3.3: Marketing Mix Notes:

Marketing Mix refers to the different elements involved in marketing a good or a service. These elements include the 4P's - short for Product, Price, Place, and Promotion

THE PRODUCT:

• It is the good or service that a business sells in the market

• Types of products include: consumer goods (e.g.: phones), consumer services (e.g.: spa), producer good (e.g.: machinery), and producer services (e.g.: accounting) 

ELEMENTS THAT MAKE PRODUCTS SUCCESSFUL:

1. It satisfies the existing needs and wants of consumers

2. It creates new needs and wants for consumers

3. It stands out from its competitors

4. It is not too expensive to produce so the selling price would be lower

5. Its design (quality, performance, reliability, etc.) should be consistent with the products brand image 

NEW PRODUCT DEVELOPEMENT:

Credit to the image: Cambridge IGCSE and O Level Business Studies 5th edition (Karen Borrington  Peter Stimpson)

• Advantages:

1. It can create a Unique Selling Point (USP) which can be used to charge a high price on the unique innovative product created

2. Increases potential sales, revenue, and profit

3. Risks are spread since if one product fails, the business wouldn't fail as well (it doesn't only depend on this product)

4. The business can charge a higher price when the product is first launched (price skimming - discussed later through this chapter)

• Disadvantages:

1. Market research is time consuming and expensive

2. Investment can be costly

WHAT IS BRAND IMAGE?

• Brand image is more than the assurance of good quality. It is an identity that makes the business' products stand out from its competitors 

• Brand loyalty is the customers' tendency to keep purchasing from a company's products instead of competitors regardless if it is more expensive

THE IMPORTANCE OF BRAND IMAGE:

• Customers can recognize the business' products easily. Example: if you see a check mark on a shoe, you immediately know it is Nike

• The business can charge a higher price for its products since customers are loyal to the brand

• It is easier for the firm to launch new products since it is already established

THE IMPORTANCE OF PACKAGING:

• It keeps the product safe and protects it from damage

• It keeps the product fresh

• Easy to transport the product

• Provides information about a product (where it was manufactured, its ingredients, etc.)

• Promotes brand image

THE PRODUCT LIFE CYCLE (PLC) STAGES:

1. Development: the product is first developed along with a prototype. The market is researched. No sales in this stage

2. Introduction: the product is launched into the market with slow sales. No competitors or profit made

3. Growth: sales start to increase rapidly and the business starts to make profit. Persuasive advertisement used (convincing the consumers why this business' products are better than competitors)

4. Maturity: sales fall slowly, intense competition, profit at its maximum

5. Saturation: sales reach their highest point and stabilize, competition is high but no new competitors present

6. Decline: the product loses its appeal so sales fall, advertisement stops and product gets pulled out of the market

EXTENSION STRATEGIES:

• They include marketing techniques used to extend the maturity stage of a product in order to keep it in the market

• Extension strategies include:

1. Finding new markets for the product like exporting the product to other countries

2. Introduce new variations of the product

3. Use a new advertising campaign 

4. Introduce a new and improved version of the product

5. Make small changes to the product's features/design like the color or packaging

PRICE:

Price refers to the amount of money the consumers are willing to pay to get the good or service the business is providing. 

DIFFERENT METHODS OF PRICING:

1. PRICE SKIMMING:

• When a business sets a high price for the unique product that just entered the market

• Advantages:

1. Profit earned is very high

2. Helps recover the costs from researching the market/developing it

• Disadvantages:

1. It can backfire if competitors produce the same product for a lower price

2. PENETRATION PRICING:

• When a business sets a very low initial price to attract customers then slowly increases it

• Advantages: 

1. Attracts customers fast

2. Increases market share quickly

• Disadvantages:

1. Lower revenue due to low prices set

2. Can be harder to recover the development costs

3. COMPETITIVE PRICING:

• When a business sets its products' price at a similar price to its competitors

• Advantages:

1. The business can start competing on characteristics like quality or service

• Disadvantages:

1. The business will need to find ways to start competing in order to attract sales

4. COST-PLUS PRICING:

• Setting a price to a product by adding a fixed amount of money that will cover costs

• Advantages:

1. It makes sure that all costs are covered

2. It is quick and easy to work out the price

• Disadvantages:

1. The price might be set higher than competitors so customers may be reluctant to buy, leading to loss of sales

5. PROMOTIONAL PRICING:

• Setting the price of a few products lower than their initial in order to attract customers (e.g.: discounts)

• Advantages:

1. Helps sell unwanted stock

2. Effective way of increasing short-term sales and market share

• Disadvantages:

1. The revenue on each item is lower so profits may also be lower

FACTORS THAT AFFECT WHICH PRICING STRATEGY TO USE:

1. Is the product new or existing? If it is new, a business should probably use price skimming or penetration pricing. However, if it is existing, a business should use competitive or promotional

