MARKETING MIX NOTES

The term marketing mix refers to the tactical elements of the marketing strategy. It is the blending of product, price, promotion and place.

6.1 Product
Product refers to anything that can be offered to a market for attention, use, or consumption that might satisfy a want or need. It includes any tangible item, services, ideas, concepts, or a person.

Product classification

1. Tangible and intangible
A product can classified as tangible and intangible. Tangible product is a physical product, such as mobile handset, cars and the TV set. Intangible product is a product that cannot be touched or felt such software, ideas, and services.

2. Consumer goods and industrial goods product
Industrial goods are consumed as raw materials or inputs by businesses to produce other products, for example, wheat to produce flour. Consumer products are consumed by final consumers for their own interests (individuals and households), and not for commercial purposes like in the industrial goods product case. Consumer goods generally can be classified into four types, namely consumer goods, commercial goods, specialty goods, and goods Unsought. This classification is based on buying habits of consumers, as evidenced by the following three aspects (effort) of consumers to reach a purchase decision, the attributes that consumers use in a
purchase, and the frequency of purchase.

3. Convenience Goods
Convenience products are goods that have generally high frequency of purchase (often purchased), take the time soon, and require only minimal effort (very small) in comparison and purchase. Examples include cigarettes, soap, toothpaste, batteries, candy, letters and news. Convenience products themselves can be further grouped into three categories, namely, staples, impulse goods and goods emergencies.

4. Shopping Goods
Purchases of goods are goods that in the process of selection and purchase by consumers in different alternatives that are available. Comparison criteria include price, quality, and model of each item. Examples are household equipment, clothing and furniture.

5.Specialty Goods
Specialist shops are goods which have characteristics and / or identification of a single brand in which a group of consumers willing to make a special effort to buy it. General types of specialized products branded luxury products and a specific model, such as Lamborghini cars, the clothes designed by famous designers

6. Unsought Goods
Unsouqht goods are goods that are not known to consumers or are already known, but are not generally thought of buying it.

Product mix and product lines
A product mix (or product assortment) refers to all the product lines and items that a particular firm offers for sale. Say, a manufacturing firm may have a capacity to produce, kitchen appliances, cars, and mobile handsets. These are examples of a product mix. Product mix consists of a number of product lines. That is various models of cars, mobile handsets and kitchen appliances produced by the firm. These various models , for examples, various models under car, mobile handsets and kitchen appliances are product lines. Product lines are group of products manufactured by a firm that are closely related in use and in production and marketing requirements. The depth of the product line refers to the number of different products offered in a product line.

The manufacture’s product mix has four important dimensions: width, length, depth, and consistency. Product mix width refers to the number of different product lines the company carries. Product mix length refers to the total number of items the company carries within its product lines. Product line depth refers to the number of versions offered of each product in the line. The consistency of the product mix refers to how closely relate the various product lines are in end use, production requirements, distribution channels, or some other way. The three levels of a product: this is a total product concept where a product is understood as a bundle of physical, service, and symbolic attributes designed to satisfy a customer’s wants and needs. For instance, if a product is a tangible product, this product still can be understood as a product with three levels. Let us say that product is a computer to be purchased for primary
school teaching. This computer , as a product, has three levels which are a bundle of physical, service and symbolic attributes:

  1. Level one: Core product is the benefit the product gives as a value such as convenience, speed and efficiency to the user. In this sense, the core product is intangible.
  2. Level two : Actual product is the physical product that comes as branding, colour, quality, style and fashion
  3. Level three: Augmented product is the non-physical part of a product which includes installation, delivery, warranties, customer care and finance.

New product development
New product development is a strategy for a firm growth by offering modified or new product to a market segment. The process of new product development has various steps:
1. Idea generation looking for all possible ideas that may help to develop a new
2. Idea screening is the step of eliminating unsound ideas prior to devoting resources to them
3. Concept development and testing , the step of developing the marketing and engineering details
4. Business analysis is the step estimating likely selling price, sales volume, break-even point and profitability
5. Product development
6. Market testing is the step of producing a physical prototype , making adjustment where necessary and determining customer acceptance
7. Commercialization is the step of launching the product for market Once the new product is launched for the market, the remaining main task is the adoption of this new product, which is an innovation, by customers. This will take us to the next topic.

