The Marketing Mix

Marketing MixThe marketing mix is one of the most famous

marketing terms. The marketing mix is the tactical or operational part of a marketing plan. The marketing mix is also called the 4Ps. The 4Ps are price, place, product and promotion. The services marketing mix is also called the 7Ps and includes the addition of process, people and physical evidence.

Bon VoyageThe holiday market represents a highly segmented and targeted market. For example we have Saga type holidays aimed at the over 50’s and designed to fill this group’s needs. On the other hand wehave had Club Med and Club 18-30, the latter in particular suggesting the age group these two operators were targeting. You have been appointed as the new marketing manager for a large travel group, Bon Voyage, offering a range of holiday packages aimed at several parts of the market. The group includes package tour operations, a nationwide chain of travel shops and a fleet of aircraft. One of the fastest growing parts of the travel market in recent years has been the cruise market. Once the domain of the privileged few, cruises are now available to a much wider target market as costs have come down and incomes have risen. Until now, the company that just been appointed by you has not been part of the cruise market. It now realizes it may have made a

mistake in this respect and wishes to enter the market as soon as possible. The company has negotiated the provision of two cruise ships for the next season, which will sail round the Mediterranean and the Caribbean respectively. The ships have just been refurbished and offer the most up-to-date facilities. Other companies in this market have been predominantly targeting the middle-income groups. However, there remains a part of the market which is aimed only at the luxury end, with high prices and prestigious ships.

Bon VoyageThe company has asked you to give them some preliminary advice

about how to segment this market and which target segments might be

most appropriate and why.

It also wants to know how its product offerings in this area might be positioned

so as to differentiate it from existing competitors.

The Pizza PuzzleGeorge Hansen is General Manager for the Marigold Inn in Augusta, Georgia. SharonCoombs is Restaurant and Food Services Manager for the Inn. She reports to George. Twoyears ago, Sharon noticed a decline in room service business, the highest margin portion ofher operation. This decline coincided with an increase in the national sales of pizza deliveryand carryout firms as well as an increase in the number of empty pizza boxes from thesefirms being left in guest rooms in the Inn. Her immediate response was to install a pizzaoven in the kitchen and offer room service pizza to guests. The effort met with modestsuccess, though it was well below her expectations. Questionnaires completed by departingguests revealed a problem of product quality.

Focusing on this problem, Sharon improved the Inn’s pizza until blind taste tests judged it at least equal in quality to the products of the two major pizza delivery competitors in Augusta.Sales did not improve, convincing Sharon that the problem was a perceived mismatchbetween the hotel’s image and guests’ expectations of pizza makers. Guests simply did notseem to believe that the traditional steak and seafood restaurant at the Inn could make ahigh-quality, authentic pizza.

The Pizza PuzzleBased on this conclusion, Sharon presented the following proposal to George:

“Sales of room service pizza are stagnant due to guests’ misperception that our product islower in quality than that of competitors. This misperception is based on the belief that untilwe disassociate our pizza from the Marigold Inn name. Therefore, to capture more roomservice pizza business, we should create a ‘Napoli Pizza’ image for our guest room deliveryservice by:• Preparing ‘Napoli Pizza’ brochures for each guest room, complete with a phone numberwith a prefix different from that of Marigold Inn. The number will reach a special phonein room service, which will be answered, Napoli Pizza, authentic Italian pizza from old,family recipes.’• Using special ‘Napoli Pizza’ boxes for delivering room service pizza to guests.• Issuing ‘Napoli Pizza’ hats and jackets to room service personnel for use in pizzadelivery. Room service waiters and waitresses will wear these garments to deliver pizza.They will change to their regular uniforms for other deliveries.”

How should George respond to this proposal?

The Marketing Mix

The Marketing MixThe tools available to a business to gain

the reaction it is seeking from its target market in relation to its marketing objectives

7Ps – Price, Product, Promotion, Place, People, Process, Physical Environment

Traditional 4Ps extended to encompass growth of service industry

Price

PricePricing StrategyImportance of:

knowing the market

elasticitykeeping an eye

on rivalsImage copyright: www.freeimages.co.uk

Pricing Strategies

Penetration Pricing

Penetration PricingPrice set to ‘penetrate the market’‘Low’ price to secure high volumesTypical in mass market products –

chocolate bars, food stuffs, household goods, etc.

