Understanding the Marketing Mix Essentials

Marketing mix Marketing Mix Marketing mix * Set of controllable factors that a company uses to influence customer purchasing decisions and achieve its marketing objectives. Product * Goods and services itself in comparison to other businesses 1. Design, features and quality 2. How it compares with competitors 3. Does the packaging help customers identify it 4. If it is a service, do customers receive a better service * Its quality, design and service shapes its brand * A brand is the identity of a product or business * Helps it stand out * Ex. name, logo, design, color Types of products * Consumer goods: Goods bought by consumers for their own use that are tangible * Consumer services: Services that are brought by customers for their own use. * Producer goods: Goods that are produced for other businesses to use * Helps with production (ex. machinery) * Producer services: Services that are produced to help other businesses Product requirements 1. The product needs to satisfy consumer wants and needs. 2. The product also needs to be of the right quality so consumers are willing to pay for it 3. The products production cost must not be more expensive than price charged 4. Design of product must match brand image or brand 1. Perform to standard expected by consumers/legal control Market oriented vs product oriented business * Product oriented business: Product stays consistent and adjust other factors to create market * Market oriented business: Market dictates the product/business style * This means that the product/business will change based off market Costs and benefits of developing new products Benefits 1. Creates a unique selling point as the business is the first to show this product (charge more) 2. Diversification of the business, giving it a broader range 3. Allows business to expand to new markets 4. Allows business to expand into existing market Drawbacks 1. Costs of carrying out market research/analysis 2. Cost of producing trial products and wasted materials 3. Lack of sales if wrong target market 4. Loss of company image if the new product fails to meet customer needs Importance of brand image * Brand name: Allows for advertising and recall from consumers * Brand loyalty: Keeps buying from the same brand and not lose customers * Brand image: The way you perceive the product Role of packaging * Just as important as other parts of the marketing * Has 2 functions: 1. Serves as protection to the product and not allow to spoil 1. Allows the product to be used easily 2. Has to be suitable for transporting it cannot be too delicate 2. Used also for promoting the product 1. The color and shape of the container is very important 2. It is the packaging that catches the customers eye 3. The labels must also cary legal requirements Summarized roles 1. Protect the product 2. Provide information about the product 3. To help consumers recognize the product 4. Keep the product fresh once it has been opened 5. Can be reused once the product has been used Product life cycle (development stage is step 0) 1. Introduction stage * Product is introduced into the market * Sales are still low and product might be taking a loss in this stage * Heavy advertising cost 2. Growth stage * The product is becoming better known to consumers * Sales are increasing so product starts to earn profit 3. Maturity stage * Sales are no longer growing but are not failing * This is the most profitable 4. Decline stage * Sales are fallings * It eventually becomes unprofitable and is withdrawn Extending the product life cycle 1. new markets: Owners will look to see if there are other markets for product (foreign markets) 2. New variations: Newer versions/types of the original product 3. Adapt the product: Small changes to design, color or packaging 4. New advertising: Use a new advertising campaign 5. New version: New and improved version of the old product 6. New uses: Look to see if the product can be used for something other than it’s original 7. Sell through more outlets: sell through more outlets Effect * If it is effective, then maturity stage will be prolonged Role of pricing decisions in the marketing mix * The price has to match the brand, brand image, and expectation * Compare your product prices with competitors Pricing strategies * If you can distinguish the product from others, then it is most likely branded * It will have a distinct name and pricing and you have to select and appropriate price to complement the brand image * Value for money brand should have a low price * If a product has many competitors, the price is more important * You have to note what your competitors are charging Adapting pricing strategies 1. Breaking into a new market 2. Increasing its market share 3. Increasing its profits 4. Make sure all costs are covered and target profit is earned Main methods of pricing * Note that total cost = variable cost + fixed cost * Variable cost: related to manufacturing the product * Ex. Materials, electricity, water etc. * Fixed cost: not directly related to manufacturing the product * Rent, salaries Cost-plus pricing * Estimating how many units of the product will be produced * Calculating the total cost of producing the output * Adding a percentage mark-up for profit * Ex. Benefits * Method is easy to apply * Different profit mark-ups can be used for different markets * Each product earns a profit for the