Chapter Two

Marketing Mix

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Marketing Mix:

• Marketing ‘tactics’ or tools or 4Ps• Other Ps – People, Policy, Process, Packaging, Pace• Mix elements vary leading to different strategies, perceptions

& value propositions.• Car – Mix of Engine, Mileage, Looks, Price, Features, Quality,

EMI options.

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Marketing Mix

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ProductBrand, features, design, quality, range, warranty, AMC, service, size, packing, performance

PriceStrategies, credit, costs

PromotionSales promotion, Personal selling, Advertising, Sponsorship, Multi-level Marketing, Direct Marketing, Trade fair & Expositions

PlaceChannels, location, coverage,

transportation, inventory, spread, reach, shippers

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Promotion

• Marketing Communication• Objectives – Sales, attract/retain/convert. Trial, awareness,

remind, reassure.• Retention Levels - Reading – 10%, Listening – 20%, Audio-

visual – 70%.Sight, Sound, Motion effective.

• Integrate individual promotion components for effective communication.

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Promotion Tools/ MixPromotion Tool Examples

Sales Promotion Contests Coupons Finance

Personal Selling Presentations Samples Demo

PR Inserts Press Kit Seminars

Advertising Advertisements Hoardings Banners

Sponsorship Events Theme

MLM Network Commission

Direct Database Mailers CRM

Trade Fair/ Expo Demos Brochures Techno Info

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Place (Distribution/Channel/Intermediary)

• Set of institutions performing activities to move product from production to consumption.

• Functions: Order processing, warehousing, inventory, transportation, collections.

• Ensures: Availability, visibility, movement, CRM, Feedback• Width: Trade coverage. Reach: Customer Coverage.

Depth: Brand coverage.• Growing impact of convergence – internet, mobile, retial.

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How Channel Members Add Value

• From an economic view, intermediaries transform the assortment of products into assortments wanted by consumers

• Channel members add value by bridging the major time, place, and possession gaps that separate goods and services from those who would use them

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How Channel Members Add Value

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How Channel Members Add Value

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Number of Channel Levels

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Channel Intermediaries

• Distributors – Bulk to smaller packs, handle major area, supply to stockists.

• Wholesalers (stockists) – Resell to retailers. Storage, coverage essential.

• Retailers – Strong customer influence, consumption/purchase pattern insights, service.

• Retailer types: Specialty stores – Sports. Supermarkets – Big Bazaar. Convenience stores – Kirana. Factory Outlets – Levis. Direct Sellers. Vending Machines – Tea. Co-operatives – Apna Bazaar. Chain Stores – Dominos.

Place

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Channel Intermediaries

• Internet – Channel margins & inventory costs major savings – passed on, hence economical, death of distance, geographically disperse market, niche products reach wider audience, low entry barriers, display variety & functionality, interactive, delivery costly.Popular categories – Travel & tourism, Electronics, Books, Medicines.

• 3rd party logistics (3PLs) – FedEx, UPS.

Place

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Multichannel Distribution Systems Hybrid Marketing Channels

• Multichannel Distribution systems (Hybrid marketing channels) are when a single firm sets up two or more marketing channels to reach one or more customer segments

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Multichannel Distribution System

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Channel Decisions

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Channel DecisionsIdentifying Major Alternatives

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Marketing Logistics and Supply Chain Management

• Marketing logistics (physical distribution) involves planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet consumer requirements at a profit

• Supply chain management is the process of managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers

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Price

• Price is the amount of money charged for a product or service. It is the sum of all the values that consumers give up in order to gain the benefits of having or using a product or service.

• Center stage in marketing wars. Inter-firm rivalry.• Product differentiation blunted.• Objectives – Profits/ROI, competitive position, demand, cost,

survival, product portfolio, Entry.• Economic value proposition – Titan – High priced brand

inspite of local & Grey market competition.

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Pricing Methods

• By Cost – Cost plus and Break Even

• By Competition – Going Rate, competitive pricing, cartelling, sealed bids

• Customer Oriented – Perceived Value (Lifestyles), Auctions (Amazon), Value – McDonalds Happy Meals.

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Pricing Methods – By Cost

• Cost-based pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk.