New product adoption process
In adopting process of the new product, customers differ according to the timing of their adoption of the innovation. One of the common models used is the diffusion model. The model groups the adopters of the new product as innovators, early adopters, early majority, late majority and laggards. Innovators are understood as well-informed and risk-takers who are willing to try the new
product. They represent the smallest percentage of the market.

Early adopters are those, based on the positive response of innovators, who begin to purchase the product. Early adopters tend to be educated and opinion leaders. They are more in numbers than the innovators. Early majority are careful consumers who tend to avoid risk; they adopt the product once it has been proven by the early adopters. They rely on recommendations from others who have
experience with the product.

Late majority are skeptical and acquire a product only after it has become commonplace. Laggards avoid change and may not adopt a new product until traditional alternatives no longer are available.

The new product adoption process
The new product adoption process suggests the need for the firms to pay attention to help customers so as to go through the stages smoothly and adopt the new product. The potential buyer of the new product, from first hearing the product to the final adoption it
goes through the following five stages of the adoption process:

1. Awareness : getting information about the new product
2. Interest : seeking more information about the product
3. Evaluation : checking its benefits and cost
4. Trial : based on the evaluation to buy to estimate the value of using
5. Adoption : if the trial is favorable to adopt the new product to use regularly

Product Life Cycle
With the change in marketing environment, intense competition, customer’s preferences and tastes, product life also changes. Product also passes through four product phases:
1. Introduction
2. Growth
3. Maturity
4. Decline

1. Introduction: in this stage product is relatively undifferentiated; sales are low; price generally high; distribution is selective; increasing brand awareness is the aim of promotion; almost no profit and competitor on site. The strategy is to establish market.

2. Growth: in this stage there may be increase in sales growth; profit begins to rise; there is differentiation in form of new product features; distribution becomes intense; there is improvement in quality of product; price can be maintained or reduced; competitors become entering into the product production as to seize the opportunities. The strategy is market penetration.

3. Maturity: in this stage, there is product differentiation and modification; competition is intense; price reduction is likely; likely there are new distribution channels; there is emphasis on building brand loyalty; profit goes down ; market saturation is reached; the strategy is differentiation , diversification and to maintain market share and extend the product life.

4. Decline: in this stage, the approach is to reduce cost and to harvest it; profits diminish; the option may include to discontinue the product or to find new use for it.

Branding
Branding is the entire process involved in creating a unique brand for a product.
Brand is the identity of a product; it is a product’s personality. A name, sign, term, design, slogan, symbol or a combination these are forms of a brand. Through brand, a firm intends to identify its goods and services and differentiate itself and its product from those of other sellers. Brand connects target segment emotionally; it delivers the message clearly; it also confirms credibility; it motivates the buyer; it consolidates user loyalty. Let us define these two concepts: brand equity and brand evaluation. Brand equity is the positive
differential effect that knowing the brand name has on customer response to the product. A measure of a brand’s equity is the extent to which customers are willing to pay more for the brand. Brand evaluation is the process of estimating the total financial value of a brand.

Major brand strategies
To build strong brand, here are major brand strategy decisions:
1. Brand positioning: focusing on attributes, benefits, beliefs, and values
2. Brand name selection: selection of the name; protection of the name
3. Brand sponsorship: it can be manufacture’s , private, licensing or co-branding

Service marketing
Service is defined as any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Service marketing is influenced by the service characteristics which are listed below:
1. Intangibility , for example , the service of car repairers; doctors consulting
2. Variability : depending on various factors, the service quality car repairer varies
3. Inseparability: for example, the service of a haircut and a barber
4. Perishability: example, a service of a seat booked to fly to Mombasa tomorrow on local airlines, if not used will perish

Unlike the tangible product, service marketing also has a unique marketing mix. The service mix includes: the common 4Ps (product, price, promotion and place) and people, process, physical presence, and productivity.

6.2 Price
Price is the sum of the values that consumers exchange for the benefits of having or using the product or services.

Types of cost
Let us first look at the types of cost. Types of costs are fixed costs the type of costs which occur at the establishment of the organization and relatively not replenished routinely. The fixed costs are not affected with the production or sales level. Variable costs that type of costs which occur with each extra unit produce or sale. Variable costs are directly related with the level of production. Total costs are the sum of the fixed and variable costs.

Factors affecting pricing decision
These are the factors that affect pricing decision: Internal factors of the firm such as marketing objectives; marketing mix strategy; cost ; organizational consideration ; external factors such as the market ; demand; competition, and environment.

