Marketing Mix

Elements of marketing mix

What is a marketing mix?

The marketing mix, often referred to as the 4Ps, is a fundamental

concept in marketing that comprises of various elements a business
can control to influence its customers' buying decisions.

The 4Ps stand for Product, Price, Place, and Promotion. These are
known as the elements of marketing mix.
Elements of Marketing Mix

Product: Product means the combination of goods and services that

the company offers to the target market.
Price: Price is the amount of money customers have to pay to obtain
the product.
Place: Place includes company activities that make the product
available to target consumers.
Promotion: Promotion means the activities that communicate the merits
of the product and persuade target customers to buy it.
Extended Marketing Mix
Now a day’s three more Ps have been added to the marketing mix
namely People, Process and Physical Evidence, especially in case of
service offering. This is known as extended marketing mix.

People:- All the people involved with consumption of a service are

important.
Process:- Procedure, mechanism and flow of activities by which
services are used.
Physical Evidence:- The environment in which the service or product is
delivered.
The Customer PoV:

From a buyer’s point of view, each marketing tool is designed to deliver

a customer benefit. Robert Lauterbom suggested that the seller’s four P’s
corresponds to the customer’s four C’s.

Four P’s Four C’s

Product -------------- Customer solution
Price -------------- Customer cost
Place -------------- Convenience
Promotion ---------- Communication
PRODUCT MIX
Product:
Product refers to the tangible or intangible goods or services that a company
offers to meet the needs and wants of its target market. Organisation should try
to differentiate their product from competitors in terms of any or more attributes;

● Design
● Technology
● Usefulness
● Convenience
● Quality
● Packaging
● Accessories
● Warranty
etc.
Product Characteristics:

There are two different attributes of the product,

Intrinsic: Fundamental attributes of a product that are inherent to the

product itself, and are typically related to its physical or functional
aspects. Like colour, flavour, design, material and appearance etc.

Extrinsic: These are not inherent to the product itself but are external
factors that influence how the product is perceived or experienced by
consumers. E.g. brand name, stamp of quality, country of origin, store,
packaging etc.
Few aspects of Product Mix:

It basically refers to the range of products or product lines that a

company offers to its customers. Some key aspects are;

•Product Lines
•Product line depth

•Product mix width/breadth

•Product life cycle

•Brand portfolio

etc.
PRODUCT LIFE CYCLE
Concept of Product Life Cycle

• A new product passes through a set of stages known as product

life cycle (PLC).
• PLC may apply to both brand and category of products. Its time
period varies from product to product.
• Modern product life cycles are becoming shorter and shorter as
products in mature stages are being renewed by market
segmentation and product differentiation.
• Companies always attempt to maximize the profit and revenues
over the entire lifecycle of a product
Stages of Product Life Cycle

Product life cycle comprises four stages;

1. Introduction stage
2. Growth stage
3. Maturity stage
4. Decline stage

The graph shows change in sales volume over all the stages of PLC,
under normal conditions.
 Introduction Stage
• The product is unknown to customers. Branding, Quality level etc. are
critically maintained to stimulate consumers for the product category.
Product is under more observation & consideration.

• The price may be kept high (skimming) to earn more profit & cover the
initial cost over a short period of time. It can also be kept low (market
penetration) to gain more market share. The pricing strategy depends on
the goal of the company.

• The placement or distribution system is generally selective and scattered.

• The promotion is informative and personalized. Samples/trials may be

provided to attract early adopters and potential customers. Promotional
programs are very essential in this phase.
Growth Stage
• At this stage the product is more widely known and consumed. So other than
maintaining the existing quality, new features and improvements in product
quality may be done (if needed) to have competitive advantage.

• The pricing may be maintained or increased if company gets high demand at

low competition. However it may have to be decreased to maintain market
share, if new players enter.

• The placement becomes more widely spread, and more distribution channels
have to be added to meet increasing demand.

• The promotion is focused on brand development and product image

formation. When product acceptability increases, effort should be made to
gain brand loyalty and preference.
 Maturity Stage

• The product is competing with alternatives, so company needs to add

features and modify the product in order to compete in market and
differentiate it from competition.
• The price may reach to its lowest point because of intense competition.
Hence mostly needs to be reduced to attract price conscious segment.
• The placement is intense. So new channels are added to face serious
competition and incentives should be offered to retailers to get shelf
preference over competitors.

• The promotion is focused on repeat purchasing, to create image of product

differentiation and loyalty. Incentives may also be offered to attract more
customers
Decline Stage
At this stage market becomes saturated, so sales decline. It may also be due to
technical obsolescence or change in customer taste/preferences.

At decline stage company has three options:

• Maintain the product, reduce cost and/or find new uses of product.

