11 MARKETING MIX

CHAPTER OVERVIEW

In this chapter we will examine:

The elements of the marketing mix
The role of the customer
The importance of the product in the marketing mix
The product life cycle
Types of pricing strategies
The price elasticity
Promotion methods
Channels of distribution
Using the internet in marketing
The ef fective marketing mix
11.1 THE MARKETING MIX
 THE MARKETING MIX

The marketing mix comprises all the elements associated with a product that
affect whether or not the customer decides to buy it

A broad range of factors may affect customers purchasing decisions

Looking at why a customer might choose one supermarket over another, these
factors play a part:
How far away is it?
How easy is it to park?
What is the range of products like?
Are prices competitive?
What additional facilities are there?
Are the staff friendly and helpful?
What services are provided?
Is there a loyalty program or other discounts available?
 THE MARKETING MIX

Often simplified
Commonly referred to as the 4 Ps
Price: How much customers are charged and the terms of payment
Product: Design, quality, reliability, features, functions
Place: The way the product is distributed
Promotion: How information is communicated about the product to the customer
 TESCO MARKETING MIX

Product:
Tesco sell a wide range of groceries. They sell all the leading brands products like Kelloggs, Heinz
and Nestle, as well as their own brand products, which are made for them by manufacturer s who will
add the distinctive Tesco packaging.
They hope to be able to cater for all customer s by adopting a good, better and best approach. This
means that they of fer a basic value Tesco brand, a standard Tesco brand and a range of Tesco Finest
products, as well as Healthy living and organic.
They are also diver sifying their product range away from groceries and into many other areas,
including clothing, electrical, computing, banking and insurance. This is to take advantage of their
established brand name and meet the need of as many customer s as possible.

Price :
Tesco aims to compete with the other supermarkets by of fering money of f voucher s if the same
products could have been bought at a leading rival cheaper. As such, it is not tr ying to be cheaper
than its rivals but the same.
It also needs to be aware of how the main discounting supermarkets are doing, and this may af fect
its future pricing policy.
Prices at the smaller convenience stores can be higher than in the supermarkets to reflect the
dif ference in costs .
 TESCO MARKETING MIX

Promotion:
Tesco uses above the line promotion with its T V advertising.
It also uses below the line promotion. Its Clubcard allows it to keep close track on
individual customers and offer very specific promotions.
It also tries to involve itself in the community with its links with charities such as
Diabetes UK, the race for life. This is to enhance its image as a caring company.

Place:
Tesco is widely spread geographically across the UK and has established itself in other
European and Asian countries through buying supermarket chains and expansion.
In the UK, it has stores of many different sizes from its Tesco Extra hypermarkets to its
Tesco Express and One Stop mini stores.
It also uses internet shopping where, for a small extra charge, customers can buy online
and get their shopping delivered.
Tesco acts as its own wholesaler by having its own distribution centers which buy in
bulk from the manufacturers and distribute to the individual stores.
 THE MARKETING MIX

Can be extended to include a further 3 Ps

People: Customer service (polite, well-trained, well-informed)
Physical environment: Layout and functionality, decor,
parking, ambiance
Especially important for retail, restaurants and bars
Process: Ease of ordering and paying
Self-scanning check out lines
 PHYSICAL ENVIRONMENT

Ambiance includes temperature, color, smell, sound, music and

noise
The ambience is a package of these elements which consciously
or subconsciously help you to experience the service
The ambience of a health spa is relaxing and calm, and the music
and smells underpin this experience
The ambience of a nightclub will be loud noise and bright lights
which enhance this customer experience
The marketer needs to match the ambience to the service that is
being delivered
 PHYSICAL ENVIRONMENT

The spatial layout and functionality are the way in which

furniture is set up or machinery spaced out.
Think about the spatial layout of your local cinema, or a
restaurant or caf that you have visited and how this affects
your experience of the service.
Functionality is more about how well suited the environment
is to actually accomplish your needs.
For example is the seat in the cinema comfortable, or can
you reach your life jacket when on an aircraft?
SUPERMARKETS AND THE PSYCHOLOGY BEHIND YOUR
PURCHASE
10 For $10
A grocery store survey recently found that people bought way more items when they saw 10 for
$10 deals vs. five for $5 and one for $1 sales
Even if you aren't buying 10 items, your mind will trick you into thinking that the item is such
a great deal that you end up buying more of it

Growing carts
No, you're not shrinking; it's the grocery carts that are growing. The larger the cart, the more
likely you'll end up spending more
Research found that when the size of the cart doubled, consumers bought 40% more
SUPERMARKETS AND THE PSYCHOLOGY BEHIND YOUR
PURCHASE
Precut vegetables and fruits
Precut veggies look so attractive, with their colorful packaging and promise of less work (no
need to wash or chop!). However, they aren't exactly a good deal. CBC News found that precut
veggies and fruits can be a lot more expensive than the whole items .

Items at the checkout counter

Ever wonder why all those magazines and yummy candy are crammed in the front of checkout
counters? It's one of the supermarket's tricks to get you to succumb to last -minute purchases
while you're waiting in line.
SUPERMARKETS AND THE PSYCHOLOGY BEHIND YOUR
PURCHASE
Fragrant items in the front
Flowers and other pleasant-smelling items like baked goods are often put in the front of the
supermarket, so you'll be sniffing sweet scents when you first walk in. This will not only put you
in a better mood, but it will also trigger your salivary glands, making you more prone to
impulse buys.
SUPERMARKETS AND THE PSYCHOLOGY BEHIND YOUR
PURCHASE
Where is everything?
You think you have the layout of your local supermarket down pat when you find out they
changed shelves again!
The stores are actually doing it on purpose, because if you don't know where the items are,
you'll end up spending more time in the store
More time to browse means more chances to tempt you into buying more items

Eye-level trick
Items that are placed at eye level on the shelves tend to be pricier name -brand goods, which
are the products the supermarkets want you to buy.
SUPERMARKETS AND THE PSYCHOLOGY BEHIND YOUR
PURCHASE
Essentials at the back
Many of the essentials are in the back of the store or in the middle somewhere, and not in the
front
That's because supermarkets want you to walk through the store to reach them and hopefully
pop some items into your cart along the way
Similarly, essentials and common buys are also located in the middle of aisles, which will draw
you deeper into the supermarket

Sneaky circulars
A lot of items in the circulars are full-priced and not necessarily great deals.
SUPERMARKETS AND THE PSYCHOLOGY BEHIND YOUR
PURCHASE
Club cards
Grocery stores use to build customer loyalty
Influences you into buying all of your groceries from the supermarket that you're a member of

Colorful produce
Being hit with splashes of color in the produce aisle right when you walk in the store will put
you in a good mood and will make you want to buy more
It sets the tone for the whole shopping experience and makes customers think more favorably
of the particular supermarket
SUPERMARKETS AND THE PSYCHOLOGY BEHIND YOUR
PURCHASE
99 cents psychological pricing
Tagging a product with 99 cents can make consumers automatically round down
If you price an item for $1.99 vs. $2, the theory is consumers will associate the product with
$1 rather than $2

