Learning Objectives. What are component in the marketing mix? How 4P effect the organization?

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Francis Morgan
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2 Learning Objectives What are component in the marketing mix? How 4P effect the organization? 2

3 Introduction Marketing is a business philosophy whose primary objective is the realization of profit through customer satisfaction. It is wrong to think of marketing as a set of activities, notably advertising, selling and marketing research. The marketing concept should be paramount in the action of every department. 3

4 The Marketing Mix E. Jerome McCarthy suggested the idea of the 4P s, which include: Product 1. Product 2. Price 3. Promotion Place Marketing Mix Promotion 4. Place Price 4

5 Product (or Service) The marketing mix combines many factors, but consumers view marketing effort in more tangible terms of the product (or service). The true nature of the product is how the consumer perceives it, and not what the company thinks it is or would it to be. Marketing management must find out what perceptions contribute to consumer satisfaction. 5

6 Product (or Service) (cont ) The product is the core stone of the marketing mix and it should be considered as the starting point for marketing strategy, because without it there is nothing to promote, or to price, or to distribute. Key aspect of the product as a marketing function can be summarized: 1. Product planning: to whom, where & what quantity 2. Product Management: number & type of product on offer 3. The physical product: design decision, quality/image decision and packing decision. 6

7 Price Price is a potent element of the marketing mix because of its direct impact on customer and the company. To consumer, price is a major indication of quality and an important factor in the decision making process. Price is the only element in the marketing mix which produce revenue to the firm. 7

8 Price (cont ) Price is not the only factor that affect the demand, although in some situations companies have achieved similar level of service, product quality and promotional support and it has become the major element of product differentiations. The marketing oriented seller view price as one of very important element of overall marketing effort. 8

9 Price (cont ) Company cannot survive unless the value of sales is in excess of costs. A price that is pitched too high may destroy the effectiveness of an otherwise well conceived marketing mix strategy. If it is set too low and sales volume cannot offset this disparity, it is unlikely that subsequent price increase will be readily acceptable to the marketplace. 9

10 Promotion Promotion is perhaps the element of marketing mix that is most subject to variation. For some product it may play a minimal role, but for others, marketing strategy may be almost entirely based on promotion. The effects of promotional expenditure are difficult to measure. One reason why it is difficult to evaluate is that expenditure does not create immediate tangible success. 10

11 Promotion (cont ) Promotion cover four areas: 1. Advertising 2. Personal Selling 3. Public Relation 4. Sales Promotion 11

12 Promotion (cont ) Advertising It is concerned with communicating messages to selected segment of the public to inform and influence them in a manner to perceived favorably those items that the advertising features. 12

13 Promotion (cont ) Personal Selling Advertising tend to be aimed at a group, personal selling tends to be tailored towards individuals. The seller may convey the same messages that are included in advertising but the presentation can be modified to suit specific situation and potential customers. 13

14 Promotion (cont ) Public Relation Public relation are a broad set of communicational activities through which an organization create a favorable image with its various public. These publics range from customers, company employees, shareholders and even government. 14

15 Promotion (cont ) Sales Promotion It involves those activities and elements of promotion not already mentioned. Temporary price reduction, display, coupons and free sample distribution are some of the many techniques available. 15

16 Promotion (cont ) The purpose of promotion is to create and stimulate demand. Marketing function go to make up marketing mix communication functions can be employed to form an intra functional mix. Integration is important as sales are easier when consumers are informed and made interested by advertising. The effectiveness of advertising is in turn increased when it is coordinated with specific sales promotional techniques. 16

17 Place This is concerned with activities needed to move the product or service from seller to the buyer. To understand place as a function and part of the marketing mix we divide it into two categories: 1. A structure or network through which transaction can be made so that the product is made available to the final user. This is referred to as the distribution channel 2. Once the channel of distribution has been established, the company must determine how its products can be physically moved through the distributive system. This is called physical distribution management (PDM) or logistics. 17

18 Place(cont ) Distribution channel Although changes in retailing during the past 30 years have increased the number of goods that flow directly from manufactures to retailers the use of intermediaries is still significant. Use of intermediaries in a channel system has number of advantages: 1. Channel member possess skills and knowledge of their local markets. 2. The manufacture s costs of transport, storage and stock level are reduced. 3. Middlemen relive some of the financial burden that manufactures need to bear when marketing directly to the end user. 18

19 Place(cont ) Physical Distribution Management (PDM) PDM is concerned with transporting finished goods to customers, stock control, warehouse management and order processing. The key task of this place function is to ascertain the level of service that the customer requires and to ensure that this is adhered to and the product arrives with the customer in an acceptable condition. Distribution is an effective tool for companies pursuing a non price competition strategy. 19

