MKTG13 Marketing Mix

1. MKTG13 Marketing Mix It’s not good enough to have a good mind; the main thing is to use it well.

2. Products/Service Elements 6 Elements of Product Physical Brand Product Quality Warranty Purpose Packaging

3. Identifying Key Features

4. Customers’ needs and wants • Can be grouped Industry Sector: • Health • Admiration • Amusement • Wealth • Security • Self-improvement

5. Benefits of a Product/Service • A Benefit, describes how a product/service will be of advantage. Benefits may meet a goal, satisfy a need, or solve a problem for the customer. Benefits include: • increased safety • increased efficiency • saved expense • improved appearance • greater comfort • enhanced image • You can use the features and benefits of your product/service to differentiate your business.

6. Product/Service • Can be grouped on the basis of: • function • price range • the customer group they satisfy • the way in which they are promoted • The product/service mix is measured by: • width: the number of product/service lines, and • depth: the number of individual products/services offered

7. The three Product Levels Core Product Computer Actual Product Augmented Product Support MacBook

8. Core Products The core products are the central sets of benefits that the consumer is buying to meet their needs. When buying a car, the core value of the product is the transport it provides to the owner.

9. Actual Product The actual product is the physical good or intangible service that delivers the core product. This is represented in the physical features of the good, or the performance components of the service, and the concepts involved in the idea product. Actual product is the make (Suzuki), model (Swift), colour (red) and features (air-conditioning, car radio, hatchback) included in the price.

10. Augmented Product The augmented product is the bonus component of the product consisting of any additional benefits such as prestige or implied social meanings that arise from owning the product. For cars, this can include 24-hour road-side assistance, 100,0000 km warranty and the social prestige associated with driving a red Suzuki Swift versus that of driving a red Porsche 921.

11. Product Life Cycle

12. Why is PLC important? Any for-profit business is constantly seeking ways to grow future cash flows by maximising revenue from the sale of products and services. Positive cash flow allows a company to invest in development of new products and services, to expand production capabilities, to improve its workforce, and so on. It is most companies' goal to acquire key market share and become a leader in its respective industry. A consistent and sustainable cash flow from product that is well established and stabilized is the key to any long-term investment. And knowing the product life cycle can help with this.

13. Product/Service Life Cycle The concept - products /services evolve and grow by going through four distinct phases over a period of time

14. PLC Process First, a product is being developed. After we know what it is that we are selling and what the customer wants, we introduce it to the market. As our product becomes known by consumers, it grows until it establishes a solid position in the market. At this point, our product is mature. After a period of time, the product is overtaken by development and the introduction of superior competitors. Then it goes into decline and is eventually withdrawn. All these phases together are called product life cycle.

15. Life Cycle - Phase 1 • Introduction • Consumer Resistance • Production Problems • Features are Important • Slow Growth and Little Direct Competition • High Cost / Low Profit • Product or a service is introduced to the market. This stage involves focused and intense marketing effort designed to establish a clear identity and promote maximum awareness. Consumers are testing the product in this phase.

16. Life Cycle - Phase 2 • Growth • Rapid Growth • More Competition • Improvements / Rationalisation of Products • Declining Prices • Economies of Scale • Sales are increasing and competitors are emerging. Products become more profitable and companies form alliances, joint ventures, and takeovers. Customers are accustomed to the product and are starting to purchase it repetitively. Marketing efforts and costs are still significant. Advertising costs are high. Market share tends to stabilise.

17. Life Cycle - Phase 3 • Maturity • Decline in Sales Growth • Expand Range • Further Differentiation (Minor) • Intense Competition • The market has reached saturation. Some producers at a later stage of the Maturity stage of the product life cycle begin to leave the market due to poor profit margins. Sales dynamics is beginning to decrease. Sales volume reaches a steady state supported by loyal customers. Producers attempt to differentiate their products. Brands, trademarks, and image are key tools in this production life cycle stage. Price wars and intense competition are common.

18. Life Cycle - Phase 4 • Decline • Permanent Sales Decline • Costs are Minimised • Competitors Exit • Product Eliminated • Continuous decline in sales signals entry into the Decline stage of the production life cycle. Competition is taking over your market share at this point. Economic and production conditions are becoming unfavourable. Introduction of innovative products or a change in consumer tastes is common reason for a decline. There is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing marketing and cutting other costs.

19. Trends in PLC • Short... • One most observable trend is that product life cycles are becoming shorter and shorter. This is given mostly by ever-increasing competition. • While a manufacturer of pots and utensils faced competition only from another manufacturer in the same city hundreds of years ago, a pot manufacturer these days faces competition from many companies on the other side of the globe in addition to other local manufacturers. Everyone is trying to come to the market with innovations.

20. Trend PLC cont… • Revitalisation... • Many products in mature industries are revitalized by product differentiation and market segmentation. It is not uncommon that companies try to find new niches and market segments when they see their product is about to enter the Decline phase. • Companies are becoming very flexible in their ability to reassess product life cycle costs and revenues.