Suitable for products with long anticipated life cycles

May be useful if launching into a new market

Market Skimming

Market SkimmingHigh price, Low volumesSkim the profit from the

marketSuitable for products that

have short life cycles or which will face competition at some point in the future (e.g. after a patent runs out)

Examples include: Playstation, jewellery, digital technology, new DVDs, etc.

Many are predicting a firesale in laptops as supply exceeds demand.Copyright: iStock.com

Value Pricing

Value PricingPrice set in

accordance with customer perceptions about the value of the product/service

Examples include status products/exclusive products

Companies may be able to set prices according to perceived value.

Copyright: iStock.com

Loss Leader

Loss LeaderGoods/services deliberately sold below

cost to encourage sales elsewhereTypical in supermarkets, e.g. at

Christmas, selling bottles of gin at £3 in the hope that people will be attracted to the store and buy other things

Purchases of other items more than covers ‘loss’ on item sold

e.g. ‘Free’ mobile phone when taking on contract package

Psychological Pricing

Psychological PricingUsed to play on consumer perceptionsClassic example - £9.99 instead of £10.99!Links with value pricing – high value goods

priced according to what consumers THINK should be the price

Going Rate (Price Leadership)

Going Rate (Price Leadership)In case of price leader, rivals have difficulty in

competing on price – too high and they lose market share, too low and the price leader would match price and force smaller rival out of market

May follow pricing leads of rivals especially where those rivals have a clear dominance of market share

Where competition is limited, ‘going rate’ pricing may be applicable – banks, petrol, supermarkets, electrical goods – find very similar prices in all outlets

Tender Pricing

Tender PricingMany contracts awarded on a tender basisFirm (or firms) submit their price for carrying

out the workPurchaser then chooses which represents best

valueMostly done in secret

Price Discrimination

Price DiscriminationCharging a different

price for the same good/service in different markets

Requires each market to be impenetrable

Requires different price elasticity of demand in each market

Prices for rail travel differ for the same journey at different times of the day

Copyright: iStock.com

Destroyer Pricing/Predatory Pricing

Destroyer/Predatory PricingDeliberate price cutting or offer of

‘free gifts/products’ to force rivals (normally smaller and weaker) out of business or prevent new entrants

Anti-competitive and illegal if it can be proved

Absorption/Full Cost Pricing

Absorption/Full Cost PricingFull Cost Pricing – attempting to set price to

cover both fixed and variable costsAbsorption Cost Pricing – Price set to

‘absorb’ some of the fixed costs of production

Marginal Cost Pricing

Marginal Cost PricingMarginal cost – the cost of producing ONE extra

or ONE fewer item of productionMC pricing – allows flexibility Particularly relevant in transport where fixed

costs may be relatively highAllows variable pricing structure – e.g. on a flight

from London to New York – providing the cost of the extra passenger is covered, the price could be varied a good deal to attract customers and fill the aircraft

Example:

Aircraft flying from Bristol to Edinburgh – Total Cost (including normal profit) = £15,000 of which £13,000 is fixed cost*

Number of seats = 160, average price = £93.75

MC of each passenger = 2000/160 = £12.50

If flight not full, better to offer passengers chance of flying at £12.50 and fill the seat than not fill it at all! *All figures are estimates only

Contribution Pricing

Contribution PricingContribution = Selling Price – Variable

(direct costs)Prices set to ensure coverage of variable

costs and a ‘contribution’ to the fixed costsSimilar in principle to marginal cost

pricingBreak-even analysis might be useful in

such circumstances

Target Pricing

Target PricingSetting price to ‘target’ a specified profit

levelEstimates of the cost and potential revenue

at different prices, and thus the break-even have to be made, to determine the mark-up