2. Does the product stand out from its competitors? If yes, price skimming would be the most appropriate. Otherwise, promotional or competitive pricing should be used

3. Is the competition a lot or intense? If yes, competitive pricing is ideal

4. Are the costs high? If yes, using cost-plus pricing should be the best option in order to cover costs

5. What are the business' marketing objectives? If it is to gain market share and customers quickly, then penetration pricing should be incorporated

Credits to the image: Cambridge IGCSE and O Level Business Studies 5th edition (Karen Borrington  Peter Stimpson)

PRICE ELASTICITY OF DEMAND:

• It refers to how responsive the demand for a product is to changes in its price

• It is calculated by: % change in quantity demanded/ % change in price (candidates are not required to calculate the PED)

• If the PED>1, it is said to be elastic. However, if the PED<1, it is said to be inelastic

• Think of PED as an elastic band. If a product is elastic, then the elastic band can stretch, including more products and alternatives. Therefore, an elastic product can be replaced so the business will have to lower its prices to increase profitability. On the other hand, if a product is inelastic, then the elastic band will not stretch so the product is most probably unique. Thus, a business which has a product with inelastic demand can raise its prices to increase profitability.

PLACE:

• Place refers to how the product is distributed from the manufacturer to the consumers

Credit to the image: IGCSE Aid

FACTORS THAT AFFECT PLACE DECISIONS:

1. The type of the product: is it sold to other companies or to customers? If it is marketed to other companies, such as specialist machinery, direct selling is far more likely to be used

2. The technicality of the product: if a lot of technology is involved in the product, then an experienced worker will need to explain how the product functions. Thus, direct selling is ideal

3. How often the product is bought: if it is an every day product/bought frequently, it should be sold in retail outlets to make it available to customers

4. The price of the product: if the product is expensive or luxurious, then it should be sold in limited outlets in expensive shopping areas

5. The durability of the product: if it is easily perishable then selling the products in many retail outlets to be sold quickly is ideal

6. Where competitors sell their products: the products should be sold in the same area competitors are selling in order for direct competition. This can be found in grocery stores where Dove and L'Oréal directly compete in the cosmetics section

7. Location of the customers: if the business has an international customer base, then it should be selling on e-commerce 

PROMOTION:

• Promotion refers to the marketing activities that involve communicating with existing or potential clients in order to educate  and persuade them to purchase a company's products

• The aims of promotion include:

1. Inform the customers about the product

2. Persuade the customers to buy the product

3. Increase sales and market share

4. Set a brand image

TYPES OF PROMOTION:

1. ADVERTISING:

• Includes "above-the-line promotion" which means that the communication method is paid for

• Can be presented through television, magazines, internet, billboards, etc.

• The process of advertising: set objectives --> decide the advertising budget --> create an advertising campaign --> decide a media to use --> evaluate the effectiveness of the campaign

2. SALES PROMOTION:

• The business tries to increase sales by providing after sales services, BOGOF (buy one get one free), discounts, free samples, etc.

3. BELOW-THE-LINE PROMOTION:

• The promotion is not paid for (unlike above-the-line in advertising) but rather uses incentives which motivates purchases and sales

• Incentives can come in the form of coupons, vouchers, games with cash as a reward, etc.

4. PERSONAL SELLING:

• Done when the sales staff communicates directly with the customer in order to get a sale

5. DIRECT MAIL/MAILSHOTS:

• The promotion media (such as brochures) is sent directly to the address of the customer

6. SPONSORSHIP:

• When a business pays another business/influencer to talk about the product or raise awareness

WHAT FACTORS CAN AFFECT PROMOTIONAL DECISIONS?

1. Stage in the PLC

2. The target market

3. The nature of the product

4. Cost-effectiveness

Credit to the images: Cambridge IGCSE and O Level Business Studies 5th edition (Karen Borrington  Peter Stimpson)

TECHNOLOGY AND THE MARKETING MIX:

• E-commerce is the 'online' purchase and sale of products and services using computer systems linked to the internet and applications

THE IMPACT ON THE BUSINESS:

• Advantages:

1. Low-cost promotion

2. Global coverage (many people all around the world can view the business and what it sells)

3. Able to access many consumers

4. Physical shops may not be needed (saves rental costs)

• Disadvantages:

1. Setting up a website and constantly updating it is time consuming and costly

2. No direct contact with customers

3. Competition from other websites

4. Shipping costs

THE IMPACT ON THE CUSTOMERS:

• Advantages:

1. It is convenient

2. Easier to compare the products of one business to another

3. Easy to pay

4. Wider variety of choices

5. Competitive prices

• Disadvantages:

1. Internet access is needed

2. Cannot see the product or assess the quality in person

3. Identity theft

4. Technical problems

5. No personal contact

NOTES DONE BY FARIDA SABET

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