business Limitations * Businesses could lose sales if the selling price is higher than competitors price * A total profit will only be made if sufficient units of the product are sold * There is not incentive to reduce costs Mark up pricing * We calculate the selling price by adding a percentage markup to the variable cost per unit * Price = Cost + markup * Markup = percentage of variable cost that they want Full cost pricing 1. Find the fixed costs per unit * Total fixed costs / number of units produced 2. Add fixed cost to cost of product * Total cost = Fixed cost per unit + variable cost 3. Add markup * Total cost + markup Markup vs full-cost pricing * Markup pricing is easier because you only know the cost * Full cost pricing would be used when you need to consider all costs Competitive pricing * Setting prices in line with your competitors’ pricing or just below their prices Benefits * Sales are likely to be high as the price is at a realistic level * Avoids price competition * Often used when it is difficult for customers to tell the difference between the products Limitations * The cost of production of a business is higher than competitors, then a competitive price could lead to losses being made (have to consider cost) * A higher quality product might need to be sold at a price above competitors prices for image * In order to decide what price it needs, research needs to be done Penetration pricing * The price would be set lower than the competitors prices * Temporary and designed to attract customers * Ex. cheaper subscription to attract customers * Ex. a new chocolate bar at a price several cents below to attract customers Benefits * Often used to newly launched products to create and impact with customers * It should ensure that the sales are made and the new product enters the market successfully * Markets share should build up quickly Limitations * The product is sold at a low price and therefore the profit per unit may be low * Customers might get used to low prices and reject the product if it goes up * Might not be appropriate if the brand has a quality reputation Price skimming * Usually a new invention or a new development of an old product list * can be sold on the market at higher price * Often has cost a lot in research and development * High price can help indicate quality Benefits * Skimming can make product look good quality * High research and development can be easily gained back from profit * If the product is unique, high price before competitors copy them Limitations * High price may discourage potential customers from buying * High price and profitability may encourage competitors to enter the market Promotional pricing * Used when a business wants to price a product at a low price for a short time * At the end of summer, some companies have sales for summer clothes * Or buy one get one free Benefits * Useful for getting rid of unwanted inventory that will not sell * Can help to renew interest in a product if sales are falling Limitations * Revenue will be lower because price of each will be reduced * May lead to price competition with competitors Choosing a pricing Market skimming * New products/high-demand products * Start with high price to maximize profits and lower over time Penetration pricing * New products entering competitive markets * Set a low price to attract customers and grow market share Competitive pricing * Set prices based on competitors * Used when many similar products exist Cost-plus pricing * Calculate production costs and add fixed markup * Used for stable products with predictable costs Promotional pricing * Temporarily reduce prices to boost sales * Use for special promotions or clearing inventory Price elasticity of demand * Measure of how much the demand changes when its price changes If PED > 1: Demand is elastic, they are very responsive to price changes * Price goes up, demand of customers go down more If PED < 1: Demand is inelastic, Consumers are less responsive to price changes * Price increases but the demand stays relatively the same * Usually for Basic necessities If PED = 1: Demand is unitary elastic, demand changes are the same percentage * Price goes up, demand of customers go down same amount Effects of price elasticity of demand on revenue Elastic demand * Lowering price increases revenue * Is cost per unit is high then you might not make profit Inelastic demand * Raising price increases revenue * If cost rise too much, the extra revenue might not cover the costs Unitary Elasticity * Price and demand change equally * Revenue stays consistent/constant Dynamic pricing * Prices changes during the day * If it is at its peak, then it is more expensive * If it is not then it is cheap Role of place decisions * Business actually has to sell the product * Not only about physical place but also about method * Marketing in the correct place to reach target consumers Distribution channels * Decide where to sell their products * Sell directly to consumers vs other businesses to help them sell * Longer → more expensive Distribution channel 1: Producer → Consumer * Also includes manufacturer → Manufacturer Advantages * It is simple, selling products directly to consumers * It is suitable for products such as food * There is a lower price because of no wholesaler/retailer * Can be sold by mail order catalogs/internet Disadvantages * Impractical for most because consumers don't live