Applied

Marketing
Session 5:
Marketing
Mix
Marketing Tactics: 4P’s

The marketing mix is the term given to the tactical tools the marketer has at their
disposal to achieve marketing objectives and strategies.

The Product/Service Spectrum

In reality, most products will have a service element – for example, an organisation
selling computer hardware to businesses will also provide support with using the
product, account management and customer service support

Anatomy of a Product
Model applied to a car:
• Core product – basic need being satisfied is transport
• Actual product – brand name, design and features of the car e.g.
tinted windows, satellite navigation
• Augmented product: value is added through after-sales service,
credit payment facilities and warranties.

Product/Service Mix
Product item – a specific version of the product/service that is distinct amongst the
businesses products
Product line – a group of closely related product/service items that are considered a
unit due to marketing or technology considerations
Product mix – the composite group of products/services that a company makes
available to customers
Depth of the product mix – the number of different products/services offered in
each product/service line
Width of the product mix – the number of product/service lines a company offers

Product Life Cycle

Products are said to go through a life cycle from development, launch, introduction,
growth, maturity and ultimately decline. The two curves highlight what happens to
sales and profit during the lifecycle. Notice that the profit line lags behind the sales
line. This is because investment is needed and needs more investment in marketing
activities, thus reducing profit initially to get the product launched, and then in the
maturity stages competition is likely to be more intense which tends to drive prices
down.
The PLC is a useful conceptual framework
assisting with;
• Product & portfolio planning
• Forecasting demand & growth
• Identifying product life & termination
• Identifying how profit levels may change
over time
• Setting marketing objectives & strategies
at different stages
• Comparisons of similar products
Diffusion of Innovation
The BCG Growth-Share Matrix

The Boston Consulting Group (BCG) developed a matrix designed for organisations
to assess whether they have a balanced portfolio of products or services.

Cash cows (profitable products in low growth markets) are needed to fund Stars
(market leaders in high-growth market that require investment) and Question Marks
(products with low profitability in high growth markets that require investment), and
decisions have to be made about whether Dogs are worth keeping in the portfolio as
they have low market share in a low growth market.
GE Matrix
One of the weaknesses of the
BCG Matrix on the previous slide
is the over-simplistic approach.
McKinsey & Co developed a more
wide-ranging model in conjunction
with General Electric (GE) in the
USA in the 1970s.
Unlike the BCG matrix that
measures market growth alone to
assess market attractiveness, a
range of criteria can be chosen to assess this for the GE Matrix e.g. market
size, growth rate. Rather than measure competitive strength on market share alone,
a number of factors are also used to assess competitive strength e.g. market
share, reputation, distribution capability and market knowledge.

Management decide which of these criteria are relevant for their products which
gives the model a flexible approach. The market attractiveness and competitive
strength is calculated based on a rating system of each factor, which weights the
importance of each. The competitive strength and market attractiveness percentage
calculated then gives the product a position on the matrix in one of the five zones as
shown on the slide.
The recommendations for setting strategic objectives are then associated with each
zone:
• Zone 1 – build – manage for sales and market share growth.
• Zone 2 – hold – manage for profits (equivalent to BCG ‘Cash Cows’).
• Zone 3 – build/hold/harvest – this is the ‘Question Mark’ zone.
• Zone 4 – harvest – manage for cash.
• Zone 5 – divest – improve short-term cash generation by dropping or selling the
product (equivalent to BCG ‘Dogs’).
Although a more detailed approach than BCG matrix, the limitation is that it is
harder to use because of the need to choose relevant factors and weight them
accordingly – this all relies on management so there is opportunity for bias.
The New Product Development Process

Most organisations will need to introduce new products or services to their portfolios
at some time or another. The New Product Development (NPD) process is the step-
by-step process which should be followed to increase the chances of success of any
new product/service introduction.

Stages in Setting Prices

Marketers must determine a price that will reflect customer expectations, match
market developments and produce a suitable financial return in line with
organisational objectives. However, this can be hard to achieve as the external
macro environment can change quickly and constantly; customers can be fickle and
revise their expectations quickly; market developments, such as the advances in
digital technology can alter the pattern of the market – look at the price transparency
now online, contributed to by price comparison websites such as Compare the
Market. Competitors continually modify their marketing mix which can also change
customers perceptions of their product/service value.

Pricing Strategies
Cost Plus – identify the total cost for producing your product and than add on a
margin for profit.
Variable Cost Plus – identify the variable costs for your product and then add on a
margin to cover fixed costs and profit.
Market Testing – how much will the market bear? Identify this through testing and
measuring profitability and sales levels.
Penetration – as low a price as you can to corner as much of the market as
possible.
Skimming – as high a price as possible to position a ‘quality’ product or generate
large cash flow.
Promotional – offering discounts to encourage sales such as buy one get one free.
Loss leaders – some products/services are sold at a price that is not profitable with
the aim of attracting new customers, building a customer base and selling additional
products/services to the customers.

