MARKETING

MIX- PRODUCT
OBJECTIVES
• To understand concept of Marketing Mix

• To explore the unique selling point of a product or

service

• To examine the importance of product positioning to a

successful marketing mix
vs
LEARNING OUTCOMES
• Will understand product as a key part of marketing
mix

• Will be able to explore the unique selling point of a

product

• Will evaluate the importance of product positioning

to a successful marketing mix
SUCCESS CRITERIA
Marketing Mix – Product and Price

Outstanding I can examine the importance of product positing in the minds of

consumers

Good I can explore unique selling points for any given product or service

Satisfactory I can understand and explain the concept of marketing mix and
meaning of Unique Selling Point
MARKETING MIX
"SET OF MARKETING TOOLS THAT THE
FIRM USES TO PURSUE ITS MARKETING
OBJECTIVES IN THE TARGET"
WHAT DO THE Ps
INCLUDE?
 4 Ps of
Marketing
Mix
 4 Cs of
Marketing
Mix
CRM (CUSTOMER RELATIONSHIP
MANAGEMENT)
The implementation of 4Cs are important and the key to this is
Customer Relationship Management (CRM)
CRM- is using marketing activities to establish successful
customer relationships so that existing customer royalty can be
maintained.

The base of CRM is customer information.

Collect as much information as possible – income, product,
preferences, buying habits and so on.
But technology has made customer data collection easy.
HOW TO BUILD LONG-
TERM RELATIONSHIPS
WITH CUSTOMERS?
 Targeted marketing- Target Marketing involves breaking a market into segments and then
concentrating your marketing efforts on one or a few key segments consisting of the customers
whose needs and desires most closely match your product or service offerings.

 Customer service & support- call center, customer loyalty

 Providing as much information to customers as possible- product material/features/services

 Using social media- software platforms like confirmit help businesses to understand trends
through social media and allow to make accurate decisions.
USP (UNIQUE SELLING POINT)
USP is a factor that differentiates a product from its competitors, such as the lowest cost, the
highest quality or the first-ever product of its kind. A USP could be thought of as “what you
have that competitors don’t.”.
BENEFITS OF USP
BENEFITS OF USP
 Opportunity to charge a higher price
 Serve as a competitive advantage
 Free publicity from business media reporting the USP
 Higher sales than undifferentiated product
 Customer would be more willing to identify
KEY CONCEPTS

BRAND TANGIBLE INTANGIBLE

ATTRIBUTE ATTRIBUTE
OF A OF A
USP PRODUCT PRODUCT
 Can be consumer,
industrial product or
service
Appearance,
durability quality

PROD
UCT

Brands increases the

identity of product.
Soaps & Lux Soap
WHAT WORD WILL YOU ASSOCIATE
WHEN YOU SEE THE FOLLOWING?
 THE WORDS YOU FIRST
THOUGHT WAS “THE WAY THE
PRODUCT WAS POSITIONED IN
YOUR MIND”
PRODUCT POSITIONING
Positioning is a marketing strategy that aims to
make a brand occupy a distinct position,
relative to competing brands, in the mind of the
customer.
 IMPRESSIONS PERCEPTIONS

PRODUCT
POSITIONING
EXPERIENCE
FEELING
PRODUCT POSITIONING
Positioning is a marketing strategy that aims to
make a brand occupy a distinct position, relative to
competing brands, in the mind of the customer.

Forms of product positioning :

“lowest price” , “quickest delivery”, “easy access”,
“fresh stock” etc.
 VIRTUA
L LED TV
REALIT
Slow down in
Y TV
sales growth &
profits drop
Slow sales and
non existence 3D TVs
of profit
DVDs
Rapid market
acceptance &
increasing
profits Sales fall &
profits drop
How are the key features of each
stage of the Product Life Cycle
(PLC)?
• Introduction Stage
• Growth Stage
• Maturity Stage
• Decline Stage
Introduction Stage
•Product launched into the market.
•Sales grow slowly.
•Informative advertising is done.
•Firm might not earn a profit at this stage.
•Price skimming (A pricing strategy in which a marketer sets a relatively high price for a product or service
at first, then lowers the price over time) may be used if the product is new invention and has no
competitors.
•Competitive pricing may be used if it already has lot of competitors.