21. Trend PLC cont… • Longer operating life... • Even though product life cycles shrink, the operating life of many products is becoming longer. While a 10 years old car would be considered a wreck in 60's, today's cars are relatively very durable and their life time is extending. • Companies have to take product operating life into account and adjust their planning accordingly. • Companies are attempting to optimise product life cycle revenue and profits through warranties and upgrades to existing products.

22. Limitations of the Product Life Cycle Concept The term "life cycle" implies a well-defined life cycle as observed in living organisms, but products do not have such a predictable life and the specific life cycle curves followed by different products vary substantially. Consequently, the life cycle concept is not well-suited for the forecasting of product sales. Furthermore, critics have argued that the product life cycle may become self-fulfilling. For example, if sales peak and then decline, managers may conclude that the product is in the decline phase and therefore cut the advertising budget, thus precipitating a further decline.

23. Communications In The Product Life Cycle

24. Price • It is not possible to make pricing decisions in isolation. You need to consider a combination of factors such as: • your target market • your business objectives • your marketing mix • competitors’ prices • product/service cost • demand for the product/service • general market trends

25. Business Objectives Their Effect on Pricing

26. Method of Pricing • Cost based pricing • Demand-based pricing • Competition-based pricing

27. Some Pricing Strategy Options • market skimming pricing: involves charging comparatively high price for a product/service • market penetration pricing: involves charging a comparatively low price in order to secure growing sales and a high market share • target return pricing: involves setting a price which will give a specific target rate of return on the total investment, or a predetermined target profit

28. Some Pricing Strategy Options • going rate pricing: involves setting the price according to prices usually charges by others in the industry • perceived value pricing: involves setting the price according to how the customer perceives the value of the product/service • image pricing: involves setting the price according to the image being sought for the product/service • product line pricing: involves setting the same price for all products in a product line in order to provide the customer with a choice based on the product, rather than price

29. Some Pricing Strategy Options • psychological pricing: involves the use of odd and even numbers to suggest a pricing position in the market. • loss leader pricing: involves setting a price on a particular product/service below market price, in order to attract customers to your outlet

30. Some Pricing Strategy Options • discount pricing: involves reducing the price for a product/service in order to attract new customers to the business • distress pricing: involves problem sales due to liquidation and closing down of the business • differential pricing: involves setting different prices for different groups of customers

31. Place • The word place in marketing terms refers to where the exchange of a product/service occurs between the seller and the buyer. • Deciding on a “place” means finding the most effective and efficient way to get your product/service to your customers. • This decision involves three aspects: • the location • the premises and its layout, and • methods of distribution

32. Promotional Mix The ultimate objective is to influence the recipient’s feelings, beliefs or behaviour.

33. 4P’s Marketing Mix – from the perspective of the buyer Solution / Value / Benefit Product Convenience Place Consumption Promotion Communication Inform Price Persuade Cost / Investment Value Remind The ultimate objective is to influence the recipient’s feelings, beliefs or behaviour.

34. Promotional Mix Mass Selling Personal Selling Sales Promotion Publicity PR Specific - one on one selling situation Done by Sales People Direct contact with the customer Refers to those activities which include Specials Coupons Competitions Give-aways Usually temporary activity Publicity Refers to non paid message to stimulate demand PR Refers to planned effort to contribute to generally favourable attitudes and opinions Impersonal form of promotion. On a wide basis to the public. Includes advertising

35. The Communication Process

36. Reaching the target market • Need to identify who are we trying to influence • Determining customer’s readiness to buy: • awareness • knowledge • liking • preference • conviction • purchase This is the hierarchy of effects (or buying stages)

37. Reaching the target market (continued) • Determine where the customers are located • geographic location and access to the message • Determine the types of customers • retail, wholesale, intermediaries, business • Determine how many customers there are • size of the potential customer and choice of suitable communication, e.g. personal selling.

38. Amounts of funds available • Percentage of sales method • Company might determine past or anticipated sales and apply a percentage of sales as the promotional budget. • All available funds • Company might use all available funds on the promotional campaign. • Matching the competition (also known as ‘share of voice’) • Promotional expenditure based on market share of competitors, or actual expenditure, if known. • Task or objective method • Determine what tasks or objectives the promotion must accomplish. • Determine what it will cost to perform the task or meet the objective.

39. Push versus pull strategy • Push strategy • Producer creates demand for product. • Aims promotional activity to channel member(s). • Each channel member promotes to next channel member. • Demand ‘pushed’ down distribution channel. • Consumer influenced by retailer’s advertising.

40. Push versus pull strategy (continued) Pull strategy • Producer creates demand for product. • Aims promotional activity directly at end user. • Consumer demands product from retailer. • Demand ‘pulled’ up the distribution channel.

41. Aknowledgement Adamany & Gonsalves 1994 (2011) Oulu University Library – (2011) NetMBA.com–(2011) A White Paper by Paul Hague (2001) Slideshow creation MnM Institute Pty Ltd www.mnminstitute.com info@mnminstitute.com