4 Marketing Mix Chapter Outline O Introduction Meaning and Definitions Product Mix Place Mix Promotion Mix Price Mix People Extended Marketing Mix Additional P's Summary eo00000000 INTRODUCTION Marketing includes many interrelated and interdependent activities which facilitate exchange. Marketing mix is a combination of all these interrelated activities, that are used to satisfy customer and company objectives. As, it is mentioned in the earlier chapter that manufacturer first analyses the nature of consumer needs and then plans his product to give satisfaction to the consumers. The management, therefore is more concerned with markets and market behaviours to select specific marketing targets. They use marketing information to assess the situation and then select the specific marketing targets in the form of market segments. In order to achieve organizational objectives, the marketing manager selects a combination of wide choice of ingredients like product features, messages, prices and distribution methods to create a marketing mix. For each segment of the market a combination of these ingredients is formulated to reach a particular target market segment. MEANING AND DEFINITIONS The term ‘marketing mix’ refers to a unique blend of Product, Place, Price and Promotion, popularly known as four P's. These were originally proposed by marketer and academician E. Jerome McCarthy. The four Ps of marketing mix can be regarded as the ‘core’ of the company’sma Marketing marketing system. Marketing manager can control each component of the marketing mix as these ay controllable variables of marketing. But the strategies for all the components must be blended , achieve organizational objectives. These four elements are adjusted until the right combination found that serves the needs of the product's customers, while generating optimum income, fo, example, an excellent product with a poor distribution system will likely fail. According to Borden, “The marketing mix refers to the appointment of efforts, the combination, the] designing and the integration of the elements of marketing into a programme or mix which, on the basis of an appraisal of the market forces will best achieve an enterprise at a given time". According to Stanton, “Marketing mix is the term used to describe the combination of the four inputs which institute the core of a company’s marketing system — the product, the price structure, the promotional activities and the distribution system”. In the words of Dawer, “Group of various policies used by producer to succeed in market can be said as marketing mix.” Because of wide variety of products and wider markets, marketing is becoming more integrated into organization these days. Keeping today’s scenario in consideration, some authors have proposed fifth ‘P’ (People) to generate positive response in the target market. By blending, these five marketing mix variables in an optional manner, firms can successfully capture target markets. However, the marketing mix most commonly remains based on 4Ps. PRODUCT MIX Product Line Product Services Band Package Warranty PROMOTION MIX PRICE MIX MARKETING ‘Advertising id Price Strategy Personal selling Pen Basic Price Publicity FOCUSSED Terms of Credit Sales Promotion eter Discount aia Commission PLACE MIX Distribution Channels PEORLE Delivery Service Transport ‘Appearance Warehousing Unitorm Inventory Attitude PRODUCT MIX Product is the first element of marketing mix. Product refers to what the business or non-p'°" organization offers to its customers. Customers often expect more than a tangible product from “" organization. Therefore, it is important for companies to offer a ‘total product’ to customers in or alMarketing Mix ma to satisfy them. ‘Total product’ includes not only the basic product but also many services attached to it including package, brand, shape, design, style, warranty and service subsequent to sale etc. Product mix concerns with following decisions : 1. Development and introduction of new products. 2. Matching the products with needs and wants of target consumers. 3. Modifications (in term of qualities, features, and performance) on existing products. 4. Product-related strategies including branding, packaging, labelling, colour, weight, grading, etc. 5. Product line decisions including different varieties or models, and product mix decisions including width, depth, length, and consistency. 6. Product-related services like after-sales services, home delivery, guarantee, warrantee, and demonstration. 7. Study of competitive (or comparative) advantages of products. 8. Product life cycle, relevant strategies for each of the stages of product life cycle, and consumer adoption process. A company’s product mix has four main characteristics : Length, Width, Depth and Consistency. Length of product mix refers to total no. of items in its product mix. Width refers to how many product lines the company carries. For Example : Procter and Gamble has product mix width of five lines like hair care products, health care products, personal hygiene products, beverages and food. Depth of the product mix refers to the average number of items offered by the company in each product line. Continuing the above example, in hair care product line, a company may be offering two products i.e. shampoos and soaps. Consistency means how closely the various product lines are related in production requirements, distribution channels etc. The marketing manager has to take number of decisions related to product such as product additions, product deletions and product modifications on the basis of marketing information. Intelligent consumers of today buy things not only for what these things do but also for what they mean to them. Developing and planning a product involve making sure that it has the characteristics and features the customers want. Selecting a brand name is very important decision. Branding helps buyers to determine which manufacturer's products are to be avoided and which are to be bought. Branding helps