Samples
Samples slow you down in a supermarket and can get customers to buy a product that wasn't
on their list to begin with
Trying something for free can also instill a sense of commitment or obligation to buying the
product
SUPERMARKETS AND THE PSYCHOLOGY BEHIND YOUR
PURCHASE
Bulk shopping
You may think you are saving a bundle by shopping in bulk. Even if you are, buying more may
mean that you'll consume more than normal, which is what supermarkets are hoping you will
do

Music
The music is strategically chosen by the supermarket to keep you in a relaxed frame of mind
Music that's too fast can cause you to speed up your shopping and leave the store as soon as
you can
Slow music can influence you to take your time and linger around
 CASE STUDY: DOING BUSINESS IN AFRICA

1. Explain two features of the African market.

Growing; large population; emerging middle class

2. Discuss how an understanding of the African market

might influence marketing in this region.
It will affect product development, pricing and distribution
channels
11.2 THE ROLE OF THE
CUSTOMER (THE 4 CS)
 COST (PRICE)

What price will you ask your customer to pay for your product or ser vice? What research have
you done to determine if that figure is reasonable and af fordable for your target?
Is your product or service still profitable at the price your customer is able/willing to pay ?

Price - measured in dollars, baht, etc. - is only one par t of the cost to satisfy
What will the consumers total, or real, cost be for obtaining your product or service?
Will the cost of driving to your location significantly add to their expense?
How much more will shipping charges add to their bill?
How will local, state and federal taxes impact the total cost of the product or service?

Does the value or benefit your product or ser vice of fer s the customer suppor t its cost?

One of the most dif ficult places to be in the business world is the retailer selling at the lowest
price
If you rely strictly on price to compete you are vulnerable to competition in the long term
Keep in mind that price alone doesnt usually convince the consumer to buy, so setting a low price wont
necessarily drive sales and could hurt your bottom line
 CONVENIENCE TO THE CUSTOMER (PLACE)

How easy is it to buy the product?

What barriers might the customer face when trying to locate or purchase your product or service?
What are you going to do to reduce or remove these challenges?

Whether you have a web -based business or operate a brick and mor tar one that of fers online
sales, your website must be easy to navigate. Ask yourself:
Can the customer find what they are looking for?
Can they move from product selection to checkout with just a few clicks?
Are product descriptions detailed enough for the customer to make a purchasing decision?

If a customer has a question during the purchasing process, what kind of customer suppor t do
you of fer?
Have you created an app or a mobile edition of your website? Doing so puts your product or service in the hand
of the consumer virtually 24/7

You have to know how each subset of the market prefers to buy
On the internet (Lands End clothing, Amazon Books, Dell Computers)
From a catalogue
Over the phone
Using credit cards or cash
 COMMUNICATION (PROMOTION)

What do we know about the product ?

Every customer wants to know Whats In It For Me (WIIFM). Your communication with the
customer should answer that question

Promotion is manipulative - it's from the seller

Engaging with your customer through meaningful communication builds customer confidence that
drives sales

Communication requires a give and take between the buyer and seller
Be creative and you can make any advertising "interactive "
Use phone numbers, your web site address, etc.
Listen to your customers when they are "with" you.
Use social media to ask your customers for their insights. Finding out what your customers like and
dislike about current products and learning what they want allows you to develop products and
services theyll be more likely to purchase. Create polls, track Likes and ask for comments.

You must adapt your communication approach to each of your targets. What you say and
where and how you say it is unique to each group.
 CUSTOMER SOLUTION (PRODUCT)

To position your product or service for maximum profitability, you must know what
your target customer needs and wants
How you are going to determine what your customer wants?
What benefits does it offer?
How does it meet a customer need to solve a customer problem?

Your products market position is determined by the value/worth your customers

perceive it to have.
You can't develop products and then try to sell them to a mass market
You have to study consumer wants and needs and then attract consumers one by one with
something each one wants
You have to find out what people want and then "build" it for them, their way

As you evaluate each element of the 4Cs, keep in mind that the customer drives your
decision making.
 WAYS IN WHICH CUSTOMER RELATIONS CAN BE
IMPROVED
To meet customer expectations, you must:
Know what those expectations are through research
Manage those expectations through communications stress positives; dont promise too much
Know what your competitors offer helps ensure you continue to offer value for money
Follow up after sales to get feedback
Look for ways to build relationships with customers
Is there anything else you can offer them?

Improving customer relations involves investment in:

Market research
Training
Ensuring a quality product offering value for money
11.3 PRODUCT
 PRODUCT

Businesses must continually review their products to ensure relevancy. In doing so they
consider:
The core benefit that the product meets
What does your product do and how does it add value?
Must keep track of competitors and be aware of new technology that might affect their business

The nature of the product/ser vice itself

What are the product features? How will they change market to market?
Product should be developed according to how people will use them

The augmented features

A commodity that has both the primary physical attributes and the non -physical attributes that are
added to increase the product's value. May increase the price of the basic product being purchased
Refers to: guarantee, after sales servicing, warranty, tech support, etc.
 PRODUCT DIFFERENTIATION AND UNIQUE SELLING
POINT (USP)
A marketing process that showcases the dif ferences between products

Dif ferentiation looks to make a product more attractive by contrasting its unique
qualities with other competing products

Successful product dif ferentiation creates a competitive advantage for the seller, as
customers view these products as unique or superior
 PRODUCT DIFFERENTIATION AND UNIQUE SELLING
POINT (USP)
Dif ferentiation achieved by having a USP
Why is your water better then other water our water only comes from this lake.

Product dif ferentiation can be achieved in many ways

It may be as simple as packaging the goods in a creative way
Or as elaborate as incorporating new functional features

Sometimes dif ferentiation does not involve changing the product at all, but creating
a new advertising campaign or other sales promotions instead
 JONES SODA

1. During the company's early years, how did Jones Soda dif ferentiate its product
from other soft drinks? How did it compete with Coke and Pepsi?

2. Who is Jones Soda's target demographic? How has the company chosen to reach
those customers?

3. What mistakes did Jones Soda make during its attempts to expand its market?
What ef fects did these mistakes have on the business?

4. How did the company revive itself and its sales?

 Jones Soda was started by Peter van Stolk in Seattle, Washington

Created sodas to enter the nearly 70 billion dollar soda market

But how did he take on giants like Pepsi and Coca Cola with such a small business?
Well, the short answer is that he didn't.
 JONES SODA

He realized that the market was made up of people largely unsatisfied with the
same old colas that everyone thinks of automatically

So the market he was targeting was rebels: people who resisted conformity and
eschewed the norm

He started by concocting unique beverage flavors that were a wild departure from
the status quo

Drinks with names like "Jelly Donut", "Bug Juice" and "Fun" were an instant hit, but
even his awful-tasting novelty beverages like "Turkey and Gravy" were popular for
their uniqueness
 JONES SODA

The company's brand image employs user -supplied photography on the labels of
their bottles

For years their only advertising was via two RVs that travelled the country giving
away free sodas and branded gear at high schools and skate parks

The resulting word of mouth drove the fledging company to 35 million a year in
sales revenues

The main reason it all worked was that Jones sodas knew their target market, and
their target market loved them
 DOMINOS

You get fresh, hot pizza delivered to your door in 30 minutes or less or it's free.