General pricing approaches
This can be cost -based price, cost-plus pricing, adding a standard markup to the cost of the product and breakeven pricing. The other approach is value -based pricing: setting price based n buyers perceptions of value rather than on the seller’s cost. There is also another approach: competition-based pricing. This is setting prices based on the prices that competitors charge for similar products.

New Product Pricing Strategies
This are market skimming pricing and market penetration pricing .Market skimming pricing is setting a high price for a new product to skim maximum revenues from the segments willing to pay the high price. Market penetration pricing is setting a low price for a new product in order to attract a large number of buyers and a large market share.

Product Mix Pricing Strategies
This includes product line pricing, optional product pricing, captive product pricing, and product bundle pricing

Price Adjustment Strategies
Discount and allowance pricing which includes cash discount for those customers who pay their bills punctually or in advance; quantity discount for those customers who purchases in bulk Quantity; functional discount for the member of the trade channel who performs certain function for seller, such as selling, storing, and record keeping; seasonal discount for those buyers, who purchase merchandise or services out of season; allowance , the promotional money paid by the manufacturers to the retailers against a performance or as per agreement.

Segmented pricing is selling a product or service at two or more prices, where the difference in prices is based on the differences in the environment of the segment. Another adjustment strategy is psychological pricing; price is based on the perceptions of the consumer for the product. Reference price is price that buyers carry in their minds and refer to when they look at a given Product

Promotional pricing is temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales.
Geographical Pricing is in which goods are placed free on board a carrier and the customer pays the actual freight from the factory to the destination. Uniform-delivered pricing is a geographical pricing strategy, in which the company charges the same price plus freight to all customers, regardless of their location. Zone zoning is a geographical pricing strategy, in which the firms divide their clients’ location in different zones as per distance with the production house and fix charges for each zone. All customers within a zone pay the same price.

Basing point pricing is a geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer location, regardless of the city far from the production house. Freight-absorption pricing is also a geographical pricing strategy in which the company absorbs all or part of the actual freight charges in order to get the business.

6.3 Promotion
Promotion refers to communicating with the public in an attempt to influence them toward buying a product. Promotion is also coordination of individual methods of promotions such as advertising, personal selling and sales promotion.

Promotion Mix
Promotion mix consists of these elements:
1. Advertising
2. Personal selling
3. Sales promotion
4. Public relations

Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.
Advertisement is important for standardized products; products aimed at large markets; products that have easily communicated features; products low in price; and products sold through independent channel members and/or are new products.

Use of advertising is for promoting products or organizations; stimulating primary and selective demand; offsetting competitor advertising; making salespersons more effective; increasing use of product; reminding and reinforcing customers; and, reducing sales fluctuations.

Personal selling refers to personal presentation by the firm’s sales force for the purpose of making sales and building customer relationship.

Types of Advertising Agencies
The objective of advertising is to create awareness within a specific target audience during a specific period of time. Types of the advertising agencies that carry out the objectives of advertising are creative Agency; Media Buying Houses; Public Relation s; Off Line Advertising Agency and Production Houses

Personal selling
Personal selling is a persuasive communication between a representative of a firm and one or more potential buyer for a sale. It is a face to face communication with an aim to sell a product.

The advantages of personal selling are freedom to adjust a message to satisfy customers informational needs, dynamic; precision, enabling marketers to focus on most promising leads; give more information; two way flow of information, interactivity; Discover the strengths and weaknesses of new products and pass this information on to the marketing department. Its minus is high cost.

Forms of personal selling (types of sales persons): These are the types of sales persons: order taker seeks to have repeat sales; order getter identifies potential customers who will buy a product;

The sales management process
1. Sales plan formulation – setting the objectives; organizing sales force
2. Sales plan implementation – sales force recruitment, selection, training , motivation and compensation
3. Evaluation and control of the sales force , including quantitative and behavioral assessment

Sales plan formulation
1. Setting objectives – this is specifying what to achieve
2. Organizing the sales force – taking into consideration various organizing structure : geographical structure, customer structure, product structure,

Steps in personal selling process
Prospecting and qualifying: this identify potential customers and screening them
1. Pre-approach : learning about a customer before making a call
2. Approach : knowing how to meet the buyer
3. Presentation : showing the product benefits
4. Handling objections: overcoming buyer objections
5. Closing : ask the buyer for order
6. Follow-up : ensuring customer satisfaction and repeat business