sellers to develop loyal customers. Package also performs many functions. The packaging lends charm to the product and reinforces the brand name. In these days of self-service, every package design must attract attention of consumers where many more other packages are lying on the shelf to attract customer's. attention. Besides providing storage and safety to a product, package contains information related to ingredients, usage, legal restrictions, expiry and price etc. Warranty is also a part of total product. Product warranty which communicates a written guarantee of a product's integrity and outlines the manufacturer's responsibility for repairing or replacing defective parts, create satisfied customers.Pas] Marketing Miz PLACE (DISTRIBUTION) MIX Place (Distribution) mix strategies are concerned with making products available when and where customers want them. It cornprises of many activities or many decisions related to Channels of Distribution, Transportation, Warehousing and Inventory Control so that they arrive in usable condition at designated places when needed. The middlemen is a link between a producer and 2 consumer. So, a firm has to choose a proper channel of distribution of products which can provide various services ~ financing, gathering market information, marketing the products, distribution etc, Wholesalers and retailers assist manufacturers in distributing products to ultimate consumers because every organization does not have the resources or ability to manage all the activities required in the distribution process. Place decisions involve : @ Studying geographical concentration of customers. Studying types of distribution channels and channel members. (iii) Analyzing various relevant factors affecting channel decisions. (iv) Selecting suitable channel of distribution. (v) Strategic decisions related to distribution activities. (vi) Physical distribution including transportation, communication warehousing, inventory control, insurance, banking etc. (vii) Balancing distribution costs and selling price. (viii) Designing a suitable distribution network, and long-term distribution strategies. (&) Developing and adopting logistics management for effective distribution of products. Transportation decisions involve selecting the specific mode that will be used to physically move Products from manufacturer or wholesaler to the buyer. While selecting the mode of transport, nature of product must be considered like perishability, weight and fragility etc. Alternatives may be evaluated in terms of costs, speed, dependability of delivery and availability of transportation mode. Functions of Transport : 1. Ithelps in creating new markets, increases demand, 2. It helps in stabilizing the prices of the products by transporting them to the areas where they are needed. 3. It creates time utility by making available goods when they are demanded. 4. Itplaces significant role in economic, social, political development of the country. Another major aspect of distribution is Warehousing. It's necessary because of time lag betwee" Production and consumption. Marketing managers need to take number of decisions related '0 warehousing such as optimum number, location and types of warehouses needed, Importance of Storage/ Warehousing : 1. Storage helps in preserving the goods in the warehouses.Marketing Mix as per the demand of 2. It helps in price stabalization by supplying the goods in the market the products, 3. Storage helps in protecting the goods and warehousing against theft, deterioration, fire, etc. 4. Financing is facilitated as loans can be raised against the goods kept in the warehouses. 5. Warehouses provide the facilities of packing, processing and storage of goods. Inventory Control is another important decision taken in distribution mix. Managers should be cautious while taking decision relating to ideal level of inventory keeping supplier's costs as low as possible. Overstocking and out of stock should also be taken care of. PROMOTION MIX Promotion is the persuasive communication by the marketer to existing customers and potential buyers. Promotion includes advertising, sales promotion, personal selling and publicity. Through these activities of promotion marketers inform, educate, persuade and remind the customers about the product, its benefits and about an organization. A good promotion strategy sometimes dramatically increases a firm’s sales. Advertising has the ability to communicate to a large number of people at once. It is indirect and non-personal method of persuading consumers. Most commonly used methods of advertisement are Television and Magazines. Direct mailing of catalogues, and electronic media advertisement (buying through computers) are becoming popular these days. Personal selling. is face-to-face interaction between seller and buyer. No other tool of promotion has strong convincing power as personal selling. Due to face-to-face interaction of buyer and seller, personal selling alone can provide immediate feedback of information which is absent in advertisement and publicity. It enables a salesman to understand properly the buyer’s mind, his problems, his needs and his preferences. Publicity is similar to advertisement because like advertisement, publicity is done through same mass media. The only difference is that publicity involves an unpaid message whereas advertising is a paid form of message delivery. When information about a company, a product or an event is newsworthy, mass media may communicate that information ‘for free’. Defective products, unfair trade practices, anti-social activities often result in unfavourable publicity. Sales Promotion plays very important role in lubricating the marketing efforts. Sales promotion is a direct and open persuasion to the customer to try the product immediately. It stimulates consumer purchasing and dealer effectiveness. Sales promotion is done through exhibitions, trade fairs, displays, demonstrations, free samples, coupons and contests etc. (Discussed in detail in