• Harvest the product by reducing marketing cost,(promotion/ distribution etc.)

and continue offering the product to loyal niche customer segment till the
time it is feasible (in terms of profitability).
• Discontinue the product when there’s no profit or a successor is available.
Decision may also be taken on selling out to competitors who want to keep the
product.
Limitations of Product Life Cycle (PLC)

• It has no empirical support. It may hold good in case of larger

organisations, but it may not be accurate in all the cases.
• It is not the best tool to predict sales volume.
• Different products have different properties, hence they may follow
varied life cycle pattern.
• Many a times managerial decision plays a crucial role and affect the
life of product.
 Few more concepts:

Product Elimination: Also known as product discontinuation or product

phase-out, is the strategic decision by a company to remove one or more
of its products or product lines from the market.

Major reasons: Low Sales or Declining Demand/obsolete

technology/changing customer preference/profitability concern/strategic
repositioning/compliance issue

Major Benefits: Cost Saving/more efficient resource allocation

Product Simplification:

It is a strategic approach employed by companies to streamline their

product offerings by reducing complexity and focusing on core, high-
performing products.

Major Reasons: Elimination of Redundancy/Standardization/Focus on

Core Competencies/Cost Reduction/Enhanced Quality
Control/Improved Customer Experience

Major Benefits: Cost Saving/ efficiency/improved focus/enhanced

quality/customer satisfaction/
Product Diversification:

Expanding the range of products or services offered to reach new

customer segments or capitalize on emerging trends.

Key Aspects: New Product Categories/Related Products/Unrelated

product/Market Research

Benefits: Risk mitigation/revenue growth/market expansion/customer

retention/competitive advantage/cross-selling opportunity
 New Product Development

• New product development (NPD) is a comprehensive process that

businesses undertake to bring new products or services to the market.

• This process involves various stages, from idea generation to

commercialization.

• It is crucial for companies looking to innovate, stay competitive, and

meet changing customer needs
Stages of NPD:

1. Idea Generation:
• Internal Sources: From within the organization, such as employees,
research and development (R&D) teams, or brainstorming sessions.
• External Sources: From customers, suppliers, competitors, and market
trends.

2. Idea Screening:
• Evaluate and filter ideas based on criteria such as feasibility, market
potential, alignment with organizational goals, and resource requirements.
• Identify the most promising concepts and eliminate those that are less
likely to succeed.
Stages of NPD:

3. Concept Development and Testing:

• Develop detailed product concepts, including features, specifications,
and design.
• Test these concepts with a target audience (or experts) to gather
feedback and assess potential market acceptance.

4. Business Analysis:
• Conduct a thorough analysis of the proposed product's business
viability.
• Assess market size, pricing strategies, cost projections, potential
revenue, and return on investment.
Stages of NPD:

5. Prototype Development:
• Create a prototype or a minimum viable product (MVP) to test the
product's design, functionality, and feasibility.
• Iteratively refine the prototype based on testing and feedback.

6. Market Testing:
• Conduct a small-scale launch or market test to assess consumer
response and gather real-world data on the product's performance.
• Adjust marketing strategies based on the test results.
Stages of NPD:

7. Commercialization:
• Scale up production and plan to launch the product on a broader
scale.
• Implement marketing plans, distribution strategies, and promotional
campaigns to support the product launch.

8. Launch and Distribution:

• Full-scale launch, including marketing communications, distribution
to retailers, and online availability.
• Monitor and manage initial customer reactions and feedback.
Further course of action:
Post-Launch Evaluation: Assess the product's performance in the
market.
Gather customer feedback, evaluate sales data, and make adjustments to
marketing or product features as needed.

Product Life Cycle Management: Continuously monitor the product's

life cycle, and plan for updates, improvements, or potential phase-out.
Requisites for successful NPD:

Successful new product development requires collaboration

among various departments, market research, innovation (R&D),
and should also have a customer-centric approach.

Companies that effectively navigate this process can gain a

competitive edge, satisfy customer needs, and drive growth in
dynamic markets.
PRICE MIX
Price, as a concept
• Price refers to the exchange of something of value between a buyer
and a seller.
• It determines how much revenue the company will earn and drives the
financial health of the organization.
• However, marketers cannot simply price products and services based
on the expected revenue of the organization. It must be set so that the
buyer sees value in the product offering and is willing to pay the price
for it.
• In other words, marketers must put the perception of value (for the
customers) at the forefront while also considering the financial impact
to the organization.
Price as an Indicator of Value

• The price-value equation is a subjective assessment by

consumers based on what they feel as value.

• When a customer’s expectations are met at (what they

consider) an acceptable price, value is realized.

• Perceived value increases with increase in product quality

and decreases with increase in price.
Perceived Value & Perceived cost

• The perceived values/benefits are directly related to the price-value

equation.
• These may include status, convenience, brand, quality, etc. and can
vary from buyer to buyer or even situation to situation.
Similarly,
• Perceived costs can also include a number of criteria in addition to the
price printed on the price tag.
• These may include travelling to the PoS, time taken to complete the
process, ease of purchase etc.
The Profit Equation

• The price marketers set for goods and services offered will
have a direct impact on the company’s profit-making ability.

• Therefore, the price set should achieve value not only for the
buyer but also for the company.

