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Principles of MarketingMs. Otieno Dorcas

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Topic 6 Part 2THE MARKETING MIX

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The Marketing MixThe marketing mix is a strategic blending of the elements of marketing. These elements are:1. product, 2. price, 3. place, 4. promotion, 5. people, 6. physical evidence and 7. processes

It is the combination of these elements that lead to the ultimate satisfaction of the consumer.

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Product

The product is what the company is offering in the market. As seen, we sell anything from goods to ideas.

A product can (and usually) has a mix of anything that can consist of a product. So a product can be a mix of a good + a service bundled up together

To the marketer, a product has the following levels

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Definitely not all the products are the same. The way goods are marketed is not the same way as experiences are. Services have the following characteristics that make them significantly different from goods 1. Intangible – you can not see, touch, feel or smell a service

before purchase2. Variable – the quality changes with the person who is giving

them. It is very difficult to standardize services3. Inseparable – they cannot be separated from those people

who provide them. 4. Perishable – they cannot be stored for later use. E.g. you

cannot take the medical consultation from the doctor to use it at home later

For that reason, companies have to invest a lot of money on evidence management to convey the right signals to the consumer so as to communicate the product to the customer

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Product decisions should consider the product's advantages and how they will be leveraged. Product decisions are at 3 levels

Product 1. Individual Product DecisionsThese are attributes to the particular product on offer

Product Attributes- quality, features, style, design, size, quantity, etc. Branding – a combination of name, sign, colour, design that identifies the product

Packaging

Labelling

Support Services – warranties, after sale services

2. Product Line DecisionsClosely related products in function and target market

Line filling – adding more items to the present range

Line Stretching - taking a product line beyond present customers either upwards or downwards

3. Product Mix Decisions

Width - number of product lines

Length – number of items carried in a product line

Depth – number of versions offered for each category line

Consistency – how related the products are

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PriceThis is the value that the company charges to the consumer. Basically it is the amount a customer pays for the product. This value paid by the customer can be both in cash and non- cash form. It is through the price that companies make profits or losses since it is the marketing arm that gets revenue from the customers.

When setting the price, the company has the following continuum to decide where to set their price

Report for 2010

Product costs Margins, Environmental Factors, Competition

Consumers’ perception of value

Price floor: no profits beyond this point

Price ceiling: no demand beyond this point

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Pricing Strategies Major Pricing Strategies 1. Cost Based Pricing: This is perhaps the simplest method of

pricing. The company calculates all the costs and adds a margin to come up with the price. In this approach, the company comes up with the product then sets the price.

2. Value Based Pricing: in this approach, the company researches on the customers’ perception of value. He then sets a price based on what the customers are willing to pay for the product. This perception then drives the other elements of marketing e.g. product design, distribution etc.

3. Competition Based Pricing: this is where a company bases the price on what the competition is charging. Companies use this, especially, in cases where estimating demand is difficult for them as competitors’ price is usually assumed to be the collective industry wisdom

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Other Pricing Strategies 4. Penetration pricing:

setting a low price to attract a large number buyer to gain a large market share e.g. airtel entering into Kenya

5. Price skimming: setting a high price to reap maximum revenues and then lowering the price as time goes by e.g. mobile phones

6. Product line pricing: setting prices based on the different products in the product line. The difference in prices is normally set on the perceived value. E.g. Vaseline range of products

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Other Pricing Strategies 7. Optional Pricing: having

different prices for buying core products separate from accessories e.g. buying a computer then mouse, bag and software separately

8. Product bundling : this is the combination of several products and selling the entire batch for a reduced price. Especially works when a company has either a loss leader or a value leader product. E.g. combo meals

9. Psychological pricing: using prices to trigger some emotional feeling to buy the product. Majorly uses perception

10. Promotional Pricing: temporarily lowering the price of a product to induce short term sales

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Place Distribution is all about making the product available to the consumer as and when it is needed.

The distribution strategy to be followed is important as it precisely distribution that will determine where the product will be at a particular time, who it will reach and how many of those it has reached are the actual intended consumers.

In the distribution strategy, the following key considerations must be examined: 1. Number of Channels 2. The Degree Of Directness Of The Channel3. The Number Of Channel Members4. Criteria In Selection Of Channel Members

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1. Number Of Channels

This is considering how many ways the company is reaching the customer.

A company can have more than one way of reaching the consumer.

This is never cast on stone

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2. The Degree Of Directness Of The Channel

This deals with the closeness of the relationship between the consumer and the business. The degree of directness could be classified as direct or indirect. Different products demand different levels of directness.   Direct Channel Indirect Channel Market Conditions Concentrated markets

i.e. in one geographical area

Dispersed markets

Product Attributes Perishables, hazardous, large, bulky, expensive

Durable, safe, cheap, small

Cost Benefits In Selection Of Channel Members

Used if channel members give you minimal benefit

Used if channel members give you a considerable level of benefit e.g., incurring advertising costs, packaging costs etc.

