss leader strategy to gain sales and market share.

PRICE

Pricing new products

• Half price sales are an example of penetration pricing• A business can choose between two pricing tactics when

launching a new product: • Penetration pricing means setting a relatively low price to

boost sales. It is often used when a new product is launched, or if the firm’s main objective is growth.

• Price skimming means setting a relatively high price to boost profits. It is often used by well-known businesses launching new, high quality, premium products.

Some different pricing strategiesPg 148 - 149

Mindmap this answer…• Middlesbrough PC developed a new processor • Sold very well, but is now passing from its

growth stage into its maturity stage. • Competitors have already entered the market.

Suggest two promotional activities Middlesbrough PC might use. Give your reasons.

Sunderland PC Shop

My New PC Shop…. Hired a Manager

(Recently fired)

Cost Plus Pricing

Total Price $12.50

Cost $10.00

Mark up $2.50

Add 25%Cost-Plus:Setting a price which covers the cost of production plus a set amount of profit.

No Sales….

No Sales Round the corner

Competitive Pricing

$12

If there is strong competition in a market, customers have choice, business must set their prices competitively.

$12

Psychological Pricing

• Used to play on consumer perceptions• Classic example - $9.99 instead of $10.00!• Links with value pricing – high value goods

priced according to what consumers THINK should be the price

We Got The Coolest Gadget…

We’re the only ones to have it…

Skimming

Cost $17

Price Skimming• High price, Low volumes• Skim the profit from the market• Suitable for products that have

short life cycles or which will face competition at some point in the future (e.g. after a patent runs out)

• Examples include: Playstation, jewellery, digital technology, new DVDs, etc.

Many are predicting a firesale in laptops as supply exceeds demand.Copyright: iStock.com

Competition may get them soon

But I bought a warehouse full….

We’d better sell them quick, get an exclusive deal and then I’ll put the price up….

Penetration pricing

Penetration Pricing• Price set to ‘penetrate the market’• ‘Low’ price to secure high volumes• Typical in mass market products – chocolate bars,

food stuffs, household goods, etc.• Suitable for products with long anticipated life cycles• May be useful if launching into a new market

Nobody Wants to Come in…We still haven’t shifted all

those pen drives…

Ok, we can make a loss on this one, but make sure they buy the other stuff too…Loss-leaders

What Strategy and why?ASDA launches a new range of own-label soups.

DFDS Seaways launches two new cruise ships.

Virgin Media Cable television moves into a new area and needs to achieve a market share.

Sunderland Marriot try to fill their hotel during winter weekends.

Burger King introduces a new range of value meals.

Influence of Elasticity

• Any pricing decision must be mindful of the impact of price elasticity

• The degree of price elasticity impacts on the level of sales and hence revenue

• Elasticity focuses on proportionate (percentage) changes

ACTIVITY TASK

• Discuss various pricing strategies? (AO1)• How much will you charge for your product

and why? (AO3)• What is the implication for this decision?

(AO3)

Knowledge…..

• Understand how pricing decisions are made• Understand the main methods of pricing: cost

plus, competitive, psychological, penetration, price skimming

• Show awareness of the implications of the methods

• -pg 148

PRICE

• Quiz:• http://www.bbc.co.uk/schools/gcsebitesize/b

usiness/marketing/productprice/quiz/q50352165/

• (Uses pounds – UK)

PLACE

Appreciate the importance of distribution channels and the factors that determine the selection of them• Knowledge and understanding of a distribution channel• Recommend and justify an appropriate channel in a givensituation

Place

• As part of its marketing strategy, a company needs to decide where best to distribute a product.

• What is place?• Place is the point where products are made

available to customers. A business has to decide on the most cost-effective way to make their products easily available to customers.

• PLACE: • Place refers to the Distribution Channel of a

Product - all aspects related to how a Product is ‘moved’ from the manufacturer to the customer.

• The Distribution Channel can be Direct or Indirect:

Wholesaler vs retailer-pg 152

Look at the different types of channel of distributionNote benefits & issues-pg 152 - 154

Channel of distribution

Typical marketing channels for consumer product

Producer Producer Producer

Wholesaler

Retailer

Customer

Retailer Customer

Customer

A B C

Channel of distribution

• This involves selecting the best channel of distribution. Potential methods include using:

• Retailers. Persuading shops to stock products means customers can buy items locally. However, using a middle man means lower profit margins for the producer

• Producers can opt to distribute using a wholesaler who buys in bulk and resells smaller quantities to retailers or consumers. This again means lower profit margins for the manufacturer.

Channel of distribution

• Telesales and mail order. Direct communication allows a business to get products to customers without using a high street retailer. This is an example of direct selling.

• Internet selling or e-commerce. Online selling is an increasingly popular method of distribution and allows small firms a low cost method of marketing their products overseas. A business website can be both a method of distribution and promotion.