Pricing Tactics

What Does Place Cover?

Place refers to two key areas, firstly the actual route or the channel the goods or
services take to market and secondly the actual physical distribution or
logistics of getting the product or service to the end user.
Place has a significant impact on all areas of the marketing mix such as:
• Product design and packaging must allow for efficient stacking, handling and
transport
• Competitive pricing might depend on the company’s ability to provide reliable
delivery
• Promotional campaigns must be coordinated with distribution functions so
advertised products are available to buyers

Distribution decisions must also consider customers changing needs and

preferences, many now expect products to be available online and not just in a
physical retail outlet.

‘Place’ also considers the digital channels the business uses to reach these
audiences. It has the following implications on the ‘Place’ element of the Marketing
Mix:
• The place of purchase – where can the goods and services now be bought? This
can include offline, online, or mobile apps etc. Buying online could be through seller-
controlled websites (Own Website), seller-orientated websites, such as Amazon
Marketplace, buyer-orientated websites, such as discount sites and finally, buyer-
controlled sites such as reverse auctions.
• Logistics – this considers product/service delivery, for example, transportation and
delivery of goods. Consumers are now becoming more demanding in terms of the
delivery of goods, with many organisations using delivery and fulfilment as a key
differentiator.

Place and the Multi-Channel Customer Journey

This case study on Costa Coffee shows how the organisation has taken into account
the multi-channel customer journey when making decisions about where and how to
make their products available to customers. The availability of Costa Coffee products
through multiple channels helps to make it as easy as possible for customers to
access Costa Coffee products.

Channels for Consumer Products

Intensive where the
product is offered through
as many outlets as
possible so utilizing all
channels A to D shown
here. Coca cola would be
an example of this
distributing direct through
vending machines,
wholesale and retail
outlasts and well as distributing abroad.

Selective where the product is distributed through a limited number of outlets such
as white goods, brown goods carts etc. The purchase tends to be more highly
involved, and more information and guidance is sought by buyers.

Finally, Exclusive which is a very limited, possibly single channel or even single
outlet which adds to the exclusivity of the product. Many bespoke products will fall
into this category.
Channels for Industrial Products
Distribution channels for B2B are very similar to B2C, although they tend to be
shorter in length. This reflects the relative complexity of products/services in
business markets, where there is often a need for the producer to work closely with
the customer to support the relationship.
Intensive, selective or exclusive channel strategies are also used. A direct channel
such as e-commerce may be used or alternatively distribution may be through a
number of channels.

Functions of Intermediaries

Using intermediaries or middlemen as they are sometimes referred to serves a

number of key functions, from breaking bulk and offering an assortment of products
to giving information and advice and being more accessible.

Imagine if rather than going to your local supermarket for your weekly shop you had
to go to the Heinz factory to buy your beans and then to Proctor and Gamble to buy
your shampoo! The chances are it would not be cost effective for them to sell you a
single item so you may have to buy a few cases! Not very convenient or efficient!

Different intermediaries can also be used to increase online visibility and sales – this
can include affiliate and partnership agreements. For example, using affiliate
networks or third-party websites to drive required actions on the organisation’s
website. This can also include partnerships with third party sales sites, such as Ebay
and Amazon.

Test Your Knowledge

Consumer marketing channels can be made up of?

a. Producers, B2B distributors and customers
b. Wholesalers, retailers and business customers
c. Agents, B2B distributors and consumers
d. Producers, retailers and consumers

Promotion
Promotion is the P that is devoted to communication with customers and potential
customers usually referred to as the target audience. Schramm developed a simple
communication model that shows how two-way communication takes place. This
model underpins all we do with our promotion or marketing- based communications.

Developing effective marketing communications follows a six stage process:

1. Identify a target audience – who should the message get to?

2. Determine the response sought – what does the marketer want the
audience to do after they get the message i.e. the call to action?

3. Choosethemessage–copyorimages(orboth)

4. Choose the channel – communications tools and media

5. Select the source’s attributes – what is it about the product or

organisations that needs to be communicated?

6. Collect feedback – how successful was the message?

Communications Strategy: Push, Pull and Profile

A Pull strategy aims to increase levels of awareness, change and/or reinforce

attitudes, reduce risk and/or encourage involvement and provoke action (behaviour).
This ‘action’ can be an enquiry, trial or to make a repeat purchase and/or tell their
friends/colleagues.
The aim of a Push strategy is to support the relationship with the channel
intermediary and to encourage organisations to accept stock (with attendant costs),
understand the attributes of each product so that they can best add value and
allocate resources - this requires trust and the channel will want to reduce risk as
much as possible.
While a Profile strategy is designed to reflect the organisation itself
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rather than products or services. It is targeted at a range of stakeholders but can use
different messages for each. Such communications are designed to build
awareness, perception, attitudes and reputation.