near factory * Not suitable for products that can be sent * May be expensive to send making it ineffective Distribution channel 2: Producer → Retailer → Consumers * Sells to outlet which sells to consumer Advantages * Producer sells large quantities to retailers * Reduced distribution costs Disadvantages * No direct contact with customers * Price is often higher than direct selling as retailers need to cover costs Distribution channel 3: Producer → Wholesaler → retailer → Consumer * Involves a wholesaler who breaks bulk * Breaking bulk is where they buy in large quantities but then break themselves Advantages * Saves storage space for small retailers and reduces storage cost * Small retailers can purchase fresh products in small quantities because they have a short shelf life * Wholesaler may give credit to retail customers so they can take the goods straightaway * Because the business is already payed, business’ products is out * The wholesaler has the bulk and retail has the broken down * Wholesaler may deliver to the small retailer reducing costs for business * Wholesaler can give advice to small retailers about what is selling well * Also advise manufacturer * Less paperwork because manufacturer only has process with wholesaler Disadvantages * More expensive than if bought straight from manufacturer * Might not have the full range of products * Takes longer for fresh goods to reach shops * Wholesaler might be far from small shops * Consumer price is often higher Distribution channel 4: Producer → Agent → Wholesaler → Retailer → Consumer * When products are exported, the manufacturer uses an agent on other countries * Allows manufacturer to have some control over the way the product is sold * Agent will either put a mark up or will receive commissions * Agent can also be wholesaler Advantages * Manufacturers may not know foreign markets * Agents are more aware of local conditions and will be in the best positions Disadvantage * Producer has less control over the way product is sold Choosing a method of distribution 1. Cost: Whether businesses have funds to spend on transportation * Direct distribution: less cost for distribution * Indirect distribution: More cost for distribution 2. Nature of product: Whether the product is physical, digital, services * Physical: most traditional methods 3. Marker: Is it a local/small marker or large/global market * Large/global market: Indirect distribution Importance of promotion * Promotion gives the consumer information about the rest of the marketing mix * Involves actual selling of the product * Not paid for * Advertising is paid for and does not involve actually selling Importance * When a brand image is being created for a product * Includes 2 main parts: * Advertisements * Involves “above-the-line” (expensive) promotions. * Such as television, newspaper, magazine and social media * Sales promotion * Involves “below-the-line” (cheap) promotions * Ex. coupons or free gifts * Involves selling the product itself Aims of promotion 1. Inform people about particular issues often used by government 2. To introduce new products to market 3. To compete with competitors product 4. To create brand image 5. To increase sales 6. To improve company image How promotions influence sales * Promotions influence sails through 5 main methods * There are above the line promotions and below the line promotions/advertising Advertising (above the line) * Communicating with customer through medias such as radio/internet/television * There should be a call to action to buy the product * Media that is used depends on available budget * Two main forms of advertising * Promotional advertising: * To stimulate immediate purchase * Usually urgent and limited * Focuses on the benefits and value of product * Call to action is involved * Ex. 50% off, buy one get one free * Informational advertising: * Provides information to consumers about product * Use of the product and where you can buy * Usually used on a new product * Focuses on why it is better than others Types of advertising * Television * Product placement * Display signs(neon lights) * National Newspapers * Local Newspapers * Internet/social media * Magazines * Leaflets * Direct mail * Posters/billboards * Sides of bags/vehicles * Radio Types of promotion * Price reduction * Money off coupons * BOGOF * Free gifts * Competitions * Free sample * Point of sale displays * Point of sale administrations * After sale services Sales promotion (below the line) * They give discounts for their products only * Is included in the direct sales of the product * Examples includes * Money-off coupons/vouchers * Point of sale displays * Loyalty rewards * Competitions/games for prizes Personal selling * Usually is used with expensive products with high profit per unit * Usually when they have direct one to one interaction with consumer * Can be expensive because there needs to be enough staff for the consumers * These staff usually have commissions in addition to salary Direct mail * Posting leaflets/other advertising and directly giving to consumers * Usually not seen now with the internet Sponsorship * Business pays for its name and/or products to be linked to an event * individual/groups of individuals Differences Promotion vs advertising * Promotion: Non paid, requires selling the product * Advertising: Paid, does not require selling the product Informative vs persuasive advertising * Informative: Information about the product * Persuasive: Limited sale/discount to persuade immediate purchase Promotion vs sales promotion * Promotion: Umbrella term for promotion * Sales promotion: Just the term for coupons and vouchers Personal selling vs direct marketing * Personal selling: Face to face selling the is personal * Direct marketing: Done by big industries who need to directly communicate product without interaction Point of sale display vs point of sale marketing: * Display: Just a picture/visual * Demonstration: Actually using the product Money off vs coupon * Coupon: umbrella term * Money off coupon: Specifically to lesson cost Coupon vs voucher * Coupon: one specific product * Voucher: Reward that can be used for all products Importance of marketing budget * States range or how much money is available to market product * Cost effectiveness is important (cost of advertising vs increase in sales) * Small businesses find it harder to compete with larger ones Technologies * Affects marketing in terms of products through new tech releasing * Affects marketing through marketing through marketing itself * Social media marketing * Viral marketing E-commerce impact on businesses Opportunities * Global coverage * Low cost promotion * Able to access many consumers * Shops might not be needed * B2B easier Threats * Setting up/maintaining cost * No direct contact * Competition * Transport E-commerce impact on consumers Opportunities * Convenience * Easy to compare * Easy to pay * Wider choice * Competitive prices Threats to consumers * Identity theft * Technical problems * Cannot see/feel products * Internet access required * No personal contact E-commerce advertisements Advantages (social media networking) * Target consumers * Target demographics * Cheap to use * Reaches difficult to reach groups Disadvantages 1. Alienates customers if annoying 2. Has to pay for advertising if using pop ups 3. Customers might not use social media 4. Lack of control of advertising if being used by others 5. Messages may be altered in a bad way Advantages 1. No extra cost if already set up 2. Control of advertising 3. Can change adverts quickly and update 4. Can provide more info 5. Attracts funds/payments from other companies Key terms * Marketing mix: set of uncontrollable factors that a company uses to influence customer purchasing decisions and achieve its marketing objectives * Product: Goods and services * Brand: Identity of a product/business based off quality, design and service * Brand name: Allows for advertising and recall from consumers * Brand loyalty: Keeps buying from the same brand and not lose customers * Brand image: The way you perceive the product * Market oriented: Changes product based off market * Product oriented: Changes other factors other than product to create a market * Unique selling point: first business with the new product, allowing them to charge more * Novelty factor: like unique selling point * Introduction stage: Products are introduced into market with low sales * Growth stage: Product is better known and starting to new customers * Maturity stage: Sales are not growing but are the same, most profit * Decline stage: Sales are falling, it is about to go out * Variable cost: Directly related to production of the product * Fixed cost: not directly related to the production of the product * Cost-plus pricing: Cost + amount * Markup pricing: Cost + markup * Full cost pricing: Cost + fixed cost per unit + profit margin * Competitive pricing: Similar or slightly lower pricing * Penetration pricing: Limited amount of lower pricing * Market skimming: High research, high profit, new product * Promotional pricing: Special promotions to attract customers * Price elasticity of demand (PED): How much the demand changes based off price * Elastic pricing: Price goes up, demand goes more down * Inelastic pricing: Price goes up, demand stays relatively the same * Unitary elastic: price goes up, demand goes down by exact same factor * Dynamic pricing: If product is at its peak/season it will go up * Distribution channel 1: Producer → Consumer * Distribution channel 2: Producer → Retailer → consumer * Distribution channel 3: Producer → Wholesaler → Retailer → Consumer * Distribution channel 4: Producer → Agent/wholesaler → wholesaler → Retailer → Consumer * Wholesaler: Stores bulk product before selling to retailers * Breaking bulk: Breaking bulk products into smaller portion/repackaging * Direct distribution: Producer → consumer * Nature of product: physical/digital/service * Promotion: Non-paid promotion of the product that involves selling * Advertising: Paid promotion that gives the general image of product * Above the line: expensive * Below the line: inexpensive * Advertising: Communication with consumers through media * Persuasive advertising: Limited time, sales/discounts influencing * Informative advertising: provides information about the product * Sales promotion: Discounts/coupons/games for discounts * Personal selling: Direct interaction with customers but needs more staff * Direct mail: Giving physical leaflets/posters * Direct marketing: Social media directly communicating to consumer (no contact) * Sponsorship: paying for business and/or product to be mentioned/sold in event * Product placement: Showing product in show/movie * Marketing budget: range/specific amount to be spent on marketing * Delegation: * Primary:

Marketing mix
Marketing Mix

Marketing mix
* Set of controllable factors that a company uses to influence customer purchasing decisions and achieve its marketing objectives.

Product
* Goods and services itself in comparison to other businesses
   1. Design, features and quality
   2. How it compares with competitors
   3. Does the packaging help customers identify it
   4. If it is a service, do customers receive a better service
* Its quality, design and service shapes its brand
* A brand is the identity of a product or business
* Helps it stand out 
   * Ex. name, logo, design, color

Types of products
* Consumer goods: Goods bought by consumers for their own use that are tangible
* Consumer services: Services that are brought by customers for their own use. 
* Producer goods: Goods that are produced for other businesses  to use
   * Helps with production (ex. machinery)
* Producer services: Services that are produced to help other businesses

Product requirements
1. The product needs to satisfy consumer wants and needs. 
2. The product also needs to be of the right quality so consumers are willing to pay for it
3. The products production cost must not be more expensive than price charged
4. Design of product must match brand image or brand
   1. Perform to standard expected by consumers/legal control

Market oriented vs product oriented business
* Product oriented business: Product stays consistent and adjust other factors to create market
* Market oriented business: Market dictates the product/business style
   * This means that the product/business will change based off market

Costs and benefits of developing new products

Benefits
1. Creates a unique selling point as the business is the first to show this product (charge more)
2. Diversification of the business, giving it a broader range
3. Allows business to expand to new markets
4. Allows business to expand into existing market

Drawbacks
1.  Costs of carrying out market research/analysis
2. Cost of producing trial products and wasted materials
3. Lack of sales if wrong target market
4. Loss of company image if the new product fails to meet customer needs

Importance of brand image
* Brand name: Allows for advertising and recall from consumers
* Brand loyalty: Keeps buying from the same brand and not lose customers
* Brand image: The way you perceive the product

Role of packaging
* Just as important as other parts of the marketing
* Has 2 functions:
1. Serves as protection to the product and not allow to spoil
   1. Allows the product to be used easily
   2. Has to be suitable for transporting it cannot be too delicate
2. Used also for promoting the product
   1. The color and shape of the container is very important
   2. It is the packaging that catches the customers eye
   3. The labels must also cary legal requirements

Summarized roles
1. Protect the product
2. Provide information about the product
3. To help consumers recognize the product
4. Keep the product fresh once it has been opened
5. Can be reused once the product has been used

Product life cycle (development stage is step 0)
1. Introduction stage
* Product is introduced into the market
* Sales are still low and product might be taking a loss in this stage
* Heavy advertising cost
2. Growth stage
* The product is becoming better known to consumers
* Sales are increasing so product starts to earn profit
3. Maturity stage
* Sales are no longer growing but are not failing
* This is the most profitable
4. Decline stage
* Sales are fallings
* It eventually becomes unprofitable and is withdrawn

Extending the product life cycle
1. new markets: Owners will look to see if there are other markets for product (foreign markets)
2. New variations: Newer versions/types of the original product
3. Adapt the product: Small changes to design, color or packaging
4. New advertising: Use a new advertising campaign
5. New version: New and improved version of the old product
6. New uses: Look to see if the product can be used for something other than it’s original
7. Sell through more outlets: sell through more outlets

Effect
* If it is effective, then maturity stage will be prolonged

Role of pricing decisions in the marketing mix
* The price has to match the brand, brand image, and expectation
* Compare your product prices with competitors

Pricing strategies
* If you can distinguish the product from others, then it is most likely branded
   * It will have a distinct name and pricing and you have to select and appropriate price to complement the brand image
* Value for money brand should have a low price
* If a product has many competitors, the price is more important
   * You have to note what your competitors are charging

Adapting pricing strategies
1. Breaking into a new market
2. Increasing its market share
3. Increasing its profits
4. Make sure all costs are covered and target profit is earned

Main methods of pricing
* Note that total cost = variable cost + fixed cost
   * Variable cost: related to manufacturing the product
      * Ex. Materials, electricity, water etc.
   * Fixed cost: not directly related to manufacturing the product
      * Rent, salaries

Cost-plus pricing
* Estimating how many units of the product will be produced
* Calculating the total cost of producing the output
* Adding a percentage mark-up for profit
* Ex.

Benefits
* Method is easy to apply
* Different profit mark-ups can be used for different markets
* Each product earns a profit for the business

Limitations
* Businesses could lose sales if the selling price is higher than competitors price
* A total profit will only be made if sufficient units of the product are sold
* There is not incentive to reduce costs

Mark up pricing
* We calculate the selling price by adding a percentage markup to the variable cost per unit
* Price = Cost + markup
* Markup = percentage of variable cost that they want

Full cost pricing
1. Find the fixed costs per unit
* Total fixed costs / number of units produced
2. Add fixed cost to cost of product
* Total cost = Fixed cost per unit + variable cost
3. Add markup
* Total cost + markup

Markup vs full-cost pricing
* Markup pricing is easier because you only know the cost
* Full cost pricing would be used when you need to consider all costs