While a bit on the wordy side, this example is an excellent USP because it's
completely transparent.

The terms are so clear that the customer knows he can hold the company to its
promise.

Domino's no longer of fers this deal because it inspired a number of car accidents
involving delivery drivers trying to beat their thirty -minute limit.

This slogan is an excellent example of why it's a bad idea to overpromise and under
deliver. Never make a promise to a prospect or customer unless you're sure you can
keep it!
 DEBEERS

A diamond is forever.

There's a reason that this slogan has been around since 1948 and is still in use
today.

The slogan points out that diamonds, being next to unbreakable, last forever and
thus are the ideal symbol for undying love.

As a result, diamonds became the almost inevitable choice for engagement rings.
It's no surprise that Advertising Age magazine named this slogan the best
advertising slogan of the 20th century.
 M&MS

The milk chocolate melts in your mouth, not in your hand.

This is an example of how even a rather of f -beat USP can be catchy and compelling.

Who would think of making a selling point out of the fact that your product doesn't
melt if you hold it? M&Ms did, and it worked very well for them.
 FEDEX

When it absolutely, positively has to be there overnight.

FedEx no longer uses this slogan, but while it lasted, it was a perfect example of a
compelling USP.

In a few words, FedEx guarantees that it will deliver your package safely and on
time.

FedEx replaced it with the slogan, The World on Time, which is vague and doesn't
contain a USP.
 AVIS

We're number two. We try harder.

This USP does a fantastic job of turning a drawback into a benefit.

For a long time, Avis was the second -largest car rental company, after Hertz. In fact,
Avis was struggling just to stay afloat.

As part of a total image makeover, Avis hired the famous ad agency Doyle Dane
Bernbach to come up with a new ad campaign.

The campaign was so successful, Avis' market share went from 11% to 35% in just
four years.
11.4 PRODUCT LIFE CYCLE
 PRODUCT LIFE CYCLE

The product life cycle traces the sales of a product over its life

The typical path for a product can be divided into five stages
 THE FIVE STAGES OF THE PRODUCT LIFE CYCLE

Research/Development
Introduction/Launch
Growth
Maturity/Saturation
Decline
Withdrawal*
 THE RESEARCH AND DEVELOPMENT STAGE

The basic idea for the product is developed

New ideas/possible inventions
Market analysis is it wanted? Can it be produced at a profit? Who is it likely
to be aimed at?

Product Development and refinement

Creation of models, mock-ups, etc.
Test Marketing possibly local/regional
Analysis of test marketing results and amendment of product/production process

Preparations for launch publicity, marketing campaign

This stage can be very expensive, varies from product to product, and is a time of high
risk
The product may never be developed successfully (Edison made 1001 attempts at getting the light
bulb right; Dyson took 15 years and 5000 prototypes to develop his vacuum)
 THE INTRODUCTION (LAUNCH) STAGE

Product/ser vice is actually launched

Many never ideas never reach this stage

Advertising and promotion campaigns to maximize publicity

These costs will be relatively high to make potential customers aware of the product
Target campaign at specific audience?
Losses are still likely to be made (high costs/low sales)

Monitor initial sales

Will likely struggle to get firms to stock their products or for customers to try their
product/ser vice
This is especially true if there are high costs involved (i.e. penalty payments)

Length of time in this stage depends on the type of product

 THE GROWTH STAGE

Increased consumer awareness/acceptance

Distributers more likely to stock the product
Sales should rise
Revenues increase
Should start turning a profit

Must ensure you can meet demand, deadlines, and can manage the growth process
Hiring new staff
Buying more equipment
Expanding premises

Some products will never reach this stage (after launch they are never successful)
 THE MATURIT Y AND SATURATION STAGE

Sales slow down

Competition likely to be greater

Cost of supporting the product declines

Monitor market changes/amendments/new strategies ?

Necessity to develop new strategies becomes more pressing

Managers must consider what to do next

Invest more funds to boost sales?
Seek new market segments?
Joint ventures?
Develop new uses for the product?
Focus on adapting the product?
Re-package?
Improve the standard or quality?
Develop the product range?
 DECLINE

Eventually sales are likely to fall

Product outlives/outgrows its usefulness/value
Fashion changes
Technology changes

Harder to get the product distributed

May have to cut price to maintain sales

Decision to withdraw may be dependent on:

Availability of new products/features
Will these fashions/trends become popular again?
 USING THE PRODUCT LIFE CYCLE

Used by managers to determine what stage their product is in

Adjust marketing mix accordingly (i.e. promotion used to announce launch of product in
introduction stage, but stress differences with competitors in maturity stage)

May help the firm to identify when a product needs

Support
Redesign
Reinvigorating
Withdrawal
New product development planning

May help in forecasting and managing cash flow

 EXTENDING SALES IN THE PRODUCT LIFE CYCLE

A firm may try to prevent sales of a product going into decline by using extension
strategies

An Extension strategy occurs when marketing activities are changed to prevent

sales falling
 EXTENDING SALES IN THE PRODUCT LIFE CYCLE

Methods might include:

Try to increase usage of product (shampoo products advising you to use twice per shower;
cleaning products become all-purpose, etc.)
Encouraging use on more occasions (Head & Shoulders used to not only stop dandruff, but
prevent it as well)
Reducing price success depends on price elasticity of demand
Adapting the product (products use terminology like New Improved Now with)
Introducing promotional offers (competitions, coupons, etc.)
Changing the image (trying to appeal to new audience)
 Introduction Growth Maturity Decline

Price May be low to May be able to May hold May cut to boost
introduce increase with sales
demand

Distribution May be limited as May increase May hold May focus

stores unsure to gain access to the on best
whether to stock market performing
outlets

Promotion May focus on May try to increase May highlight May try to reinforce
awareness awareness differences with existence and
competitors who may benefits of the
have entered product

The product May be limited May widen May stop developing May focus on best
number of range with demand new models/varieties performers
models/varieties
 CASE STUDY: SEGWAY

1. Explain two benefits of the Segway.

Energy efficient; easier than cycling

2. Discuss the ways in which the marketing of the Segway

might change as it moves from the introduction to the
growth phase of the product life cycle.
May seek more places to target (hospitals, arenas, libraries,
warehouses
May seek more distribution channels (dealerships)
May affect pricing (lower price to target bigger segment)
May develop new models for the future
 EXTENSION: PRODUCT LIFE CYCLE AND CAPACIT Y
UTILIZATION
Capacity measures the maximum possible output a business can produce with its
given resources at a particular moment in time
Depends on numbers and skills of employees
Depends on level and quality of its capital equipment and technology

Capacity utilization measures the existing output as a percentage of the maximum

possible output
The amount it is producing vs how much it could
50% capacity utilization means a firm is producing half as much as it could
25% capacity utilization means its producing a quarter of what it could
This is a bad practice as resources are being wasted and the firm is being inefficient
 EXTENSION: PRODUCT LIFE CYCLE AND CAPACIT Y
UTILIZATION
When a firm first launches a product it must predict the likely level of sales
This will determine the capacity it will need

In the early stages of the product life cycle sales will usually be less than at
maturity stage
 EXTENSION: PRODUCT LIFE CYCLE AND CAPACIT Y
UTILIZATION
If it enters market with enough capacity for peak sales, its capacity utilization will
be low early on
This can be expensive
If it can produce 100,000 units, but is only producing 20,000, the cost per unit will be high
The cost of equipment and staff have to be covered
As sales grow, the cost per unit will be lower

If the firm enters market with low capacity:

It may not be able to meet demand in the short term
If sales are high can meet demand in the long term by increasing capacity
Increasing capacity may involve high levels of investment so the firm must be confident sales
will continue to stay high
 EXTENSION: PRODUCT LIFE CYCLE AND CASH FLOW

The cash flow of a business at the start of the product life cycle is likely to be negative
Cash has to be spent researching and developing the product
Promotional costs during launch stage
Cash flow during this time especially must be monitored effectively

As sales enter the growth phase, cash flow should become positive
Less need for extensive promotion

In maturity phase:
May need to spend more on re-promoting
Cash flow may begin to fall, but usually remains positive

In decline phase:
Cash flow will drop
 MATH MOMENT

1. What stage of the product life cycle do you think sales

are in? Why?