• Cost-based pricing adds a standard markup to the cost of the product

• Total Cost = Fixed Cost + Variable CostFixed Cost = Rent, Interest, SalariesVariable cost = Raw Material, Packaging

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Pricing Method – By Cost

• Cost-plus pricing adds a standard markup to the cost of the product

• Benefits: Consumers feel it is fair, Prices are similar in industry and price competition is minimized

• Disadvantages: Ignores demand and competitor prices

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Break Even Analysis & Target Profit Pricing

• Break-even pricing is the price at which total costs are equal to total revenue and there is no profit

• Target profit pricing is the price at which the firm will break even or make the profit it’s seeking

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Break Even Analysis & Target Profit Pricing

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Pricing Method – By Competition

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Economic Models of Market structure

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Pricing Method – Customer Oriented

• Customer Perceptions of Value: Understanding how much value consumers place on the benefits they receive from the product and setting a price that captures that value

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Pricing Method – Customer Oriented

Value-based pricing uses the buyers’ perceptions of value, notthe sellers’ cost, as the key to pricing. Price is considered before the marketing program is set.• Value-based pricing is customer driven• Cost-based pricing is product driven

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Pricing Method – Customer Oriented

Customer Perceptions of Value

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Pricing Strategies

Price

High Medium Low

Quality

High 1 - Premium 2 – High Value 3 - Penetration

Medium 4 – Over Charging 5 – Medium Value 6 – Good Value

Low 7 – Skimming / RipOff

8 – False Economy 9 - Economy

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Pricing Strategies

• Premium – Sustainable advantage – Benz.• Market Penetration - Entry, Attract, Ensure Trial.• Economy – Functionality & Value – Nirma.• Skimming – Unsustainable, Significant advantage – Reliance

Mobile.• 1,5,9 – coexist in the same market till buyers insist on quality,

price, value.• 2,3,6 ways to attack 1,5,9• 4,7,8 overpricing . Customers feel taken, bad oral publicity,

avoid.

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Other Pricing Strategies

• Psychological: Bata• Geographical: Electronics across countries• Promotional: Extensive usage, if successful copied, if

unsuccessful – financial drain• Loss leader: Factory Outlets• Special discounts/Rebates : Sales• Financing: EMIs, Low interest rates• Warranties/AMCs: Extended warranties, Free AMC• Psychological discounting: Prices slashed• Exchange Offers: New in exchange for old• Value: Superstores – Big Bazaar

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Product

• A Product is anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or want

• “Our plan is to lead the public with new products than ask them what products they want. The public does not know what is possible, but we do. So instead of doing a lot of market research, we try to create a market for a product by educating them.” – Akio Morita, Sony.

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Levels of Product

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Levels of ProductCore product: Core benefit offered.

A mobile phone buyer purchases mobility, anytime access & data

and voice communication.

Actual Product:

As all mobiles offer core benefits, Differentiate to entice

potential customers.

Communicate branding, features and benefits.

Augmented Product:

Additional non-tangible benefits. Extended warranties, EMI,

Delivery & insurance.

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New-Product Development Process

Major Stages in New-Product Development

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New-Product Development Process – Marketing Strategy Development

• Marketing strategy development refers to the initial marketing strategy for introducing the product to the market

• Marketing strategy statement includes:– Description of the target market– Value proposition– Sales and profit goals

• Marketing Mix (4Ps), STPD, Targets, Projections, Geographies.

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New-Product Development Process – Business Analysis

• Business analysis involves a review of the sales, costs, and profit projections to find out whether they satisfy the company’s objectives

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New-Product Development Process – Product Development

Product development involves the creation and testing

of one or more physical versions by the R&D or

engineering departments• Requires an increase in investment

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New-Product Development Process – Test Marketing

Test marketing is the stage at which the product andmarketing program are introduced into more realistic marketing settings

Provides the marketer with experience in testing the product and entire marketing program before full introduction

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Why new product development

• Changing customer needs – Saffola• New segment Entry – Maruti SX4• Changing market needs – Scooters to Bikes• Own successes – Brand/Product line extensions• Competitive successes – ITC Sunfeast• New capabilities• New concepts – Tata Ace• New technology – iPod• Product lifecycle – MS Office• Portfolio/business realignment – Reliance Mobile• Environmental changes – Online music downloads.

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Product decisions – Brand

Brand is the name, term, sign, or design—or a combination of

these—that identifies the maker or seller of a product or service

Brand equity is the differential effect that the brand name has

on customer response to the product and its marketing

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Product decisions – Packaging & Labels

Packaging involves designing and producing the container or

wrapper for a product

Labels identify the product or brand, describe attributes, and

provide promotion

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Product decisions – Product support services

Product support services augment actual products

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