Key Marketing Communication Concepts

The Promotional Mix (Marketing Communications Mix)

Advertising - “A paid form of non-personal communication that is transmitted
through mass media” (Dibb et al. 2006). Advertising can be placed in a variety of
different media including TV, press/magazines, radio, cinema, outdoor and digital.
Public Relations - “The deliberate, planned and sustained effort to institute and
maintain mutual understanding between an organisation and its publics” IPR (cited in
Brassington and Pettitt, 2006)
Sales Promotion - Sales promotion is an activity or material that acts as a direct
inducement and offers added value to or incentive to buy the product.
Personal Selling - An interpersonal communication tool which involves face to face
activities undertaken by individuals often representing an organisation, in order to
inform, persuade or remind an individual or group to take appropriate action.
Direct Marketing - All media activities that generate a series of communications and
responses with an existing or potential customer.

Digital Media Channels

Integrating the Marketing Communications Mix

Test Your Knowledge
You are currently helping to devise a new marketing strategy for your university.
Which three of the following are marketing mix decisions that will need to be
made in the development of this strategy?
1. Where and how to promote the courses (Promotion)
2. The fees to be charged and how the students will
Apply (Price)
3. Researching the market and building a customer
profile
4. Which courses to be offered and at what levels (Product)
5. What competing universities are offering

a. 1,2and3only
b. 1,3and4only
c. 2,4and5only
d. 1,2and4only

Marketing Tactics: 7 P’s

Service Marketing Challenges

People Delivering Customer Value

The people element of the extended mix usually means the front line or customer
facing staff in the organisation but not exclusively so. All staff within an organisation
can have an impact on the customer experience. The people element in service
provision can create competitive advantage because people are individuals and very
difficult to copy. Empowering workers to resolve problems for customers can help to
build a positive working environment, motivated and productive employees which in
turn should provide customers with exemplary service – that ‘going the extra mile’ to
satisfy customers.

Within the digital marketing mix, the People variable should consider the role of
customer facing staff and what online customer service support from staff is required
as well as the role of automation in providing online support – FAQ, email
notifications, auto-responders, on-site search.
The following factors are considered when assessing the online and offline service
providers in the organisation:
Capability
Do staff have the appropriate skills, training and personal qualities required to deliver
excellent service. Are they empowered with the right tools e.g. access to customer
data
Efficiency and Effectiveness
Are staff efficient in serving customers in an organised and structured way, achieving
the desired outcomes?
Availability
Are staff available when and where the customer wants them e.g. in store, by
telephone, via social media or on the company website?
Customer Interaction
How are customers interacting with staff and what is their feedback?
Internal Marketing
Are staff informed by their employers and motivated to deliver excellent service?

Processes

Process refers to the series of events that take place in order for the service to be
delivered efficiently and effectively to the customer. Even where the physical aspects
of the product are similar to competitors, the processes involved can differentiate the
product. As the creation and consumption of a service are usually simultaneous, the
production of the service is an important part of its marketing as the customer either
witnesses it or is directly involved with it. For this reason, service providers need
smooth, efficient and customer- friendly procedures.

Process in the digital marketing mix refers to the online ordering process. This
includes those that are visible to the customer (such as forms filing, shopping
baskets, follow-up emails and website interactions) and those that perhaps the
customer cannot see, for example, process technology and CRM systems. The goal
is to optimise such processes to minimise the number of people involved and
maximise customer satisfaction.

Physical Evidence

Physical evidence is the tangible aspect of the service provision that symbolises the
intangible benefits the customer receives. For example, the policy documents you
get with insurance, the décor and ambiance of restaurants and hairdressers, the
tickets with airlines, the website of an agency. Physical evidence can be used by
customers to help make judgments about the quality of the service, a smart
reception area will have a different impact on customers to one that is shabby and
rundown. An agency website with evidence of awards, accreditations, customer
testimonials and security icons will give potential clients more confidence as it
represents a proven track record. Physical evidence is crucial in re-enforcing the
brand image of the service. Physical evidence can be categorised as either essential
evidence (essential elements to making the purchasing decision e.g. a policy
document when buying insurance) or peripheral evidence (those elements that
would be ‘good to have’ but are not essential e.g. a social media presence).

Test Your Knowledge

You have been asked to prepare a talk to give to a group of students about the
reasons for adopting the extended marketing mix when devising the marketing mix
for a service. Which of the following describes the main reasons for using the
additional THREE elements?
a. The nature of the service product
b. The type of promotion to be used
c. The price to be charged
d. The way in which the service is
distributed ( Place )