Mark-up = Profit/Cost x 100

Cost-Plus Pricing

Cost-Plus PricingCalculation of the average cost (AC) plus a

mark upAC = Total Cost/Output

Influence of Elasticity

Influence of ElasticityAny pricing decision must be mindful of

the impact of price elasticity The degree of price elasticity impacts on

the level of sales and hence revenueElasticity focuses on proportionate

(percentage) changesPED = % Change in Quantity

demanded/% Change in Price

Influence of ElasticityPrice Inelastic:% change in Q < % change in Pe.g. a 5% increase in price would be met

by a fall in sales of something less than 5% Revenue would riseA 7% reduction in price would lead to a

rise in sales of something less than 7%Revenue would fall

Influence of ElasticityPrice Elastic:% change in quantity demanded > %

change in pricee.g. A 4% rise in price would lead to

sales falling by something more than 4%Revenue would fallA 9% fall in price would lead to a rise in

sales of something more than 9%Revenue would rise

Product

ProductMethods used to

improve/differentiate the product and increase sales or target sales more effectively to gain a competitive advantage e.g.Extension strategiesSpecialised versionsNew editions Improvements – real or

otherwise!Changed packagingTechnology, etc. Image copyright: www.freeimages.co.uk

Promotion

PromotionPromotion is the business of communicating with

customers. It will provide information that will assist them in making a decision to purchase a product or service. It is the razzmatazz, pace and creativity

The cost associated with promotion or advertising goods and services often represents a sizeable proportion of the overall cost of producing an item. However, successful promotion increases sales so that advertising and other costs are spread over a larger output.

Though increased promotional activity is often a sign of a response to a problem such as competitive activity, it enables an organisation to develop and build up a succession of messages and can be extremely cost-effective.

PromotionStrategies

to make the consumer aware of the existence of a product or service

NOT just advertising

PromotionPromotion falls into two main categories: Above-the-line promotion Below-the-line promotion.

Above-the-line Above-the-line promotion is paid-for and includes traditional advertising routes

such as television, radio and the press. These are good for carrying marketing messages to a large audience. However, it is less easy to measure the impact of these channels, for example, whether a TV advert has increased sales.

Special displays or positioning in stores or advertising on supermarket trolleys are also examples of above-the-line promotional activity.

Promotion Below-the-line Below-the-line promotion can take many forms and is usually more under the control of the

business. Typical examples include events or direct mail. door-to-door leaflet drops or books of vouchers which give customers discounts over a period

of time. These help to attract consumers and establish brand loyalty so the consumer buys the product again.

email newsletter for consumers. This creates a relationship with consumers, which is unusual for a B2B organisation. It not only allows the company to communicate directly with and listen to consumers, it also enables the business to collect information, for example, about their lifestyles and product choices. This is used for feedback, research and promotions.

PR and sponsorship Public relations (PR) is a form of promotion that is concerned with developing goodwill and

understanding between organisations and the public. Sponsorship is supporting an event, activity or organisation by providing money or other

resources that is of value to the sponsored event. This is usually in return for advertising space at the event or as part of the publicity for the event.

Promotion Manchester United The product includes providing an excellent football team that

plays and wins in an exciting way. Manchester United markets itself as a global brand. The club also engages in a

range of joint promotional activities, for example with the mobile phone company Vodafone. The club has positioned itself at the upmarket premier end of the market and, as a result, it tends to charge premium prices as evidenced by the high cost of a season ticket to watch home league games.

Additionally there are other ingredients of the product including merchandising such as the sale of shirts, and a range of memorabilia. The product also relates to television rights, and Manchester United's own television channel. Its products are sold across the globe, through the club's website and a range of other sales media.  Manchester United books, shirts, programmes, keyrings and many other items are sold and promoted through its website.

What are the main elements of the marketing mix of Manchester United?

Blood Donors Respond During summer, the Pennsylvania/New Jersey regional branch of the

American Red Cross invited people to “get their kicks on Route 56”. That's the name of the summer blood drive campaign just

completed. During the campaign, all donors receiveed a Route 56-logoed Red Cross keytag, and the chance to win a year's supply of gas. When people came in to give blood, they got a keytag and a scratch-off game piece that gave them a chance to win T-shirts, visors, coffee mugs, or the grand prize of $2,000 in gas money.