• Developing new or improved channels of distribution can increase sales and allow a firm to grow.

ACTIVITY TASK

• How will you get your product to your customers? (AO1/2)

• What is your channel of distribution? (AO1/2)• Justify this choice (AO4)

•L/O Apply the elements of the marketing mix to given situations.

• QUIZ: http://www.bbc.co.uk/schools/gcsebitesize/business/marketing/productplace/quiz/q70135071/

Promotion

L/O: Understand the role of promotion• Understand the aims of promotion• Identify, explain and give examples of different forms ofpromotions• Understand how promotions influence sales• Justify an appropriate method of promotion in a given situation

Promotion

• There is much more to promotion than advertising. Businesses use various methods to gain publicity.

Customer awareness• Promotion refers to the methods used by a

business to make customers aware of its product. Advertising is just one of the means a business can use to create publicity.

Promotion

• The main objectives of promotion are

– To inform prospective customers of the product and the business

– To show the benefits of the product– To persuade potential customers to buy the

product– To present a good image

Promotion

• Your businesses objectives may include– To increase market share– To enter a new market or market segment– To extend the life of a product– To launch a new product into a market

• The success of a promotional campaign must be measured against these objectives

Methods of promotion

• Price reductions, special offers and free gifts persuade new customers to try a product and can give a boost to sales and that lasts longer than the promotion

• Free samples can increase awareness of a new product

• Competitions attract customers to new and existing products

Methods of promotion • Brochures and catalogues inform customers about a

product and present an image of the business• Point of sale promotion such as in-store displays

encourage impulse buying• Internet based using a web site and e-mail depends

on customers knowing where to look and providing an e-mail address

• After sales involves providing service backup and information as well as warranties and guarantees

Methods of promotion• Advertising should be targeted using

– Television: expensive and wide coverage– Radio: cheaper and smaller audience; no visual stimulus– Cinema: local audience– Newspapers and magazines: can be expensive but more

specialised; if kept can be long lasting– Posters: cheaper; have impact but may be ignored; little

opportunity for targeting– Leaflets: delivered to peoples homes or distributed in the

street; cheap but little opportunity for targeting

Methods of promotion

• Public relations– Press releases and news stories released to the press can

provide cheap promotion that can be targeted by using trade press

– Sponsorship of events and television programmes bring the product or business to peoples’ awareness but can be expensive

– Endorsement by celebrities associates the product with the celebrity

Methods

• List the difference between ‘above’ and ‘Below’ the line.

• -pg 158 – 162

• QUIZ: http://www.bbc.co.uk/schools/gcsebitesize/business/marketing/productlifecycle/quiz/q44385749/

• A theme and consistency should run throughout the marketing mix plan

• It must suit the target market

Creating a marketing Mix

You may chose to emphasis one of the four Ps

ACTIVITY TASK

• Why do you need to promote your product? (AO3)

• What aspects of the product are you promoting? (AO2)

• What are the different types of promotion and why are they likely to be successful? (AO1/AO3)

• Justify your choice of promotion (AO4)

Other factors

affecting the marketing mix-Marketing Strategy & Budget

Objective:

• Marketing Strategy-Understand how the mix can be used to influence consumer

purchasing-Understand how the marketing mix can change as the product

goes through its life cycle-Select and justify marketing methods appropriate to a given

situation-Understanding of the importance of the different elements of

the marketing mix and the ways in which they can be used separately or together to influence consumer purchases

-Recommend and justify a marketing strategy in a given situation

• Mixing & Strategy• Why Plan?• Planning process-Analysis of Business-Objectives

• -pg 163

Analysing the Business

• PEST• SWOT

Factors affecting the choice of marketing mix

• PESTLE:– Political– Economic– Social– Technological

• SWOT

• Strengths• Weakness• Opportunities• Threats

Setting Objecitves

Once done SWOT – able to set marketing objectives.Identify what you want to achieve over a period of time – covered by the marketing plan•Market penetration•Market development•Product development

Marketing Planning

• Different products marketed in different ways.• Methods depends on who you are targeting• Bullet point different ways for:o Market penetrationo Market developmento Product development(pg 165)

BUDGET

• Awareness of the need for a marketing budget• Knowledge of the concept of a marketing

budget• Understanding of the importance of such a

budget in terms of money available for the marketing function

• Awareness of the concept of cost effectiveness

Marketing Budget

BUDGET - a financial plan for the futureBased on forecasts and estimates- Master budget – The WHOLE BUSINESS (targets for income and expenditure)•Time•People•Materials & equipment•Costs

Factors affecting the choice of marketing mix

• Costs– All marketing activity costs money and the

availability of finance may restrict methods used– Changes in price affect profitability and the ability

to cover costs– The cost of a marketing campaign must be less

than additional revenue generated