It is entering the maturity stage as growth is slowing down

 THE VALUE OF THE PRODUCT LIFE CYCLE MODEL

It highlights the fact that marketing must be adjusted at dif ferent stages in the
development of a product

Important to remember it is just a model and varies considerably between products

The life cycle of:

A bands new single might only be a few weeks
Marmite is still in its maturity phase even though it was launched in the early 20 th century
Toys is usually short, but Legos, Barbies, etc. have been around for many years
The drink Tango was in decline, so was rebranded and brought back to great success

This means that marketing decisions in relation to product life cycle are not clear
cut
 THE VALUE OF THE PRODUCT LIFE CYCLE MODEL

Often times it is only clear in retrospect what stage a product was in

What appeared to be a slight dip may instead be the decline of a product
What appears to be a decline might only be a slight dip

Unfortunately businesses must make decisions as they go

 PRODUCT PORTFOLIO ANALYSIS

Most firms have more than one product

The range of products and services a firm has is known as its product portfolio

As part of its planning process, a business will examine the position of all of its
products in their markets ( portfolio analysis)

One of the most famous is the Boston Matrix

Measures products based on market share and market growth
 T YPES OF PRODUCT IN THE BOSTON MATRIX

The Boston Matrix is a method of product portfolio analysis that examines the
products of a business in terms of their market share and the market growth

Helps in the decision making process regarding possible marketing strategies

Developed by the Boston Consulting Group, a business strategy and marketing

consultancy, in 1968
 T YPES OF PRODUCT IN THE BOSTON MATRIX

Every circle represents one particular

product or service

The size of the circle illustrates the

turnover of the product
The bigger the circle, the higher
the turnover

The firms products can be classified

according to their market share and
the growth of the market in which
they operate
 CASH COWS

Products that have a high market share in a slow -growing market

Most promotional work will be done already

Likely to have a good distribution system

People are aware the product exists

Firms are producing in relatively large volumes

Low cost per unit

Likely to bring in high levels of cash

Can use this to finance other products
 QUESTION MARKS/PROBLEM CHILDREN

Products with small market share in a fast -growing market

In the future can possibly be successful, but can just as likely fail

These products are vulnerable and their future is uncertain

High degree of risk

Require extensive marketing

Typically these are new products

 STARS

Products that enjoy a large market share in a rapidly growing market

Highly successful

Usually expensive in terms of marketing

Money must be spent to retain their position
Promotion to maintain customer awareness
Distribution
 DOGS

These products have low market share in low -growth market

Firms may want to get rid of these products unless they can increase sales

Can sometimes be revived

Lucozade repositioned itself as from a drink for sick people to a sports/energy drink
 THE VALUE OF THE BOSTON MATRIX

Provides a snapshot of the position of all of a firms products at a particular

moment

Enables managers to determine if they have a balanced portfolio

Allows for more ef fective decision making

If it has too many dogs it might not have enough products to keep it going. May want to
invest in new products
If it has a lot of cash cows it will generate lots of cash but need to think about getting
involved in newer marketslook to develop stars
If it has too many question marks it may be vulnerable and promotions may drain resources
 THE VALUE OF THE BOSTON MATRIX

With an appropriate mix of products:

Cash cows can be used to finance development of question marks

Portfolio analysis provides a good basis for marketing planning:

Dog products sold off or production/sales halted
Invest in star products to maintain position
Milk cash cows to provide funds
Protect question marks
THE VALUE OF THE BOSTON MATRIX
 CASE STUDY: CROCS

1. Explain two features of Crocs that you would use when

promoting the product.
Comfort; odor resistant; good for the beach/rainy days

2. To what extent do you think the Crocs brand can last for
another 30 years? Justify your answer.
Depends on competition; degree of new product development;
pricing; effectiveness of promotion
11.5 PRICING
 PRICING

The price of the product can have major influence on its appeal and whether or not
customers think it is good value for the money
 HOW PRICE AFFECTS PURCHASING DECISIONS

Price plays an important part in our decision about whether or not to buy it
Southwest Airlines, Jetstar, Ryanair, Airasia, Nok Air, etc. are gaining in market share at the
expense of Thai Airways, British Airways, etc.

If the price is too high:

Customers might not be able to afford it
Might not offer good value for money compared to benefits offered

The relative importance of price varies according to the product

For gas, we will go with the cheapest option little to no brand loyalty
For rings, clothes, shoes, etc. we oftentimes wont go with the cheapest

It can be hard to compare prices directly as there are often special rates, dif ferent
tarif fs, dif ferent package options, rebates, etc.
FACTORS INFLUENCING PRICE
 CASE STUDY: FASTJET

1. Explain two factors that may have limited demand for

air travel in Africa until now.
Income; availability of routes; price; quality of service

2. Discuss the factors that may determine the success of

Fastjet.
Quality of service; price; what rivals do; infrastructure;
developments in communications; effectiveness of promotional
activities
 FACTORS DETERMINING THE PRICE OF A PRODUCT

The type of product

Shopping good (i.e. microwaves) are sensitive to price differences so prices must be
competitive
Specialty items (i.e. high performance cars, luxury watches) are less sensitive to price changes
and this may lead to higher prices

The cost of producing a unit

In short term may sell product at a loss to establish it in market, but in long term it must
generate profits

Ability of customers to pay

Dependent on the economy
 FACTORS DETERMINING THE PRICE OF A PRODUCT

Pricing points
Offering a range of products to meet different parts of the market

Demand
Airlines, hotels, travel agents will often increase their rates over holidays

Competitors
Must take account competitors prices and set similar this is why businesses stress
particular benefits to justify higher prices
Many websites offer price comparison making demand more sensitive to price
 CASE STUDY: SMOOTHIES

1. Where would you choose to compete in this market?

Justify your answer.
 THE FIRMS OBJECTIVES

The price a firm charges for a product will be influenced by its objectives

If there is a profit target, this will influence the price per unit:
If it wants to achieve $10,000 profit and expects to sell 20,000 units, it must make $0.50
profit per unit

If it is aiming for high market share, maybe the price will be set lower to boost sales
 THE STAGE IN THE PRODUCT LIFE CYCLE