the later chapters) PRICE MIX Price is what a buyer must give up to obtain a product, It is the most flexible of the four components of the marketing mix because marketers can increase or decrease the price. Marketers must determine the best price for their products. They must ascertain a Product's value to customers In order to attract the buyers and deal with the competition basic price alternations can be made by manufacturer in the form of discounts, allowances and terms of credit.mo Marketing Mix Before setting the pricing policy, a company has to consider many factors. First and foremost factor is that a company must clear about its objectives i.e. whether company want maximum current profit or maximum sales growth or maximum market skimming or product quality leadership. After selecting the pricing objectives, company will determine demand and then estimate cost. The next step afterwards is anlaysis of competitor's costs, prices and_ offers. Keeping into consideration all these factors, company has to select pricing method. The pricing method will then lead to a specific price. Companies usually do not fix a single price but adopt different pricing strategi upon geographical demands and costs, market segment requirements, purchase timing, order levels, delivery frequency and service contracts etc. Most of the companies modify their basic price to reward customers for early payments, volume purchases and off-season buying. The most commonly used pricing strategies are Cost Plus, Competition based, Skimming, Penetration etc. given to wholesalers and retailers as a consideration for performing lealers sometimes allow ies depending Trade Discounts are marketing function on behalf of manufacturers. During slack seasons di seasonal discount to reduce storage cost. Special types of allowances are offered to retailers who are expected to perform promotional activities to push up the sales like advertisement allowance, window-display allowance, free samples etc. PEOPLE This is the fifth ‘P’ suggested by many authors in recent years. The standard of customer service provided is increasingly recognized as a key factor in determining company’s success or failure. Itis the people who have to perform all the marketing activities. ‘People’ decisions are related to customer service like decisions related to service, appearance, uniform and attitude of the sales persons. Customers make judgement about service provision and delivery based on the people representing an organization. Authors like Peters and Waterman pin-pointed the way in which a company’s employees behave as the main factor distinguishing their successful American Companies. How do you want your workers to appear to your customers ? This is an important question which requires attention of every company. For Example : These days, customers want excellent service in restaurants like tasty food, good presentation, quick service, smile on the face of waiters, their spic and span uniform, their polite words and full attention. This is the reason, why people prefer to visit Pizza hut and McDonalds. EXTENDED MARKETING MIX (7P’S OF MARKETING MIX) All the traditional elenents of the marketing mix are relevant ic. Having stores that are easily accessible, offering attractive prices, providing wide range of products, offering exciting and ey? catching promos. However, it is necessary to extend traditional 4Ps to encompass growth of service industry in an increasingly competitive world. In the context of services marketing, Booms and Bitner (1981) have suggested an extended 78 approach that contains the following Ps in addition to traditional 4 Ps. saeaeseaeseeseaeeeee eee aMarketing Mix People : All people directly or indirectly involved in the consumption of a service e.g. employees or consumers. People represent the business. (discussed earlier in this chapter). Process : Procedure, practices, mechanisms and flow of activities by which services are consumed, is a fundamental element of marketing strategy. Number of questions are given due importance in this element. How do people consumer services ? What process they have to go through to acquire the services ? Where do they find the availability of services ? In order to make marketing effective in an organization efficiency need to be achieved in the process for handling customers complaints, for identifying customer needs, for handing orders. For Example : Imagine you walk into Burger King and order a Whopper Meal and you get it delivered within 2 minutes. What was the process that allowed you to obtain an efficient service delivery ? Banks that send out Credit Cards automatically when their customers old one has expired again require an efficient process to identify expiry dates and renewal. An efficient service that replaces old credit cards will foster consumer loyalty and confidence in the company. In other words processes mean that everybody knows what to do and how to do it. Physical Evidence (Physical Environment): The physical environment is an important element of the modern marketing mix. The atmosphere of the physical environment affects marketing activities. Physical evidence is about where the service is being delivered from. It is particularly relevant to retailers operating out of shops. This element of the marketing mix will distinguish a company from its competitors. Physical evidence can be used to charge a premium price for a service and establish a positive experience. For Example : All hotels provide a bed to sleep on but one of the things affecting the price charged, is the condition of the room (physical evidence) holding the bed. Customers will make judgements about the organisation based on the physical evidence. For Example : If you walk into a restaurant you expect a clean and friendly environment, if the restaurant is smelly or dirty, customers are likely to walk out. This is before they have even received the service. The importance of quality physical layout is important in a range of service providers, including : * Students going to college or university have far higher expectations about the quality of their accommodation and learning environment than in the past. As a result colleges and universities pay far more attention to creating attractive learning environment, student accommodation, shops, bars and other facilities. © Air passengers expect attractive and stimulating environments, such as interesting departure lounges, with activities for young children etc. ADDITIONAL Ps 1. Provision of Customer Service - Customer service lies at the heart of modem service industries. Customers are likely to be loyal to organisations that serve them well ~ from the way in which a telephone query is handled, to direct face-to-face interactions. Call centre staff and customer interfacing personnel are the front line troops of any organisation and therefore need to be thoroughly familiar with good customer relation’s practice. 2. Packaging : Packaging is the process of covering, wrapping or crating the goods into a package. Packaging is the group of activities in product planning which involve designing andgr Marketing wiz producing the contziner or wrapper for 2 product. Packaging refers to the way ther product o; service appears from the outside. Small improvements in the packaging or external appearance of your product or service can often lead to completely different reactions from the customers. Present version of 4 P’s Then Now P P s A | Product Prie Solution Access P P Vv E Place Promotion Value Education Product becomes solution How: the product will help you has become the focus now. Place becomes Accessibility Where you can buy (flipcart, website, mobile app) is more important now. Price becomes value What value it adds to the individual has taken more precedence. Promotion becomes Education All brands try to educate the users on the benefits rather than promote with false promises, 25 customers have become more aware. : FACTORS AFFECTING MARKETING MIX Internal as well as external factors affect the marketing mix decisions. So marketing manager hs to see the factors while deciding on the marketing mix. Internal Factors These factors are internal to the organization and controllable in nature (not completely controllable). These are also known as organizational factors. (1) General and Marketing Objectives : All the activities, processes have to be directed towards the general and marketing objectives. The marketing managers will prepare the marketing mix programme keeping in view the marketing objectives and_the overall objectives to be achieved by the organization. 2) Availability of Funds : For entrepreneurs with more time than money, the cost of a marketing tool becomes a major factor in deciding which strategies are needed to implement to find prospects. If a firm has adequate funds, it can improve product quality and can spend heavily on advertising but in case of shortage of funds, the activities of marketing mix have to be planned accordingly. (3) Nature of the Product : The nature of the product determines the marketing mix. Consumer goods require a different marketing mix as it requires more promotion and distribution in mparison to the industrial goods. __ ) Stage of Product Life Cycle : Marketing policies and plans have to be made according to the lifferent stages of product life cycle. During the introduction stage, more expenditure on promotion 7Marketing Mix of a product is required as compared to growth and decline stage where more improvement in the existing product ot introduction of a new product is required. (5) Organization Structure : The structure of the organization will affect the marketing activities. Different structures of organization will enable a different authority reasonability relationshi between management and employees. (6) Philosophy of the Management: The ideas, philosophy, views of the manager will defini alfect the marketing miy decisions. Different managers think differently to prepare the marketing policies, plans and actions. External Factors ‘These factors are uncontrollable is nature. Also known as environmental factors. They have 2n important effect on the marketing decisions. (1) Demand : Demand in the market will affect the marketing mix decisions whether more Promotion is required or not, whether new product is to be introduced or improvement in the existing product is to be made. (2) Competition : The existence of competition in the market also influences the marketing mix. If there is stiff competition then, prices have to be Kept low and more promotion of the prox required. If the competition is not tough then prices of the product can be kept high. ) Economic Conditions and Business Cycle : The need for the product or service may decease or increase depending on economic upswings or downtums. duct is In case of boom, there is more demand, more production so activities have to be planed Way, in case of depression, there is low demand, so efforts have to be made to increase the dem=nd_ (4) Government Economic Policies and Restrictions : Govt. policy is 2n uncontrollzble cor but it affects the marketing mix decisions. Government pol and restrictions effect the working of the business firms as they have to plan their activities within the framework of Gort. policies end plans, The marketing manager should take into account the government policies while prep: marketing mi. (5) Suppliers and Middlemen : Distribution system is also an uncontrollable factor which the marketing mix decisions, If a firm is indulged in direct selling then large investment > Made in storing the goods, in promotion, etc. But if efficient distribution channels are 21 the firm’s expenditure in promotion and storage can be reduced. (6) Availability of Infrastructural Facilities like, transportation warehousing comm Insurance, banking will definitely affect the marketing mix decisions as the marketing act be more smoothly performed. So a marketing manager will analyse the availshility of the facESes 2 prepare the marketing mix programme.