Marketing Mix ( The 4 P’s )

Introduction

The Marketing Mix represents a foundation for companies, centered around product, price, place and promotion ( The 4 P’s ). Basically, it’s a set of marketing tools a business uses to achieve their marketing goals in their target market.

Appropriately combined, these controlable instruments allow them to scale their businesses.

  • Product
  • Price
  • Place
  • Promotion

Nowadays, the term has evolved into more P’s.

  • People
  • Process
  • Physical evidence

The concept of product

The terminology of a product refers to anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need.

Types of products

When we say a product is tangible, we call it a good. On the other side, if the product is intangible, we call it a service.

Services are very important to the world economy and add up an important share of the market. This is why we give special attention to them. Basically, services are a form of product, that consists of activities, benefits or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.

Companies can offer both, goods and services, or simply focus on offering a specific product. It depends solely on them.

Product classifications and types of consumers

Products fall into two broad classes;

  1. Consumer Products
  2. Industrial Products

Consumer Products

These refer to products directed to final consumers, this is for personal consumption.

There are 3 major types of consumer products;

Convenience Products

The convenience products are usually acquired by customers frequently, immediately, with minimal comparison and buying effort. Thus, these products are low priced.

Shopping Products

These products are less frequently bought.Additionally compared carefully between other alternatives on suitability, quality, price and style. Consumers usually spend time and effort in gathering information about the product before making a purchase decision.

Specialty Products

Refer to products and services with unique characteristics and / or brand recognition for whom a specific group of buyers is willing to make a special buying effort.

products-and-services-purchase-decisions

Industrial Products

These refer to products directed to other intermediaries, for further processing or use in conducting a business.

Beyond deciding which segments of the market it will target, the company must decide on a value proposition; that is, how it will create differentiated value for targeted segments and what positions it want to occupy in those segments.

Positioning Strategies

  • More for more:

Providing the most upscale product or service and charging a higher price ( Rolex ).

  • More for the same:

Introducing a brand offering comparable quality at a similar price. When Toyota first introduced Lexus.

  • More for less:

Introducing a brand offering comparable quality at a lower price. Home Depot when it first opened.

  • The same for less:

It’s the strategy used by discount stores such as Walmart, and some ”category killers”, such as Mediamarkt.

  • Less for much less:

Some hotel chains, such as Holiday Inn Express, have suppressed amenities and, accordingly, they charge less.

The concept of price

The price is the amount of money charged for a product or a service. More broadly, the price is the sum of the values that customers exchange for the benefits of having or using the product or service.

The three major pricing methods are:

  • Customer value-based pricing
  • Cost-based pricing
  • Competition-based pricing
major-pricing-methods-and-customer-perceived-value

Pricing strategies

New-product pricing strategies

Pricing strategies usually change as the product passes through its life cycle, and the introduction stage is especially challenging.

Market-skimming pricing

Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price.

It only makes sense under certain conditions:

The product’s quality and image must support its higher price. The cost of producing a smaller volume cannot be so high that they cancel the advantage of charging more. Competitors should not be able to enter the market easily and undercut the higher price.

Market-penetration pricing

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

It can be done under certain conditions:

The market must be highly price sensitive so that a low price produces more growth. Production and distribution costs must decrease as sales volume increases. The low price must help keep out the comp

Product mix pricing strategies

The strategy for setting a product’s price often has to be changed when the product is part of a product mix. In this case, the firm looks for a set of prices that maximizes its profits on the total product mix.

Product line pricing

Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices.

Optional product pricing

Offering to sell optional or accessory products along with the main product. For example, the optional accessories of cars.

Captive product pricing

Setting a price for products that must be used along with a main product. For example, blades for a razor or games for a console.

Product bundle pricing

Combining several products and offer the bundle at a reduced price. For example, combo (burger+fries+drink) prices at Burger King.

Price-adjustment strategies

Companies usually adjust their basic prices to account for various customer differences and changing situations.

Discount and allowance pricing

Reducing prices to reward customer responses, such as paying early or promoting the product. For example, quantity discounts when buying large volumes.

Segmented pricing

Adjusting prices to allow for differences in customers, products, or locations. For example, customer-segment pricing when museums charge a lower admission to students or senior citizens.

Psychological pricing

Adjusting prices for psychological effect. For example, consumers usually perceive higher priced products as having higher quality.

Promotional pricing

Temporarily reducing prices to increase short-run sales. For example, sales periods in January and July in Spain.

Geographical pricing

Adjusting prices to account for the geographic location of customers.

Dynamic pricing

Adjusting prices continually to meet the characteristics and needs of individual customers and situations. For example, many airlines adjust the prices of their tickets based on the immediate demand.

International pricing

Adjusting prices for international markets. For example, Unilever has developed smaller and more affordable packages that put the company’s premier brands within the reach of the cash-strapped customers in some countries (like Greece).

The marketing channels

the-marketing-channels

What is a marketing channel?

A marketing channel is a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user.

Which are their members?

the-marketing-channel-members

Channel behavior and organization

Conventional distribution channels

They consist of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profit, even at the expense of profits for the system as a whole.

Vertical marketing systems

Distribution channel structures in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate.

vertical-marketing-systems

Horizontal marketing systems

A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity.

Multichannel distribution systems

A single firm sets up two or more marketing channels to reach one or more customer segments.

multichannel-distribution-system-examples

The role of promotion in the Marketing Mix

MARKETING-MIX-THE-4-P

At the end, not only communication communicates, but price, product and distribution (place) do too.

The IMC (Integrated Marketing Communications) is the search on the consistency of the company’s brand communication in order to more efficiently establish a coherent brand perception.

Usually, when talking about commercial communication we think exclusively about advertising, but advertising is not the only tool, even though it’s the one that traditionally received more investment from companies.

Posted in Marketing.

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