Price will likely be changed based on the stage it is in

In the maturity stage, the price will need to be reduced to avoid losing sales
 THE REST OF THE MARKETING MIX

The price charged depends on of elements of the marketing mix

A heavily branded consumer product (Nike, Coca -Cola, etc.) will be more expensive
than small brand products

An exclusive four-star restaurant will charge more than a fast -food restaurant

9,020 baht plus tax for

either lunch or dinner at Vs
Sukiyabashi Jiro, a 3 star
Michelin restaurant
 THE REST OF THE MARKETING MIX

Typically the price will be set higher if the product:

Has a unique selling point
Is perceived as being exclusive
Is in high demand
Is sold through exclusive outlets

There are many factors that can influence price making it a complex decision

Price is never fixed and might be changed a number of times

 CASE STUDY: VERTU TI

1. Explain who you think is the target market for the new
Vertu.
High income users who want a status symbol

2. Discuss the factors that would have influenced the price

set for the new Vertu.
Brand image; target market; to some extent costs and methods
of production; quality of service
PRICING STRATEGIES FOR NEW PRODUCTS
 PENETRATION PRICING

Setting a low price for a new product in order to attract a large number of buyers
and a large market share.

Companies like Vivo, Oppo and Lenovo are using this strategy to try to take market
share away from Samsung and Apple
 PRICE SKIMMING

Setting a high price for a new product to skim maximum revenues layer by
layer from the segments willing to pay the high price
When this group is exhausted, the price can be lowered to attract a new
group of customers
Appropriate when the firm can protect its idea/invention so competitors
cannot enter with a cheaper version
Often used with new technology
 COMPETITIVE PRICING

Setting the price of a product or service based on what the competition is

charging
Used more often by businesses selling similar products as the attributes of a
product remain similar (i.e. printers, hotels, sodas, etc.)
Price match guarantees, price watching, air fare aggregators, etc.
 PRICE TAKING

Price takers are firms that accept the price which dominates the market
Examples:
A small independent electrical retailer may have to accept the price set by the major seller
Independent bookstores may have to follow the prices of major bookstores
 PSYCHOLOGICAL PRICING

Techniques that marketers use to encourage customers to respond on emotional

levels rather than logical ones
For example, setting the price of a watch at $199 is proven to attract more
consumers than setting it at $200, even though the true dif ference here is quite
small
One explanation for this trend is that consumers tend to put more attention on the
first number on a price tag than the last.
The goal of psychology pricing is to increase demand by creating an illusion of
enhanced value for the consumer.
 BUNDLE PRICING

Selling multiple products for a lower rate than consumers would face if they
purchased each item individually.
Not only is bundling goods an ef fective way of moving unsold items, but it can
also increase the value perception in the eyes of your customers
Bundle pricing is more ef fective for companies that sell complimentary products.
A restaurant can take advantage of bundle pricing by including dessert with every
entre sold on a particular day of the week.
11.6 PRICE ELASTICITY OF
DEMAND
 PRICE ELASTICIT Y OF DEMAND

Every business is interested in what af fects demand for its products/services

What is it that makes sales go up or down?
If price is cut by 10%, will sales increase by 5% or 50%?

The price elasticity of demand measures the sensitivity of demand to a change in

price
If I move the price up or down are people still going to buy my product?

Ef fective marketing involves understanding what influences demand and how

sensitive it is to other factors
 WHY DOES THE PRICE ELASTICIT Y OF DEMAND
MATTER?
By calculating the price elasticity of demand, a business can identify how changes
in price may af fect quantity of sales

Important for marketing planning

If a firm is planning a price cut, it will be used to:

Estimate how much sales are likely to increase
Ensure it has enough capacity to meet demand
May need to hire extra staff or have existing staff work overtime
Is the price cut worthwhile financially? Will it lead to higher profits?
 CALCULATING THE PRICE ELASTICIT Y OF DEMAND

The price elasticity of demand is measured by:

Percentage change in quantity demanded

Percentage change in price
 CALCULATING THE PRICE ELASTICIT Y OF DEMAND

Demand is price elastic if the value of the price elasticity of demand is greater
than 1
Every 1% change in price = more than 1% change in quantity demanded
If demand rises by 20% when the price is cut by 10%, the price elasticity of demand will equal
-2 (+20/-10)

The value of 2 shows that for every 1% change in price, the quantity demanded
changes by 2%

The negative sign shows that the price and quantity demand move in dif ferent
directions
If price goes down, quantity demanded rises
If price rises, quantity demanded falls
 CALCULATING THE PRICE ELASTICIT Y OF DEMAND

Demand is price inelastic if the value of the price elasticity of demand is less than
1
Every 1% change in price = less than 1% change in quantity demanded
If the price is cut by 10%, and the increase in demand is 5%, the price elasticity of demand will
equal -0.5 (-10/+5)

The negative sign shows that as price goes down, quantity demanded rises (price
and demand go in opposite directions)

0.5, which is less than 1 , shows that for every 1% change in price, there will only be
a 0.5% change in quantity demanded

This means demand is not very sensitive to price changes

 CALCULATING THE PRICE ELASTICIT Y OF DEMAND

A local store raises the price of ice cream from $2.00 to $2.20. Due to this, the
amount you buy falls from 10 cones to 8 cones.

Calculate the price elasticity of demand.

(10-8)
x 100
10
= -2
(2.00-2.20)
x 100
2.00

Is demand price elastic or price inelastic?

Price elastic
 MATH MOMENT

1. The price elasticity of demand is -0.8. What happens to sales if the

price increases by 20%?
Sales fall by 16%

2. The price elasticity of demand is -3. What happens to sales if the

price increases by 20%?
Sales fall by 60%
WHAT DETERMINES THE VALUE OF PRICE ELASTICIT Y
OF DEMAND?
 WHAT DETERMINES THE VALUE OF THE PRICE
ELASTICIT Y OF DEMAND?
Availability of similar products
If it is easy to switch from one product to another, demand is likely to be sensitive to price change
(demand will be price elastic)
When buying a lightbulb, most consumers do not care what brand they buy they are likely to buy
the cheaper one
Many businesses attempt to differentiate their products to keep consumers from switching (try to
make demand for their products price inelastic)
Coca-Cola works hard to distinguish itself from other colas in hopes that few customers will switch brands
even if its prices are higher
Successful branding should reduce the price elasticity of demand and make demand price inelastic

Time
In the short-term customers are often loyal to their current provider (esp. with credit cards, banks,
insurance co., etc.) often because people are inherently lazy or think any advantage to changing
will only be temporary
In the long-term, if customers feel they are getting a bad deal, this will be an incentive to switch
This means demand will become more price sensitive (more price elastic) over time
 WHAT DETERMINES THE VALUE OF THE PRICE
ELASTICIT Y OF DEMAND?
Type of product
When buying convenience products (milk, tissues, etc.) purchasers tend to go to the nearest
stop
Purchasers do not spend much money on each item
Demand is likely to be price inelastic
Shopping goods (clothes, shoes, etc.) are likely to be more sensitive to price
Customers spend time comparing options
Demand is likely to be price elastic

