Marketing Management

Chapter 22

Marketing Mix

The term marketing mix was coined by Neil H. Bourdon when he published his article
called “The concept of the marketing mix” in the year 1964. Marketing mix deals with

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the way in which the organization uses the combination of product, price, promotion
and place to sell its product or service in the market.

The marketing mix is also referred to as “Four P’s”. The marketing mix is concerned
with:

1. Product - the product (or service) that the customer obtains. E.g. Styling, Quality,
Safety
2. Price - how much the customer pays for the product? E.g. Pricing Strategy
3. Place – how the product is distributed to the customer. E.g. Distribution Channel
4. Promotion - how the customer is found and persuaded to buy the product. E.g.
Advertising

The four factors are termed as a mix because of the fact that each ingredient has an
impact on each other.

Marketing Mix consisting of “4 P’s” was used in the initial stages of marketing. As we
advanced forward the mix of 4 factors was increased to “7 P’s” and was termed as
Service Mix. The service mix besides the 4 P’s consists of:

1. People - The staff hired in the organization

2. Process – The kind of systems the organization uses to achieve efficiency.
3. Physical Evidence – The kind of outlook the organization has based on which first
perception is formed.

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Later on 4 C’s were introduced which should take over the 4 P’s according to some,
however there are oppositions to it.

Customer Value
Cost (Vs. Price)
(Vs. Product)

Convenience Communication
(Vs. Place) (Vs. Promotion)

Consumer wants and needs (vs. Products)

The target market should be studied at a macro level and in order to determine the
needs and wants of the customer and then attracting consumers through what they
want.

Cost to satisfy (vs. Price)

The purpose of this is to identify and maximize customer value. In other words the
organization needs to provide a good balance of quality and quantity that the customer
feels that investing in such a product is worth it.

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Convenience to buy (vs. Place)
Organizations should also consider the convenience to buy instead of the place.
Organizations should analyze whether the market prefers to buy on the Internet, from a
catalogue, on the phone, or using credit cards.

Communication (vs. Promotion)

Communication requires a give and take between the buyer and seller. Organizations
should focus on customer building and customer relationships and promote two way
communication, For Example keeping an organization to an accessible to customers in
times of problems through efficient customer service and active emailing system.

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Strategic Planning Process

Strategic planning is concerned about the overall direction of the business. It also
involves decision-making about production and operations, finance, human resource
management and other business issues.

The following questions need to be addressed when conducting strategic planning

process:

1. Where are we now?

2. How did we get there?

3. Where are we heading?

4. Where would we like to be?

5. How do we get there?

6. Are we on course?

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 Mission and Objectives

Environmental Scanning

Strategy Formulation

Strategy
Implementation

Evaluation and control

A Strategic marketing plan is useful to businesses and can help in:

1. Identifying sources of competitive advantage

2. Gaining commitment to a strategy

3. Getting resources needed to invest in and build the business

4. Informing stakeholders in the business

5. Setting objectives and strategies

6. Measuring performance

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S.W.O.T Analysis/Situation Analysis/Strategic Analysis

SWOT Analysis was described in the late 1960’s by Edward P. Learned. SWOT Analysis
is an analytical tool that aids organizations analyzing the Strengths, Weaknesses,
Opportunities and Threats. The first two are seen as being Internal to your
organization while the latter two are External environmental or market conditions.
SWOT Analysis is commonly used as a part of strategic planning. A SWOT analysis must
first start by defining a definitive objective. Your Strengths allow you to capitalize on
Opportunities in achieving your objective. On the other hand, your Weaknesses expose
you to Threats that hinder you from your objective.

S.W.O.T
Analysis

Internal External
Analysis Analysis

Strengths Weaknesses Opportunities Threats

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Internal Analysis uses the information from:

1. Productivity- measure of output from a production process, per unit of input

2. Efficiency - efficiency refers to the use of resources so as to maximize the
production of goods and services
3. Costs - cost is the value of money that has been used up to produce something
4. Core Competencies - specific factor that a business sees as being central to the
way it, or its employees, works which provides an edge to the organization relative
to others.

External Analysis uses the information from:

(1) Competitors – What are they doing?

(2) PEST Factors:

1. Political

2. Economic

3. Social

4. Technological

SWOT Analysis:

1. Strengths: are characteristics of the business or team that gives it an advantage

over others in the industry.
2. Weaknesses: are characteristics that place the firm at a disadvantage relative to
others.

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3. Opportunities: are external chances to make greater sales or profits in the
environment.
4. Threats: are external elements in the environment that could cause trouble for the
business.

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Multi-Perspectives Needed

The quality of the SWOT analysis can be improved tremendously if interviews are held
with stakeholders such as:

1. Customers
2. Community
3. Creditors
4. Government
5. Owners
6. Managers
7. Employees
8. Suppliers

By adding multi perspectives; it can help to eradicate errors and provide a precise
analysis.

Limitations of SWOT:

SWOT Analysis is arbitrary in nature and it tends to oversimplify situations which at

times cannot be fit into the 4 categories in the analysis. Some argue that the four
factors are superficial in nature.

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 BCG GROWTH SHARE MATRIX

BCG Portfolio planning model was developed by Bruce Henderson of the Boston
Consulting Group in the early 1970’s. It focuses on Market Share and Business Growth.

1. Dogs Characteristics

1. Dogs are in low growth markets and have low market share.
2. Dogs should be avoided and minimized.
3. Expensive turn-around plans usually do not help.

2. Cash Cows Characteristics:

1. Cash cows are in a position of high market share in a mature market.

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2. If competitive advantage has been achieved, cash cows have high profit margins
and generate a lot of cash flow.
3. Because of the low growth, promotion and placement investments are low
4. Investments into supporting infrastructure can improve efficiency and increase cash
flow more.
5. Cash cows are the products that businesses strive for.