Growth Stage
•Sales grow rapidly.
•Persuasive advertising may be used.
•Prices may be reduced if faced by stiff competition.
•Firm starts earning profits.
Maturity Stage
• Sales increase slowly and reach the highest sales figures.
•Competition is at the maximum level as many new ‘me too’ products may be in the market.
•Promotional pricing might be a good option.
•Profits are at the highest level as the firm is also getting economies of scale.
•Repetitive advertising is done to remind the consumers.

Decline Stage
•Sales start to decline.
•Profits start to come down.
•Marketing research it done to find out whether this decline is permanent or temporary. If the
decline is permanent in nature then stop the production of the product, otherwise implement
extension strategies.
•Advertising is reduced.
E-conferencing Credit cards

Drones Black & White

TV

Typewriter Electric Cars

Faxes
CAN YOU CO-RELATE
PRODUCT LIFE CYCLE
AND 4Ps OF
MARKETING?
PRODUCT LIFE PRICE PROMOTION PLACE PRODUCT
CYCLE STAGE

INTRODUCTION HIGH HIGH RESTRICTED

BASIC
OUTLETS
MODEL

IF
GROWTH GROWING PLANNING OF
SUCCESSFUL, BRAND
NUMBER OF PRODUCT
THEN PRICE IDENTIFICATION
OUTLETS DEVELOPMENT
RISE

PRICES NEED BRAND HIGHEST NEW MODEL,

MATURITY
TO BE IMAGING GEOGRAPHICAL COLOURS,
COMPETITIVE CONTINUES REACH ACCESSORIES

LOWER ADVERTISING EITHER REPLACE

DECLINE ELIMINATE WITH OTHER
PRICES, TO IS LIMITED UNPROFITABLE PRODUCT OR
SELL OFF OUTLETS WITHDRAW FROM
MARKET
Decision Making Assist in planning
of marketing mix

Product Life Cycle is

important for
marketing decisions

Understand the
cash flow status
 Extension strategies are marketing

EXTENSION STRATEGY
plans to extend the maturity stage of
the product before the market
demands a completely new product
FORMS OF EXTENSION STRATEGY
Introduce new variations of the original product
Try to sell the product in different markets.
Make small changes in the colour, design or
packaging
Start a new advertising campaign.
Add more retail outlets to boost sales.
HOW CASH
FLOW
MIGHT BE
DEPEND ON
PLC?
 During the DEVELOPMENT (generally
a stage before introduction) stage Cash
flow is negative (as nothing has been
sold as yet).
 At the INTRODUCTION stage, the cost
incurred during the development stage
due to heavy promotional expense which
will continue till growth stage. – Cash
flow is negative
 At Maturity stage- cash flow is positive
( sales are high, promotional cost may be
limited)
 At Decline stage- As sales flow- cash
flows tends to reduce cash flow.
PRODUCT PORTFOLIO
ANALYSIS
Analyzing the range of existing products of a business to help allocate resources effectively
between them.
Important to analyse product portfolio because:
1. Effective allocation of resources
2. Data for key members of the management- data like the performance of the products in the
market, revenue generation by the each product, market share, customer preferences
3. Cash flow management
4. Understand the performance of each product
BALANCED PRODUCT PORTFOLIO
What is Product Portfolio?

It is the range of
existing products
of a business
BALANCED PRODUCT
PORTFOLIO
As one product declines, so other
products are being developed and
introduced to take its place.

 Cash flow should be reasonably

balanced, so there are products at
every stage and the positive cash flows
of the successful ones can be used to
finance the cash deficits of others.

 Factory capacity should be kept at

roughly constant levels as declining
output of some goods can be replaced
by increased demand of another
PRODUCT LIFE CYCLE- EVALUATION
 PLC is important part of marketing audit as it helps manager gauge
the health of the product portfolio of a business. BUT,
1. PLC is based on current data – might be difficult to predict future
trends (majority of olden fashion trends which fashionista
expected to die are now in trend e.g. slim fit pants)
2. The shape and duration of the cycle varies from product to
product
3. Strategic decisions can change the life cycle.
4. Actually hard to accurately say where the product is in its life
cycle.
 PRICE
Amount paid by customers for a
product.