The campaign was particularly important because it helped increase blood donations during the summer, a time when levels are typically become dangerously low. "This was our emergency summer campaign," says Jennifer Lawser, account manager for blood services at the regional office. "In the summertime, people are on vacation, kids are home from school, and nobody really thinks about donating blood.

The fun auto-related theme was a big hit during a time of record-high gas prices. Donations increased more than 16% over the prior year. By the way, the free gas was donated in a nice public relations move by Lukoil Corp. "Most people thought it was a great incentive. Others felt it wasn't the reason they donated, but it was nice to walk away with a token of appreciation," Lawser says. "Either way, we won

Tattoos Build Awareness What do the phrases "Run Your Own Race" and "Don't Cry Til' You Get

to the Car" have in common? They're both albums by Mulberry Lane, a Nebraska-born pop group made up of four sisters. But unless you're one of the 500,000 people who bought one, you likely wouldn't know that.

Mulberry Lane realizes the importance of keeping its name fresh in people's minds as one element in helping CD sales and growing its overall fan base. Part of this is, as the majority of groups know, selling logoed items such as T-shirts, posters and pins at its concerts.

But when it came time to release A Very Mulberry Christmas, its first holiday album, as well as launch its Midwest tour, the group wanted to go beyond the fundamentals. "We wanted a branded piece that would visually represent our music," says Bo Rizutto, one of the group's members. "We decided on temporary tattoos. Kids love them, and parents approve because they're temporary. And kids always take handfuls to give to their friends. They walk around with the tattoos for a few days, and it keeps our name out in public."

As many of Mulberry Lane's songs deal with young love and many fans are also young, the tattoos themselves were a very basic design: the words "I Love Mulberry Lane" with the copy in black and the heart in red. An initial order of 500 was given away at the merchandise table at the tour's first concert. The group ended up reordering them for the next show, and, says Rizutto, has been doing so "constantly" ever since.

Fueled by the popularity of the tattoos at shows, the group now includes them in all of its press kits as well. To date, thousands have been distributed, and they work. "The whole campaign has been wonderful," says Rizutto. "It's great to go into a radio station or record store and see people wearing Mulberry Lane tattoos. We think they really add an extra element of fun."

Top U.S. Cities Play the Branding Game No matter what business you're in, it's a good idea to think about branding. Whether you operate a medical

practice, a construction company, or a food distributor, you should be thinking about the image of your business. Cities and towns that play the branding game well are part of a growing trend of thriving destinations whose mottos and monikers are helping to market their appeal and put them squarely on the map.

So says TaglineGuru (www.TaglineGuru.com), which recently released its survey of the Top 50 U.S. City Slogans and Top 50 U.S. City Nicknames. It also announced the winners of the "Sloganville, USA Awards," recognizing the most notable and notorious city slogans across the nation.

According to 100 leading branding, marketing and advertising professionals, "What Happens Here, Stays Here" (Las Vegas) was ranked #1 out of 400 city slogans, followed by "So Very Virginia" (Charlottesville, VA); "Always Turned On" (Atlantic City, NJ); "Cleveland Rocks!"; and "The Sweetest Place on Earth" (Hershey, PA).

The well-known moniker "The Big Apple" was ranked #1 out of nearly 800 city nicknames, followed by "Sin City" (Las Vegas); "The Big Easy" (New Orleans); "Motor City" (Detroit); and "The Windy City" (Chicago).

Rankings were based on whether slogans and nicknames expressed a city's brand character and personality; told a story in a clever, original, and memorable way; and inspired others to visit there, move there or learn more. According to Eric Swartz, president of TaglineGuru, "Re-branding your town with a memorable motto or moniker is the most cost-effective way to leverage your assets, increase your visibility and build brand identity. For small towns, it means creating slogans that are unique and specific capitalizing on their history, values and individual style. For big cities, re-branding means staying vibrant, contemporary and inclusive."

Guerilla Marketing Promotes Free ATM's The signs were everywhere: billboards, newspapers, even posters on the subway. To promote its new "no ATM

fees at any bank anywhere" policy, TD Banknorth kicked off a multi-tiered campaign. The bank launched its "Bank Freely" campaign - featuring a No ATM Fees Visa debit card - that spread through Connecticut, New York, Pennsylvania and New Jersey. 