Proportion of income spent on the product

If you spend only a small proportion of your income on a product, you may not be very sensitive
to price changes they have only limited impact on your spending
If you spend a high proportion of your income on a product (housing, car, etc.) then a change
will have a more noticeable effect and demand is likely to be more price sensitive
 WHAT DETERMINES THE VALUE OF THE PRICE
ELASTICIT Y OF DEMAND?
Demand for the brand vs demand for the product
Demand for gas is likely to be very price inelastic most consumers would find it
difficult/inconvenient to do without their cars
Demand for one companys gas is likely more price elastic as it is easy to switch to another
gas company
Demand for a brand is more price elastic than for the whole product category
 A PRICE CUT AND PRICE ELASTIC DEMAND

If demand is price elastic, a business can increase revenue by lowering the price
It earns less for each item, but its overall income increases due to selling more products

If a firm sells 10,000 units at $5, its total revenue is $50,000

If the price is cut to $4 and sales jump to $15,000, the new total revenue is $60,000
A 20% price cut increased sales by 50% and revenue increased

Total revenue is the income generated from sales

Increase in revenue does not necessarily mean increase in profits

Additional expenses might be incurred to increase capacity
 A PRICE CUT AND PRICE INELASTIC DEMAND

If demand is price inelastic, revenue will fall when the price is cut
The increase in sales is not big enough to compensate for each item selling for less

If a firm sells 10,000 units at $5, its total revenue is $50,000

If the price is cut to $4 and sales increase to $11,000, the new total revenue is $44,000
A 20% price cut increased sales by 10% and revenue falls

When demand is price inelastic, the business could earn more by increasing price
It would lose some customers, but overall income should increase
 SUMMARY TABLE: PRICE ELASTICIT Y AND REVENUE

Price decrease Price increase

Price elastic demand Revenue increases Revenue decreases

Price inelastic demand Revenue decreases Revenue increases

 CASE STUDY: PRICE ELASTICIT Y OF DEMAND

1. Explain what is meant by a price elastic and price inelastic demand.

Price elastic means that the percentage change in quantity demanded is
greater than the percentage change in price.
Price inelastic means that the percentage change in quantity demanded
is less than the percentage change in price.

2. Discuss the significance of the findings in table 11.4 for marketing

managers.
If price is inelastic, managers may increase price to increase revenue
If demand is price elastic, managers may decrease price to raise revenue
 CASE STUDY: ELASTICIT Y OF AIR TRAVEL DEMAND

1. Explain why demand for short-haul flights was more price

elastic than demand for long-haul flights.
There are more substitutes (can use cars, trains, boats, etc. for shorter
distances)

2. Discuss the significance of the findings above for the

pricing of flights on a particular route.
If demand is price elastic, airlines might decrease price to boost revenue
If demand is price inelastic, airlines might increase price to boost
revenue
 MATH MOMENT

1. Sales fall by 2% to 490 units

2. 500 x $200 = $100,000
3. 490 x 200 = $98,000
4. Sales fall by 25% to 375 units
5. 500 x $200 = $100,000
6. 375 x 200 = $75,000
 PROBLEMS WITH THE PRICE ELASTICIT Y OF DEMAND
CONCEPT
The value of price elasticity of demand is an estimate
You never know for certain how the market will respond
Only after changing the price will you know how sensitive demand is to price

The value of price elasticity needs to be treated with caution

Markets are always changing and this will affect the price elasticity of demand

Demand for a product will be affected by:

New products
Changes in consumer tastes
Developments in distribution
Competitors marketing campaigns
 PROBLEMS WITH THE PRICE ELASTICIT Y OF DEMAND
CONCEPT
Because so many dif ferent things can af fect demand, its dif ficult to know exactly
caused the change in sales after a price change
Was it the price change? Government policies? Consumer confidence?

By listening to experts and results from test markets, managers are likely to have
some idea of how sensitive demand is to price

Even if the exact value is not known, an understanding of whether the product is
price elastic or inelastic is useful when setting and changing prices
 PRICE DISCRIMINATION

Demand conditions for the same product can vary

Demand for public transport from 7-8 am and 5-6 pm is very heavy
Demand is less heavy at other times

If a business can identify dif ferent demand conditions, it may want to change the
price in the dif ferent markets
Demand for transport before 9 am and between 5 -6 pm is likely to be price inelastic because
people have to get to and from work
At these times a business may increase price
At other times it is likely to be price elastic (there is not the same pressure to travel) so a
business may want to decrease price
Airlines use this strategy and increase prices over holidays
 PRICE DISCRIMINATION

Price discrimination is paying dif ferent prices for the same product/service at
dif ferent times

Price discrimination may occur:

At different times of the day (i.e. taxi fares higher after midnight)
To different age groups (i.e. lower fares for children and pensioners)
To different customer groups (i.e. discounts for members)
11.7 PROMOTION METHODS
 WHAT IS PROMOTION?

The promotion of a product involves communicating about it to existing

or potential customers

These messages may be intended to:

inform customers (e.g. tell them about modifications to the product, promotional
offers or new releases)
persuade them (e.g. highlighting the products benefits compared with the
competitors products)
reassure buyers they did the right thing by buying the product in the first place.
PROMOTIONAL MIX

The promotional mix refers to the

combination of ways in which the
business communicates about its
products.
 ADVERTISING

Paid for communication used as a long -term strategy to build brand loyalty

Many different media available

Newspapers, radio, television, billboards, etc.
Whats the most appropriate?
Resources available
Target group and their lifestyles
Likely sales
Nature of the product (mass-market products such as cars may be able to justify television advertising, but a
local decorator may use shop windows or the Yellow Pages)

Many customers are bombarded by advertising

Getting a message through to the target group so that they pay attention can be difficult
Digital TV and radio, internet, social media, etc. have all increased this
Decreases effectiveness

Can be effective if done properly

 SALES PROMOTION

Attempts to boost sales (usually in the short term)

Promotional offers
Buy one get one (BOGO), 10% off, etc.
Competitions
Price cuts

When undertaking a promotional campaign a firm must consider

What will it cost?
What will it do to the brand image?
How effective will it be?
What is the likely impact on sales?
 PERSONAL SELLING

Based on face-to-face contact with customers

Used in service sector when producer deals directly with the customer
Typically takes place through a sales force if:
A product is sold in low volumes
A product is complex and needs to be explained
 PUBLIC RELATIONS (PR)

Involves contact with the media and various groups the firm deals with

Attempts to send out particular messages about the firm or its products

Create a story or event to attract attention that you dont pay for

Involves:
Press releases to the media
Handling customer complaints
Organizing promotional events

Sponsorship is a common form of PR activity

 CASE STUDY: RICHARD BRANSON AND THE VIRGIN
BRAND

1. Explain two key features of the Virgin brand.

The brand is relatively young; Its a challenger of established brands; It is
fun

2. Discuss other products that you think the Virgin brand could
extend to.
Does it fit with the brand values?
 DIRECT MAIL

Involves sending mailshots to customers

Can be carefully targeted due to increasingly sophisticated database information

 BRANDING

A brand is a name, design, logo, symbol or anything that makes a product

recognizable and distinguishes it from the competition in the eyes of the customer

By building a brand, businesses hope to make customers more loyal

May allow them to charge more by making demand more price inelastic
Easier to introduce new products as customers feel reassured and are more willing to try them

Associate a brand with values

May feel more secure driving a Volvo, more fashionable using a Mac, smarter wearing Prada,
etc.