Types of sales force structure
1. Territorial : in this case the sales force can have exclusive territory to sell the product line of the firm
2. Product : the sales force is structured along the product lines
3. Customer : the sales force is structured along the customers’ type
4. Complex : it can combine territory, product and customer

Sales promotion is defined as the short-term incentives, to encourage the purchase or sale of a product or service. Public Relations is building good relations with the firm’s various publics and corporate clients by publicity and interacting in favorable moods and media, as well as handling unfavorable rumors, stories and events are also the part of public relations. To achieve its objectives, public relations make use of methods that include the press conference, press release, event sponsorships, publicity event, letter to editor, media tours, articles

Steps to develop public relations strategy, to
1. Define objectives for publicity and media plan
2. Define the specific, measurable, actionable, realistic and time-bound objectives
3. Determine the target audience
4. Develop a schedule for public relations campaign
5. Develop plan of “attack”
6. Put to measure to track the results of the campaign

Direct marketing can also be understood as part of promotion mix. Direct marketing is communications with targeted individual consumer to obtain an immediate response and development of long-term relationship. Direct marketing involves direct communications with targeted individual consumers to achieve an immediate response and develop long lasting customer relationships. Direct marketing can be done through E-mail, Direct mail, Telephone, Catalogues, and Fax. That is, forms of Direct marketing includes face to face marketing; telemarketing; direct mail marketing; Catalog marketing; direct response television marketing and kiosk marketing.

Developing effective communication
To facilitate the objectives of the promotion, effective communication needs to be developed.
To develop effective communication,
Identify the target audience
Define objective
Design a message
Determine message contents
Determine message structure
Choose Media
Decide on personal communication channel
Decide on non-personal communication channel
Select the message source.

Sales Promotion
Sales promotion is the short-term incentives to encourage the purchase or sale of a product or service for a limited time period. The main objective of sales promotion is to build relationship between consumer and the brand as well as creating short term sales or temporary brand witching. To carry out the objectives of sales promotion, the salesperson is a representative of a firm, who performs one or more works in terms of vision, communicating, servicing, and information gathering.

Sales promotion tools
The salesperson has various sales promotion tools such as consumer promotion tools ; sample – small amount of a product offers free to the consumer for trial; coupon; cash refund offer; price pack; premium; advertising specialties – items printed with an advertiser’s name, given as a gift to consumers; patronage reward; point of purchase display of products; contests and games.

Promotion Mix Strategies
There are push strategy and pull strategy
Push strategy is a promotion strategy in which the seller pushes the product through distribution channels to final consumer.
Pull strategy is in which the seller directly hit the final consumer to induce them to buy the product. Consumer will demand the product from channel members, if the pull strategy effect successfully.

Public Relations
Public relations is building good relations with the company’s various publics and corporate clients by publicity and interacting in favorable moods and media, as well as handling unfavorable rumors, stories and events . The tools of public relations use: press release; product publicity; public affairs; lobbying and investors.

Place (Distribution channels)
Place , which is also known as the distribution channels, is a set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user. The distribution channels can be

  • Direct channel ( from producer to a consumer)
  • Indirect channel ( from producer through intermediaries to a consumer)

Through distribution producer’s (manufacture’s) product can pass to a wholesaler, then to a retailer before finally reaching a consumer. Or it may go first to a retailer finally to reach a consumer. In these cases, there are intermediaries between the producer and the finally consumer. But the producer can sell directly to the final consumer. In this case, there is no an intermediary. The intermediaries may be short or long. It is long, for instance, when the product passes through an agent, a wholesaler, retailer, and short when it only passes through a retailer to reach a consumer. Intermediaries, such as retailers and wholesalers, tend to add efficiency because they can do specialized tasks better than the consumer or the manufacturer.

Intermediaries add efficiency by
1. Breaking bulk – the final consumer buys only the small quantity; quantities are gradually broken down to reach a consumer
2. Intermediaries move goods efficiently
3. Consolidation and distribution – the final consumer can access a product easily as in the supermarket
4. Carrying inventory less costly to the holding of inventory
5. Financing – wholesaler and retailer may negotiate for lower prices

Determining on need and the nature of distribution channel involves making decisions on location of the consumer, cost of distribution, type of product and the strategy of distribution.

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