20 Past Paper Q & A December 2009 / Q8 (a) Identify and describe the four Ps of the product (not service) marketing mix. (9 marks) 20

21 Past Paper Q & A (cont ) Answer The four Ps of the marketing mix are: 1. Product refers to the actual product/service that the organization develops. However, the product does extend to both the tangible aspects such as features, packaging etc. and the intangible aspects of a product such as service levels and brand image. 2. Price is the element that generates revenue and therefore a profit for the organization. Price will involve the organization understanding all its costs (fixed and variable) and taking into consideration other factors such as competitor price levels and market positioning when setting the price of a product/service. 3. Promotion is the way an organization communicates with its target audience using different elements of the marketing communications mix such as advertising, PR, sales promotion etc. 4. Place refers to more than a physical location. It is the way an organization distributes/delivers its products/services to its target market. Place refers to the physical means by which an organization delivers its products e.g. via retailers, directly online etc., but also refers to the way the whole distribution channel is developed and managed in terms of coverage required, levels of service needed and levels of after sales service required. 21

22 Past Paper Q & A (cont ) December 2008 / Q 5 (c) Give, and explain, four examples of how a company could use place to gain a competitive advantage. (13 marks) 22

23 Past Paper Q & A (cont ) Answer Adding Value: The choice of distribution can add value to a product by providing additional services such as good customer service, technical support and/or sales advice. An example would be in the purchase of a computer where customers wish to seek expert advice and have demonstrations as part of their decision-making. Differentiation: Place can assist an organization in differentiating itself from its competitors, for example by offering additional support services, or being able to provide products more conveniently perhaps by having extended opening hours or quicker delivery times. Reducing Costs: Place can be used to reduce the costs to an organization, perhaps by providing products directly to customers eliminating the mark-up required by distribution intermediaries. This means cost savings can be passed onto consumers allowing the organization to compete on price. Market Intelligence/Customer Needs: Distribution channels and outlets often have direct contact with buyers and customers and therefore the staff in these channels have a wide knowledge and understanding of customer needs and buyer behavior. The organization can use this information to improve its products and services and perhaps even develop new products and services. (Note: other factors could include developing customer loyalty, retaining customers, brand image/positioning) 23

24 Past Paper Q & A (cont ) December 2007 / Q2 (a) Explain in detail the term marketing mix. (8 marks) (b) Using a product of your choice, describe how the marketing mix is used. (12 marks) 24

25 Past Paper Q & A (cont ) (a) Refer slide 21 (b) Next slide 25

26 Past Paper Q & A (cont ) The product I will use to demonstrate how the marketing mix is used will be Dell computers for the consumer market. Product: Dell sells computers to the mass consumer market; however Dell s product strategy includes the ability for customers to design a personalized specification for their own computer, so although its target market is mass its product strategy is almost bespoke product. Dell s product strategy also includes intangible benefits, such as credit facilities and on-line service support. Price: Dell s price strategy is a mixture of demand and competitor pricing. Computers are relatively price sensitive and there are many competitors in the market. Therefore Dell sets its price at a fairly low level to compare favorably with its competitors and to enable customers to upgrade and renew their computers on a regular basis. Dell also uses price as a promotional tool by offering discounts and special offers to its customers to encourage customer retention. Promotion: Dell uses a variety of promotional tools; price has been mentioned above. However its main promotional tool is direct mail. Using its website Dell has built a large customer database which it uses to send direct mail and e- mail communications to advise customers of its sales promotions and new product developments. Place: Dell has used place as one of the most important marketing tools to differentiate its products. Dell was one of the first organizations to offer computers direct to customers, eliminating the need for a long distribution channel. This allowed Dell to build up a customer base, control standards of service from delivery to after-sales service and also allowed itself the ability to offer customers the freedom to design their own computer specification. Also by eliminating the need for a long distribution channel Dell was able to cut costs and therefore compete on price. The major distribution channel was Dell s own website where customers were able to shop online, order online, apply for credit online and obtain service support. 26

27 Past Paper Q & A (cont ) June 2009 / Q 4 (a) Briefly describe the four elements of the marketing mix. (8 marks) (b) Using an organization of your choice, demonstrate how the marketing mix should be applied. (17 marks) 27

28 Past Paper Q & A (cont ) (a) Refer slide 21 (b) Refer slide 26 28

29 Q & A 29

Marketing: Managing Profitable Customer Relationships

Marketing: Managing Profitable Customer Relationships Chapter 1 Learning Goals 1. Define marketing and the marketing process. 2. Explain the importance of understanding customers and identify the five