Some want to identify with a brand and the lifestyle associated with it

A brand has to be protected so that it doesnt become associated with the wrong
things
 CASE STUDY: BEST GLOBAL BRANDS

1. Choose one of the brands from table 11.5 and explain what
you think are the brand values (what does the brand stand
for).

2. Discuss the benefits to a business of having a strong brand.

May make price inelastic; makes it easier to launch more products in
terms of consumer acceptance and adoption; becomes an asset in its
own right
 MERCHANDISING

Includes using the name of a product on a range of other items

Bands sell CDs plus T-shirts, posters, mugs, toys, etc.

Used to promote in-store sales

Point-of-purchase displays (POPs)
 CASE STUDY: SWATCH

1. Explain what is meant by segmentation.

Segmentation occurs when a market is divided into groups of similar
needs and wants

2. Discuss the possible reasons why a firm such as Swatch

operates with different brand names.
Targets different segments; can adopt a different marketing mix for each
segment; can meet the needs of each segment more precisely
 PROMOTIONAL METHODS
Method of promotion Advantages Disadvantages

Advertising Wide coverage Can be expensive, e.g. TV advertising

Control of the message
Can be used to build brand loyalty

Public relations Can be relatively cheap Cannot control the way the story is covered by
the media
Direct mail Relatively cheap May not be read

Sales promotions Can entertain and interest the consumer Often short-term effects
Can encourage brand switching
Personal selling Two-way communication Can be expensive
Can answer customer enquiries Can only reach a limited number of customers
Branding Can enable higher pricing Brands may get damaged (for example, through
Can launch other products by building on brand loyalty poor quality) and this affects any products sold
under this name

Merchandising Can make the shopping experience better through the There will be a cost involved in providing displays
displays in terms of both money and time
May encourage purchase of items that were not originally
intended (impulse buys)
 CASE STUDY: RED BULL

1. Explain the reasons why a business might choose to

sponsor an event.
To be associated with the values of the event; to promote its name and
raise awareness

2. Discuss other types of events you think it would make

sense for Red Bull to sponsor.
Other events linked to the same values (active, healthy, daring, edgy,
etc.)
 CHOOSING THE PROMOTIONAL MIX

The composition of the promotional mix depends on numerous factors

The nature of the product

May use advertising if it is a consumer product
A sales force might be necessary for technical products

The marketing expenditure budget

Will act as a constraint on all firms
Faced with a small budget, a firm cannot consider TV advertising
Will have to rely on cheaper methods instead

The available options

Technological developments internet ads, text ads, etc.
Legal changes where and how certain products can be advertised
 ABOVE THE LINE AND BELOW THE LINE PROMOTION

Above the line

Mainstream advertising TV, posters, radio, internet

Below the line

Free gifts, discounts, special offers

Above the line pulls customers into the shop or online store
Below the line pushes them into buying
You see an advert that makes you aware of a brand; then a special offer inside the shop that
makes you buy
 T YPES OF PACKAGING

Packing can be an important part of the mix

Many people include it as a separate P along with price, promotion, etc.

Important
To protect from damage
To promote the product attractive design
To provide information
 COCA-COLA PROMOTIONAL MIX STRATEGY

Coca-Cola went from a cocaine -infused elixir in 1886 to a ubiquitous sugary drink by
1929.

Now people in more than 190 countries drink 1 .9 billion servings every day

Having a product people enjoy is far from the only thing needed to become one of
the world's most valuable companies
 COCA-COLA IN THE BEGINNING

Started a mass coupon initiative that resulted in 10% of all products from 1887 to
1920 to be given away in order to build brand awareness.

Provided retailers with Coca-Cola swag (posters, decorations, calendars, clocks)

All national and global advertising contained variations of "Drink Coca -

Cola/Delicious and refreshing" and fit into a standardized design style.
 COCA-COLA NOW

Coca-Cola invests billions of dollars a year in advertising and promotions around the
world to maintain its position of industry leadership against rival Pepsi.

Spend a good portion of the ad budget on television advertising. It has used polar
bear characters and a message of nostalgia and tradition as part of its branding
over time.

Magazine ads, online and social media have also been used as media for Coca -Cola
marketing.

Sales promotions at the store are used to drive revenue during slow periods .

Engages in sponsorships (American Idol, BET Network, NASCAR, NBA , NCAA, Olympic
Games, FIFA World Cup, etc.)
 COCA-COLA NOW

Special incentives are given to the distributors and retailers for pushing Coke
products

Retailers are given refrigerators and Coca Cola merchandise for advertising the
brand

At supermarkets, special emphasis is given on the shelf spaces to generate more

visibility of its products

Coca Cola also engages in various CSR (corporate social responsibility) activities to
help support environmental and social issues across the globe

Announced recently that for the first time, all Coke Trademark brands will be united
in one global creative campaign: Taste the Feeling.
 SWATCH PROMOTIONAL MIX

Swatch enjoys an esteemed position in the market and has adopted an aggressive
marketing campaign to create and retain positive brand awareness
It has launched ad campaigns via social media platforms like its own website,
Twitter and its Facebook page which has a fan following of more than 320,102
followers
Swatch also advertises its products via electronic and print media in television and
magazines. It has been an active participant in several sponsorship deals to gain
exposure
 SWATCH PROMOTIONAL MIX

Swatch is of ficial timekeeper and active sponsor of the Olympics and European
Sports

It has entered into a partnership deal with MT V

Swatch has also signed a promotional deal with World Volley Ball Federation

It has launched Swatch Members Club for its loyal customers

 11.8 CHANNELS OF
DISTRIBUTION (PLACE)
 CHANNELS OF DISTRIBUTION (PLACE)

The distribution of a good or service refers to the way in which the ownership of it
passes from the producer to the consumer

Directly from producer to end consumer

Dell Computers, Avon cosmetics, etc. supply some customers direct
Insurance, health care, education are other examples

Intermediaries
Sony and Phillips have intermediaries between producer and final seller
Retailers (Walmart, Tesco, etc.) final stage of distribution chain
Wholesalers buy products in bulk and sell on to retailers
Easier to deal with than individual manufacturers and have a range of products
 CHANNELS OF DISTRIBUTION (PLACE)

The dif ferent distribution channels can be described in terms of the number of
levels involved in the process
 CHANNELS OF DISTRIBUTION (PLACE)

Zero-level channel
Good/service passes directly from producer to consumer
Dentists, accountants, plumbers, etc.