• So it is in the company’s interest to set prices that create

value for the buyer and maximize profit for the company,
The Profit Equation

• Profit is the financial gain of a company, or the difference between the

amount earned and the amount spent in buying, operating, or
producing something.
• It is the difference between total revenue and total costs and is
calculated with the profit equation.

Profit = Total Revenue – Total Cost

Where;
Total Cost = Fixed Cost + Variable Cost
The Psychology of Pricing

• Price Anchoring: A buyer relies on the first piece of information that

he sees. This acts as an anchor, or a frame of reference for what the
buyer expects a price to be.
• Artificial Time Constraints : Trigger a sense of urgency in the buyer
to purchase, or miss an opportunity.
• Price Appearance: The longer it takes to read and pronounce, the
more impact the buyer believes it has on their wallet.
• Price Gouging : when companies or individuals take advantage of a
situation, typically an emergency or natural disaster, and charge
exceptionally high prices for products or services.
Five critical C’s of Pricing
Establishing pricing policy:

The Five-Step Process for Establishing Pricing Policies (attribution: Copyright Rice University, OpenStax, under CC
BY 4.0 license)
Pricing objectives can be;

Objective Description
Customer value
Based on a product’s added value
proposition
Cost Based on the cost to produce a product
Developed to boost sales volume(s) of a
Sales orientation
product
Market share Focused on increasing market share
Focused on a specific profit at a specific
Target return
time
Competition Developed based on competitors’ prices

Customer driven Focus on what the customer is willing to pay

 Estimate Demand:

The relationship between price and

demand shown in the demand curve
is negatively sloped. (if certain
conditions like
substitute goods, personal income,
and consumer tastes, remain
unchanged)

The supply curve is positively

sloped, as with increasing price, the
organisation wants to supply more.

Demand Curve (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)
Demand elasticity is a
measure of the change in
the quantity demanded in
relation to the change in its
price.

Mathematically, it is
derived from the percent
change in quantity
demanded divided by the
percent change in price.
Estimate Costs

• The next step in determining a pricing policy is to estimate

the total cost of producing a product or service.
• When estimating total costs, it is important to divide costs
into fixed and variable costs.
• Fixed costs are those expenses that do not change regardless
of the number of units sold.
• Alternatively, variable costs do change based on the number
of units produced.
Analyse the External Environment

• PESTLE
Few other factors affecting pricing decision:

• Competitors’ Costs, Prices, and Products

• Stage in the Product Life Cycle
Select Pricing Strategies or Tactics

• After gathering all the data explained previously, marketers should set
specific pricing strategies or tactics.
• The strategies and tactics chosen for a product or service should align
with;
⮚ the other marketing mix elements,
⮚create value for the customer, and
⮚maximize profits for the company.
Pricing Strategy

• Pricing strategy refers to the overall approach or plan that a business

adopts to set the prices of its products or services.

• It involves making strategic decisions to achieve specific business

objectives.

• Research, Market conditions, consumers’ willingness to pay,

competition, trade margins, expenditures incurred, etc., all these are
considered while developing a pricing strategy.
Commonly used Pricing Strategies:
Premium Pricing:
This strategy involves using high pricing, where there is a uniqueness about the
product or service and/or a substantial competitive advantage exists.

Penetration Pricing:
It is the strategy of entering the market with a low initial price to capture greater
market share.

Dynamic Pricing:

A dynamic pricing strategy in marketing involves changing the price of the

items based on the present market demand.
Price Skimming:
It involves charging a relatively higher price for a short period of time when a
new, innovative, or much-improved product is launched in the market.

Economy pricing:
The strategy targets customers who prefer to save money. One/more category of
product/s may be offered at a reasonable price.

Bundle pricing:
As the name suggests, it is a strategy where a business sells a bundle of goods
together. Typically, the total price of the goods is lower than the individual
products sold separately. This helps in moving the inventory and selling the
stocks that are left over.
Pricing Method
Pricing method refers to the specific approach or calculation used to
determine the actual price of a product or service.

It involves the mechanics of setting a numerical value for the product or

service, often based on certain criteria.

Pricing methods are the practical techniques used to implement the

broader pricing strategy
Commonly used pricing methods:

Cost-Plus Method: Adding a specific percentage markup to the production or

acquisition cost to determine the selling price.

Competitive Pricing: Setting prices based on the prices charged by competitors,

either at a similar level or at a discount.

Auction-type Pricing Method: Here the product is auctioned and the highest
bidder gets the product based on the bid price, under normal circumstances.
Target Return Pricing: Setting prices to achieve a specific target
return on investment or profit margin.

Dynamic Pricing Algorithms: Using automated algorithms to adjust

prices in real-time based on factors like demand, competitor pricing, and
market conditions.

Markup Pricing: Determining the selling price by adding a

predetermined percentage of profit to the cost of goods.
Ethical issues involved:

• Price Fixing
• Deceptive/Illegal Price Advertising
• Predatory Pricing
• Monopoly Gouging
• Price Discrimination