Competitive pricing
* Setting prices in line with your competitors’ pricing or just below their prices

Benefits
* Sales are likely to be high as the price is at a realistic level
* Avoids price competition
* Often used when it is difficult for customers to tell the difference between the products

Limitations
* The cost of production of a business is higher than competitors, then a competitive price could lead to losses being made (have to consider cost)
* A higher quality product might need to be sold at a price above competitors prices for  image
* In order to decide what price it needs, research needs to be done

Penetration pricing
* The price would be set lower than the competitors prices
* Temporary and designed to attract customers
* Ex. cheaper subscription to attract customers
* Ex. a new chocolate bar at a price several cents below to attract customers

Benefits
* Often used to newly launched products to create and impact with customers
* It should ensure that the sales are made and the new product enters the market successfully
* Markets share should build up quickly

Limitations
* The product is sold at a low price and therefore the profit per unit may be low
* Customers might get used to low prices and reject the product if it goes up
* Might not be appropriate if the brand has a quality reputation

Price skimming
* Usually a new invention or a new development of an old product list 
* can be sold on the market at higher price
* Often has cost a lot in research and development
* High price can help indicate quality

Benefits
* Skimming can make product look good quality
* High research and development can be easily gained back from profit
* If the product is unique, high price before competitors copy them

Limitations
* High price may discourage potential customers from buying
* High price and profitability may encourage competitors to enter the market

Promotional pricing
* Used when a business wants to price a product at a low price for a short time
* At the end of summer, some companies have sales for summer clothes
* Or buy one get one free

Benefits
* Useful for getting rid of unwanted inventory that will not sell
* Can help to renew interest in a product if sales are falling

Limitations
* Revenue will be lower because price of each will be reduced
* May lead to price competition with competitors

Choosing a pricing

Market skimming
* New products/high-demand products
* Start with high price to maximize profits and lower over time

Penetration pricing
* New products entering competitive markets
* Set a low price to attract customers and grow market share

Competitive pricing
* Set prices based on competitors
* Used when many similar products exist

Cost-plus pricing
* Calculate production costs and add fixed markup
* Used for stable products with predictable costs

Promotional pricing
* Temporarily reduce prices to boost sales
* Use for special promotions or clearing inventory

Price elasticity of demand
* Measure of how much the demand changes when its price changes

If PED > 1: Demand is elastic, they are very responsive to price changes
* Price goes up, demand of customers go down more
If PED < 1: Demand is inelastic, Consumers are less responsive to price changes
* Price increases but the demand stays relatively the same
* Usually for Basic necessities
If PED = 1: Demand is unitary elastic, demand changes are the same percentage
* Price goes up, demand of customers go down same amount

Effects of price elasticity of demand on revenue

Elastic demand
* Lowering price increases revenue
* Is cost per unit is high then you might not make profit

Inelastic demand
* Raising price increases revenue
* If cost rise too much, the extra revenue might not cover the costs

Unitary Elasticity
* Price and demand change equally
* Revenue stays consistent/constant

Dynamic pricing
* Prices changes during the day
* If it is at its peak, then it is more expensive
* If it is not then it is cheap

Role of place decisions
* Business actually has to sell the product
* Not only about physical place but also about method
* Marketing in the correct place to reach target consumers

Distribution channels
* Decide where to sell their products
* Sell directly to consumers vs other businesses to help them sell
* Longer → more expensive

Distribution channel 1: Producer → Consumer
* Also includes manufacturer → Manufacturer

Advantages
* It is simple, selling products directly to consumers
* It is suitable for products such as food
* There is a lower price because of no wholesaler/retailer
* Can be sold by mail order catalogs/internet

Disadvantages
* Impractical for most because consumers don't live near factory
* Not suitable for products that can be sent
* May be expensive to send making it ineffective

Distribution channel 2: Producer → Retailer → Consumers
* Sells to outlet which sells to consumer

Advantages
* Producer sells large quantities to retailers
* Reduced distribution costs

Disadvantages
* No direct contact with customers
* Price is often higher than direct selling as retailers need to cover costs

Distribution channel 3: Producer → Wholesaler → retailer → Consumer
* Involves a wholesaler who breaks bulk
* Breaking bulk is where they buy in large quantities but then break themselves