One-level channel
Has one intermediary (i.e. a retailer buys products from the manufacturer and sells to
consumer)

Two-level channel
Has two intermediaries (i.e. a wholesaler buys products from the manufacturer and sells to a
retailer who sells it to the consumer)
 CHANNELS OF DISTRIBUTION (PLACE)

Will vary considerably from product to product

Convenience items (Milk, newspapers, gum, etc.) will aim to generate a wide a distribution as
possible
Customers are not willing to travel far to buy them
Shopping goods (Personal computers, vacuums, microwaves, etc.) will aim to be distributed to
certain stores where customers expect to find them
Not distributed to as many outlets as convenience items
May have to fight hard to get intermediaries to stock them
Specialty products (Rolex, Porsche, etc.) have even fewer outlets
Nature of outlets is very important must reinforce brand image
Producer/Industrial goods tend to be distributed directly
Machinery, office equipment, etc.
 CHOOSING A DISTRIBUTION CHANNEL

Will depend on:

Access to markets
Small target can distribute directly
Mass-market product will need intermediaries

Desired degree of control

By selling to intermediaries, a firm is handing over control of the way the products are marketed
Can change price, how its compared to competitors, where its displayed

Costs
May be cheaper to sell directly
Price of product will be higher if it goes through multiple intermediaries
 CHOOSING A DISTRIBUTION CHANNEL

Distribution as a competitive advantage

Amazon, Direct Line, Lastminute.com
Direct to customers
Cuts costs (enabling them to offer better value)
Provides convenience

Choosing the right distribution channel is an important part of the mix

Can impact:
Market coverage
Costs
Control over product promotion and marketing
 GETTING THE RIGHT DISTRIBUTION OUTLET

The nature of the outlet can have an impact on the buying experience
Layout, dcor, availability of staff and changing rooms, in -store displays, etc. all influence the
view of the product
Especially important for specialty items (luxury cars, jewelry, etc.)

IKEA is renowned for its highly ef fective store design

Very large stores placed out of town
Offer lots of parking spaces
Typically easy to get to for car drivers
Customers have to walk through all the displays to get to the cash registers
Leads to customers buying more than they planned
 CASE STUDY: DELL COMPUTERS

1. Explain two benefits of selling online.

Miss out intermediarieskeep control and keep costs lower

2. Discuss the possible reasons why Dell changed its strategy

in recent years and started to sell its products through
retailers as well as online.
Customers may benefit from personal advice and guidance; customers
may want to see, touch, and compare; reluctance to buy just online
 CASE STUDY: HOTEL CHOCOLAT

1. Explain two factors Hotel Chocolat might take into account

when deciding where to open a new store.
Likely customer numbers; income; transport links; number of people
typically passing the area; location of competitors

2. Discuss the possible reasons why Hotel Chocolat was more

successful when it opened stores than it was when it was
just operating online.
Customers may have needed to see, smell and taste the products; the
store environment reinforces and adds to the brand image
11.9 USING THE INTERNET FOR
THE 4 PS/4 CS
 USING THE INTERNET FOR THE 4 PS/CS

The growth of the internet is an important external change

Businesses now can trade globally 24/7
Target marketing (i.e. Google Adwords) so ad shows when key words are used
They can monitor customer behavior more accurately
Tracking how visitors use your website
Enables different prices to be charged depending on location
Dynamic pricing (used by airlines and hotels) offers different prices dependent upon location, demand,
etc.
Enables direct distribution without the need for wholesalers and retailers
Electronic distribution (i.e. MP3s, e -books, etc.)
 IMPACT OF THE INTERNET ON MARKETING
Element of the Impact of the internet
marketing mix

Price The internet allows prices to be changed according to when people order (for example, how far in advance of an event), what time of day they
order, whether they have visited the site before, whether they have bought from you before. The ability to adjust the price based on many
factors so there is no one price is known as dynamic pricing. Businesses such as airlines and online retailers such as Amazon use dynamic
pricing very effectively.

Promotion Businesses can promote their products online and target who their adverts reach depending on, for example, where you are searching from and
which terms you are using to search. Businesses can get others to help promote their products through viral marketing where their own
campaign is forwarded via social media such as Twitter and Facebook by individuals to their friends. Methods of promotion such as blogs and
Twitter are cheap ways of communicating.

Distribution Businesses can now sell direct to the customer online rather than selling through intermediaries. By selling directly through e-commerce, a
business may need fewer physical stores. This is known as clicks rather than bricks.

Product Some products can now be downloaded rather than having to be physically produced, for example music and e-books.

People Interestingly, people are not necessarily removed from marketing due to the internet. In fact, many businesses now promote in their websites
the ability to talk to a customer service representative at any time. The internet can interest you in an item and the sales representative can
help you with enquiries or to make your choice.

Process The internet can make the buying process more convenient in that you can search more widely than in a main shopping street.

Physical The design of a store may be less significant with the internet but the design of the website becomes key. The appearance, the ease of finding
evidence information and navigating the site affect the customer experience.
 CASE STUDY: E-BOOKS

1. Do you think there is anything publishers can do to increase

sales of printed books?
Consider price (but if price is lower can they make profits?)
Develop the product so the book itself becomes desirable
Make books more accessible (wider distribution channels)
Make distribution channels more attractive (book cafes, etc.)
11.10 AN EFFECTIVE MARKETING
MIX?
 AN EFFECTIVE MARKETING MIX?

Must be an integrated approach consisting of many activities to be ef fective

All aspects must work together and complement each other
Dont develop exclusive brand and distribute it through bargain retailers

All elements fit together to enhance the overall value

When buying a phone, you probably considered brand name, features, design, pricing plans,
length of contract, terms of insurance, special offers
Many factors combined to influence your decision
 AN EFFECTIVE MARKETING MIX?

The nature of the product and market conditions make some elements more
important
A car insurance business might spend lots of advertising and a sales team
A local bakery may rely on word of mouth
A luxury hotel needs to have a good location
A web-based business can be operated from home
Gift-type products will need to impress the customer with packaging
Packaging for computer equipment sold to businesses needs to protect during transportation
Exclusive handmade shirts might use higher prices to reflect quality
Holiday packages might need lower prices in order to compete
 AN EFFECTIVE MARKETING MIX?

The mix chosen must combine and complement each other so that the product
provides better value for money than the competition
Offering more benefits (additional features, etc.)
Promoting the benefits more effectively
Making the product more accessible

4Ps model is basic model of what influences a buying decision

The buying process is very complicated and involves many dif ferent factors
 CASE STUDY: BARBIE

1. Explain the ways in which Mattel might promote Barbie.

May use advertising; sponsorships (TV series, etc.); merchandising;
extend brand image on to a range of products; targeted online
campaigns

2. Discuss whether the loss of market share to Bratz means

that sales of Barbie are doomed.
Depends on the actions takenmay change its products, its promotional
activities, its pricing and its distributional channels to boost sales
It is not inevitableit has a strong brand and a great deal of experience
 MARKET STRUCTURES

A market where one firm dominates is called a monopoly

This firm has power over the market and may make high profits

Customers have little choice and may be charged higher prices

There might be little incentive to innovate and quality of service may be reduced

To remain a monopoly, a firm might have to innovate to stay ahead of the

competition
 MARKET STRUCTURES

An oligopoly market is one where a few large firms dominate the market rather than
just one
The UK has a few large banks, a few large supermarkets, a few large electricity providers

These firms watch each other closely and there is a high degree of competition
Promotional campaigns (Discounts, offers, etc.)
How they do business
Lots of distribution channels (lots of branches)
Ease of doing business (online banking)
Additional offerings (insurance, investment advice)

Can lead to collusion with firms combining to work together

Leads to higher prices and less choice for consumers