3. Stars Characteristics:

1. Stars are defined by having high market share in a growing market.

2. Stars are the leaders in the business but still need a lot of support for promotion a
placement.
3. If market share is kept, Stars are likely to grow into cash cows.

4. Question Marks Characteristics:

1. These products are in growing markets but have low market share.
2. Question marks are essentially new products where buyers have yet to discover
them.
3. The marketing strategy is to get markets to adopt these products.
4. Question marks have high demands and low returns due to low market share.
5. These products need to increase their market share quickly or they become dogs.
6. The best way to handle Question marks is to either invest heavily in them to gain
market share or to sell them.

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Limitations:
Some limitations of the BCG matrix model include:
1. A high market share does not necessarily lead to profitability at all times
2. The model employs only two dimensions – market share and product or service
growth rate
3. Low share or niche businesses can be profitable too (some Dogs can be more
profitable than cash Cows)
4. The model does not reflect growth rates of the overall market
5. The model neglects the effects of synergy between business units
6. Market growth is not the only indicator for attractiveness of a market

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 GE Matrix / Industry Matrix / McKinsey Matrix

The GE matrix was introduced in the 1970’s by General Electric. It is a technique used
by organizations to help a company decide what product to add to its product portfolio,
and which markets are worthy of continued investment.

(1) Factors impacting Market Attractiveness

There are several factors that impact and determine market attractiveness:

(i) Market size

(ii) Market Growth

(iii) Market Profitability

(iv) Pricing Trends

(v) Competitive Intensity/rivalry

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 (vi) Risk of return

(vii) Differentiation between products and services

(viii) Distribution Structure

(2) Factors that impact Competitive Strength

Factors to consider include:

i. Strength of Assets
ii. Brand Strength
iii. Market Share
iv. Customer Loyalty
v. Relative cost position
vi. Distribution Strength
vii. Record of innovations
viii. Access to investment resources

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 Ansoff Product / Market Matrix

The Ansoff Growth matrix is a tool that helps businesses to decide their product and
market growth strategy. Ansoff’s product/market growth matrix suggests that a
business attempts to grow depending on whether it markets new or existing products in
new or existing markets.

Market Penetration

1. Maintain and increase the market share

2. Secure the dominance of growth markets

3. Drive out competitors

4. Increased usage by existing customers

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Market Development

1. New geographical markets

2. New product dimensions

3. New distribution channels

4. Utilizes different pricing policies

Product Development

 Introduction of new products

Diversification

Marketing of new products in new markets

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 Pest Analysis

PEST analysis stands for "Political, Economic, Social, and Technological analysis". This
tool is used to scan the macro-environmental which aids in conducting strategic
planning.

Political Economical

Technologica
Social l

Political Factors: Some of the political factors are:

 Tax policy
 Labor Law
 Environmental Law
 Trade Restrictions
 Tariffs

Economic Factors

 Economic Growth
 Interest Rate
 Exchange Rate

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 Inflation Rate

Social Factors: Some of the Social Factors are

 Age Distribution
 Career Attitudes
 Culture

Technological Factors: Some of the technological factors are:

 R&D Activity
 Automation
 Outsourcing


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Micro Environment

Factors or elements in an organization's immediate area of operations that affects its

performance and decision making freedom. These factors include competitors,
customers, distribution channels, suppliers, and the general public. It describes the
relationship between the firms and the driving forces that control this relationship.

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Macro Environment:

Macro environment is dynamic and uncontrollable in nature and is prone to changes. It

impacts an organization's decision making process and affects its performance and
strategies. These factors include the economic factors; demographics; legal, political,
and social conditions; technological changes; and natural forces. Specific examples of
macro environment influences include competitors, changes in interest rates, and
changes in cultural tastes, disastrous weather, or government regulations. An
organization needs to be flexible in order to survive the competition.

Internal Environment:

It consists of the 5 M’s

1. Man

2. Money

3. Machinery

4. Materials

5. Markets

Marketing Environment

(1) The Internal Communication: E.g. Staff for internal customers, office, technology,
wages and finance

(2) The Micro-Environment: E.g. Our External Customers, agents and distributors,
suppliers, our competitors

(3) The Macro Environment: Political (and legal) forces, economic factors, socio cultural
forces and technological forces. These are known as PEST.

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 Michael Porter 5 competitive forces

Porter's Five Forces is a framework for industry analysis and business strategy
development formed by Michael E. Porter of Harvard Business School in 1979. Porter
determines “The competitive intensity” and therefore “attractiveness of a market”.
Porter referred to these forces as the micro environment.

Bargaining
Power of
Customers

Bargaining Competitive Threat of

Rivalry
Power of within an
new
Suppliers industry entrants

Threat of
Substitute
Products

The Threat of the entry of new competitors

1. Economies of scale
2. Capital / investment requirements
3. Customer switching costs
4. Access to industry distribution channels
5. The likelihood of retaliation from existing industry players.

Threat of Substitutes

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1. Buyers' willingness to substitute
2. The relative price and performance of substitutes
3. The costs of switching to substitutes

Bargaining Power of Suppliers

1. There are many buyers and few dominant suppliers

2. There are undifferentiated, highly valued products
3. Suppliers threaten to integrate forward into the industry (e.g. brand manufacturers
threatening to set up their own retail outlets)
4. Buyers do not threaten to integrate backwards into supply
5. The industry is not a key customer group to the suppliers

Bargaining Power of Buyers

1. There are few dominant buyers and many sellers in the industry
2. Products are standardized
3. Buyers threaten to integrate backward into the industry
4. Suppliers do not threaten to integrate forward into the buyer's industry
5. The industry is not a key supplying group for buyers

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