Advantages
* Saves storage space for small retailers and reduces storage cost
* Small retailers can purchase fresh products in small quantities because they have a short shelf life
* Wholesaler may give credit to retail customers so they can take the goods straightaway
   * Because the business is already payed, business’ products is out
   * The wholesaler has the bulk and retail has the broken down
* Wholesaler may deliver to the small retailer reducing costs for business
* Wholesaler can give advice to small retailers about what is selling well
   * Also advise manufacturer
* Less paperwork because manufacturer only has process with wholesaler

Disadvantages
* More expensive than if bought straight from manufacturer
* Might not have the full range of products
* Takes longer for fresh goods to reach shops
* Wholesaler might be far from small shops
* Consumer price is often higher

Distribution channel 4: Producer → Agent → Wholesaler → Retailer → Consumer 
* When products are exported, the manufacturer uses an agent on other countries
* Allows manufacturer to have some control over the way the product is sold
* Agent will either put a mark up or will receive commissions
* Agent  can also be wholesaler

Advantages
* Manufacturers may not know foreign markets
* Agents are more aware of local conditions and will be in the best positions

Disadvantage
* Producer has less control over the way product is sold

Choosing a method of distribution
1. Cost: Whether businesses have funds to spend on transportation
* Direct distribution: less cost for distribution
* Indirect distribution: More cost for distribution
2. Nature of product: Whether the product is physical, digital, services
* Physical: most traditional methods
3. Marker: Is it a local/small marker or large/global market
* Large/global market: Indirect distribution

Importance of promotion 
* Promotion gives the consumer information about the rest of the marketing mix
* Involves actual selling of the product
* Not paid for
* Advertising is paid for and does not involve actually selling

Importance
* When a brand image is being created for a product
* Includes 2 main parts:
* Advertisements
   * Involves “above-the-line” (expensive) promotions.  
   * Such as television, newspaper, magazine and social media
* Sales promotion
   * Involves “below-the-line” (cheap) promotions 
   * Ex. coupons or free gifts
   * Involves selling the product itself

Aims of promotion
1. Inform people about particular issues often used by government
2. To introduce new products to market
3. To compete with competitors product
4. To create brand image
5. To increase sales
6. To improve company image

How promotions influence sales
* Promotions influence sails through 5 main methods
* There are above the line promotions and below the line promotions/advertising

Advertising (above the line)
* Communicating with customer through medias such as radio/internet/television
* There should be a call to action to buy the product 
* Media that is used depends on available budget
* Two main forms of advertising
   * Promotional advertising:
      * To stimulate immediate purchase
      * Usually urgent and limited
      * Focuses on the benefits and value of product
      * Call to action is involved
      * Ex. 50% off, buy one get one free
   * Informational advertising:
      * Provides information to consumers about product
      * Use of the product and where you can buy
      * Usually used on a new product
      * Focuses on why it is better than others

Types of advertising
* Television
* Product placement
* Display signs(neon lights)
* National Newspapers
* Local Newspapers
* Internet/social media
* Magazines
* Leaflets
* Direct mail
* Posters/billboards
* Sides of bags/vehicles
* Radio

Types of promotion
* Price reduction
* Money off coupons
* BOGOF
* Free gifts
* Competitions
* Free sample
* Point of sale displays
* Point of sale administrations
* After sale services

Sales promotion (below the line)
* They give discounts for their products only
* Is included in the direct sales of the product
* Examples includes
   * Money-off coupons/vouchers
   * Point of sale displays
   * Loyalty rewards
   * Competitions/games for prizes

Personal selling
* Usually is used with expensive products with high profit per unit
* Usually when they have direct one to one interaction with consumer
* Can be expensive because there needs to be enough staff for the consumers
* These staff usually have commissions in addition to salary

Direct mail
* Posting leaflets/other advertising and directly giving to consumers
* Usually not seen now with the internet
 
Sponsorship
* Business pays for its name and/or products to be linked to an event
* individual/groups of individuals

Differences

Promotion vs advertising
* Promotion: Non paid, requires selling the product
* Advertising: Paid, does not require selling the product

Informative vs persuasive advertising
* Informative: Information about the product
* Persuasive: Limited sale/discount to persuade immediate purchase

Promotion vs sales promotion
* Promotion: Umbrella term for promotion
* Sales promotion: Just the term for coupons and vouchers

Personal selling vs direct marketing
* Personal selling: Face to face selling the is personal
* Direct marketing: Done by big industries who need to directly communicate product without interaction

Point of sale display vs point of sale marketing: 
* Display: Just a picture/visual
* Demonstration: Actually using the product