TD Banknorth ads in popular magazines and TV spots helped snag consumers' attention. But the campaign's guerilla marketing had the strongest effect. Bank reps, called "free agents," cruised around in customized Honda Elements that looked just like the No ATM Fees card, handing out branded coffee and popcorn cup holders, mock-up newspapers, bottled water, and door hangers. "We gave out water at a baseball game and ice cream on a hot day," says Thomas Dyck, director of marketing for TD Banknorth. "It was all about giving something free to the customer." 

The popcorn cup holders stole the spotlight at movie theaters, and morning travelers who stopped by their local cafes got their daily dose of caffeine and TD Banknorth advertising. Stickers that read, "With the money you save from no ATM fees, you can get more of these" decorated all the products. "Guerilla marketing gives you the opportunity to actually engage in a dialogue with customers," says Dyck. "Customers could ask our 'free agents' questions about the no ATM fees offer and get answers immediately." 

"The goal for the entire campaign is to take a year to interact with customers firsthand and to learn what else they might want in a bank," says Dyck. The buzz surrounding communities who use TD Banknorth appears to have already pushed the campaign in the right direction.

Place

PlaceThe means by which products and services

get from producer to consumer and where they can be accessed by the consumerThe more places to buy the product and the

easier it is made to buy it, the better for the business (and the consumer?)

People

PeoplePeople represent the business

The image they present can be importantFirst contact often human – what is the lasting

image they provide to the customer?Extent of training and knowledge

of the product/service concernedMission statement – how relevant?Do staff represent the desired culture

of the business?

Process

ProcessHow do people consume services?What processes do they have to go

through to acquire the services?Where do they find the availability

of the service?ContactRemindersRegistrationSubscriptionForm fillingDegree of technology

Physical Environment

Physical EnvironmentThe ambience, mood or physical

presentation of the environmentSmart/shabby?Trendy/retro/modern/old fashioned?Light/dark/bright/subdued?Romantic/chic/loud?Clean/dirty/unkempt/neat?Music?Smell?

The Marketing MixBlend of the mix depends upon:Marketing objectivesType of productTarget marketMarket structureRivals’ behaviourGlobal issues – culture/religion, etc.Marketing positionProduct portfolio

Product lifecycleBoston Matrix

4Cs of Marketing4cs is also important for marketing mix. The four Cs includes- Customer Solution Customer Cost Convenience Communication

The Marketing Mix- The 4 Cs

The Four Ps is being replaced by the Four Cs model, consisting of consumer, cost, convenience, and communication.

The Four Cs model is more consumer-oriented and fits better in the movement from mass marketing to niche marketing.

The product part of the Four Ps model is replaced by consumer or consumer models, shifting the focus to satisfying the consumer.

Product is replaced by Customer: You have to study consumer wants and needs and then attract consumers one by one with something each one wants.It is to create a custom solution rather than pigeon-holing a customer into a product.

Pricing is replaced by cost, reflecting the reality of the total cost of ownership. Many factors affect cost, including but not limited to the customers cost to change or implement the new product or service and the customers cost for not selecting a competitors capability. You have to realize that price - measured in dollars - is one part of the cost to satisfy. If you sell hamburgers, for example, you have to consider the cost of driving to your restaurant, the cost of conscience of eating meat, etc.

The Marketing Mix- The 4 Cs

Place is replaced by the convenience function. With the rise of internet and hybrid models of purchasing, place is no longer relevant. Convenience takes into account the ease to buy a product, find a product, find information about a product, and several other considerations. You have to know how each subset of the market prefers to buy - on the Internet, from a catalogue, on the phone, using credit cards, etc. Lands End clothing, Amazon Books and Dell Computers are just a few businesses who do very well over the Internet.

Promotions feature is replaced by communication. Communications represents a broader focus than simply promotions. Communications can include advertising, public relations, personal selling, viral advertising, and any form of communication between the firm and the consumer. Be creative and you can make any advertising "interactive". Use phone numbers, your web site address, etc. to help here. And listen to your customers when they are "with" you.

The Marketing Mix- The 4 Cs

The Marketing Mix- The 4 Cs