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3. The Number Of Channel Members

The decision of number of channel members is decided by the level of intensity the company wants the product available. There are three ways in which one can distribute using channel members. 1. Intensive: this is mass distribution. It is most effective for

products that are distributed indirectly. One looks for as many retailers and wholesalers as possible

2. Selective: involves choosing distributors on the basis of a certain set of criteria. E.g. for you to buy genuine Gucci suits in Kenya, there are few selected stores to sell them some which are Brands (on Banda street) Sir Henry’s (on Kimathi Street)

3. Exclusive: having only one wholesaler or one retailer. The product is only found in one set of stores

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4. Criteria In Selection Of Channel Members

If the channel has a degree of indirectness, it is wise to have the following key factors in mind.

First, the reputation of the channel member in question. The reputation should match that of the company if not higher. This is because, a channel member can damage the image created by the company. For example, if your company is well known for quality, the channels members must also consider quality as one of their top most priorities.

Second, the services provided by the channel member in question. Often businesses look for a mutually beneficial relationship. The channel member to be used must bring in some form of value to the business.

Third, the reliability and the continued growth of the channel members must be taken into consideration.

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Promotion This involves all the methods of communication that a company uses to make consumers aware, interested or desirous of the company’s products.

Promotion includes 5 broad categories of means of communication that are also known as the promotion mix. These are:1. Advertising2. Sales promotion3. Personal selling4. Public relations5. Direct marketing

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Steps In Developing Effective Communication 1. Identify the target audience: this is of utmost importance. This

determines the what, the how, the when, the where and the who will communicate the message.

2. Determine the communication objectives: this heavily depends on the buyer-readiness stage. Could be awareness, knowledge, liking, preference, or conviction

3. Design a message: here, the company decided on the message content (what) and structure (layout). Content mainly deals with the actual word spoken or written, and the appeal it carries. The appeal can bea) Rational-showing desired benefit or a logical conclusionb) Emotional – love, joy, humour, fear, guilt, func) Moral –appeals to sense of right or wrong

4. Choose the media: here is where the actual channel is selected. Can be personal or non personal

5. Select message source: this is the person who delivers the message. E.g. doctors, athletes, a model, an actress. It is heavily dependant on the brand

6. Collect feedback

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The Promotion Mix1. Advertising : this is any form of paid non-personal

communication by an identified sponsor. It involves, print, broadcast, internet, outdoor advertising,

2. Sales Promotion: a short term incentive to encourage purchase of a product. It includes, discounts, coupons, displays and demonstrations

3. Personal Selling: this is a presentation done by the company’s sales team to make sales and/or build relationships. It includes, sales presentations, and trade shows

4. Public Relations : building good relationships with the company’s stakeholders by building a good corporate image or dispelling rumours and bad events. It includes, press releases, sponsorships, special events, web pages

5. Direct Marketing: this is connecting with individual consumers to get immediate feedback and build long lasting relationships. It includes, catalogues, telephone marketing, internet, mobile marketing

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PeopleThese are the employees of the organization with whom customers interact with.

Normally, customers make judgments about service provision and delivery based on the people representing the company. This is because people are one of the few elements of the service that customers can see and interact with. They are the ones who create the image of the firm by the service they deliver

Firms that provide services must find ways in which they can effectively manage the contact employees to ensure that their attitudes and behaviors are conducive to the delivery of service quality.

Staff require appropriate interpersonal skills, aptitude, culture, and service knowledge in order to deliver a quality service.

This is especially important in services because employees tend to be variable in their performance, which can lead to variable quality. This may in turn affect the purchase of customers

Report for 2010

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ProcessThese are systems within the organization that ensure product delivery. These systems include procedures, mechanisms and flow of activities.

Systems ensure that there is no confusion in the service delivery, which in turn ensures consistency. All services therefore, need to be underpinned by clearly defined and efficient processes.

In the process, people have the following questions to ask

1. How do people consume services?2. What processes do they have to go through to acquire the

services?3. Where do they find the availability of the service?

– Contact– Reminders– Registration– Subscription– Form filling– Degree of technology

Report for 2010

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Physical EvidenceThis consists of all the tangible aspects that a customer interacts with within the location of service provision.

Physical evidence is all about where the service is being delivered from. It is particularly relevant to retailers operating out of shops. This element of the marketing mix will distinguish a company from its competitors. Physical evidence can be used to charge a premium price for a service and establish a positive experience. The physical evidence shows the ambience, or mood to communicate quality. Is it

– Smart/shabby?– Trendy/retro/modern/old fashioned?– Light/dark/bright/subdued?– Romantic/chic/loud?– Clean/dirty/unkempt/neat?– Music?– Smell?

Report for 2010

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Bringing It All TogetherNow that we have gone through all the elements, and have the various target markets that the company serves at hand, its time to bring it all together. The questions you need to ask is,

1. For this target market, what elements are being used?2. Is the combination being used a fit, or a mismatch?3. Are the elements being used relevant or irrelevant for the

said target market4. What can the company do to improve their marketing

strategy if there is a discrepancy

The combination of the elements is the marketing strategy. This means that you cannot have a marketing strategy with just one element. ALL HAVE TO WORK IN UNISON FOR YOU TO HAVE A MARKETING STRATEGY

Report for 2010

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