Money off vs coupon
* Coupon: umbrella term
* Money off coupon: Specifically to lesson cost

Coupon vs voucher
* Coupon: one specific product
* Voucher: Reward that can be used for all products

Importance of marketing budget
* States range or how much money is available to market product
* Cost effectiveness is important (cost of advertising vs increase in sales)
* Small businesses find it harder to compete with larger ones

Technologies
* Affects marketing in terms of products through new tech releasing
* Affects marketing through marketing through marketing itself
   * Social media marketing
   * Viral marketing

E-commerce impact on businesses

Opportunities
* Global coverage
* Low cost promotion
* Able to access many consumers
* Shops might not be needed
* B2B easier

Threats
* Setting up/maintaining cost
* No direct contact
* Competition
* Transport

E-commerce impact on consumers

Opportunities
* Convenience
* Easy to compare
* Easy to pay
* Wider choice
* Competitive prices

Threats to consumers
* Identity theft
* Technical problems
* Cannot see/feel products
* Internet access required
* No personal contact

E-commerce advertisements

Advantages (social media networking)
* Target consumers
* Target demographics
* Cheap to use
* Reaches difficult to reach groups

Disadvantages
1. Alienates customers if annoying
2. Has to pay for advertising if using pop ups
3. Customers might not use social media
4. Lack of control of advertising if being used by others
5. Messages may be altered in a bad way

Advantages
1. No extra cost if already set up
2. Control of advertising
3. Can change adverts quickly and update
4. Can provide more info
5. Attracts funds/payments from other companies

Key terms
* Marketing mix: set of uncontrollable factors that a company uses to influence customer purchasing decisions and achieve its marketing objectives
* Product: Goods and services
* Brand: Identity of a product/business based off quality, design and service
* Brand name: Allows for advertising and recall from consumers
* Brand loyalty: Keeps buying from the same brand and not lose customers
* Brand image: The way you perceive the product
* Market oriented: Changes product based off market
* Product oriented: Changes other factors other than product to create a market
* Unique selling point: first business with the new product, allowing them to charge more
* Novelty factor: like unique selling point
* Introduction stage: Products are introduced into market with low sales
* Growth stage: Product is better known and starting to new customers
* Maturity stage: Sales are not growing but are the same, most profit
* Decline stage: Sales are falling, it is about to go out
* Variable cost: Directly related to production of the product
* Fixed cost: not directly related to the production of the product
* Cost-plus pricing: Cost + amount
* Markup pricing: Cost + markup
* Full cost pricing: Cost + fixed cost per unit + profit margin
* Competitive pricing: Similar or slightly lower pricing
* Penetration pricing: Limited amount of lower pricing
* Market skimming: High research, high profit, new product
* Promotional pricing: Special promotions to attract customers
* Price elasticity of demand (PED): How much the demand changes based off price
* Elastic pricing: Price goes up, demand goes more down
* Inelastic pricing: Price goes up, demand stays relatively the same
* Unitary elastic: price goes up, demand goes down by exact same factor
* Dynamic pricing: If product is at its peak/season it will go up
* Distribution channel 1: Producer → Consumer
* Distribution channel 2: Producer → Retailer → consumer
* Distribution channel 3: Producer → Wholesaler → Retailer → Consumer
* Distribution channel 4: Producer → Agent/wholesaler → wholesaler → Retailer → Consumer
* Wholesaler: Stores bulk product before selling to retailers
* Breaking bulk: Breaking bulk products into smaller portion/repackaging
* Direct distribution: Producer → consumer
* Nature of product: physical/digital/service
* Promotion: Non-paid promotion of the product that involves selling
* Advertising: Paid promotion that gives the general image of product
* Above the line: expensive
* Below the line: inexpensive
* Advertising: Communication with consumers through media
* Persuasive advertising: Limited time, sales/discounts influencing
* Informative advertising: provides information about the product
* Sales promotion: Discounts/coupons/games for discounts
* Personal selling: Direct interaction with customers but needs more staff
* Direct mail: Giving physical leaflets/posters
* Direct marketing: Social media directly communicating to consumer (no contact)
* Sponsorship: paying for business and/or product to be mentioned/sold in event
* Product placement: Showing product in show/movie
* Marketing budget: range/specific amount to be spent on marketing
* Delegation: 
* Primary:

Transcript for:Understanding the Marketing Mix Essentials

Transcript for:
Understanding the Marketing Mix Essentials