• How to decide the right price for a

product?
• What influences the pricing
decisions?
• Does demand have an impact on
the pricing decisions?
WHY PRODUCTS SHOULD BE PRICED RIGHT?

 Price also determines the degree of value added to the

product/service.
 Can influence the revenue and profit of a business if priced well.
 Right price can establish a positive psychological image about the
product.
 Customers will feel value for money if product/services are priced
right.
 More chances of repeat sales as customers are happy with the
right pricing.
PRICE ELASTICITY OF DEMAND

PED measures the responsiveness of demand for a product

following a change in its own price.

How to calculate PED:

Example: The price of a product increased
from $4 to $5 and demand fell from 300 PED=
units per week to 270 units. What is the
PED?
Percentage change in quantity demanded= New quantity- Old quantity/ Old quantity* 100

Percentage change in price = New price- Old price/Old price*100

PED= -10/25= -0.4

The Price Elasticity of Demand is negative because quantity demanded moves opposite
direction from price and that demand changes by every 0.4% for every 1%.
PED<1- INELASTIC DEMAND

e.g. Salt
If the price of salt increased, demand
would largely be unchanged. It is only
a small % of income and people tend to
buy infrequently. It is a good with no
real substitutes at all.
PED>1- ELASTIC DEMAND

If the Gulf News decreases its

price, people may tend to buy
this more even though there are
substitutes.
PED=0
PED=
PED= 1
FACTORS THAT DETERMINE THE PRICE ELASTICITY OF DEMAND

 1.The number of close substitutes for a good – the more close substitutes in the market, the more
elastic is demand because consumers can easily switch their demand if the price of one product
changes relative to others.
 2.The degree of necessity or whether the good is a luxury – goods and services deemed by
consumers to be necessities tend to have an inelastic demand whereas luxuries tend to have a more
elastic demand.
 5.Whether the good is subject to habitual consumption – when this occurs, the consumer becomes
less sensitive to the price of the good in question because their default position is to buy the same
products at regular intervals.
 6.Peak and off-peak demand - demand tends to be price inelastic at peak times and more elastic at
off-peak times.
 7. The level of consumer loyalty: Products which have high consumer loyalty are not likely to
effect on sales due to a price rise. (e.g. Coca-cola – consumer will purchase with the rise in price due
to its loyalty factor)
APPLICATION OF PRICE ELASTICITY OF
DEMAND
 Making accurate sales-forecast : Since marketers are aware of the
responsiveness of demand with the change in price, this can help them as a
guide to forecast sales based on an increase or decrease in price.

 Assisting in pricing decisions: Marketers will have a clear idea as to how

much price needs to be fixed so that there is no adverse effect on the
demand of the products.

 Price determination of joint products: Products which are joint in terms

of purpose can take help of PED to determine if increase in price of one
commodity can have an effect on the other.
EVALUATION OF PRICE ELASTICITY OF DEMAND
 PED assumes that nothing else has changed- other than
two factors price and demand, it does not consider any
other factor (competitors, change in income levels) which
in reality cannot be idealistic
 PED needs to recalculated because there can be change
in price as price cannot remain constant for a long period
of time. Hence, last year’s PED cannot be useful for this
year as market conditions, prices would have changed.
HOW DO MANAGERS DECIDE THE RIGHT PRICE?
WHAT FACTORS INFLUENCE THEM?
 Cost of Production- The price must be such that all COP are covered only
then the price can cover all cost incurred.
 Competitors price- Competitors price can serve as a benchmark for us to
increase or decrease. But, if competitor is a market leader, then you may want
to set a price lower than that of the competitor unless your product is really
differentiated.
 Business & marketing objectives
 Whether it is a new product or existing product- Different pricing methods
can be used for different products.
 Competitiveness of the market
DIFFERENT PRICING
METHODS-
MARK-UP PRICING
Often used by retailers-

To the price retailers buy the product they add a fixed percentage mark-up and
then sell the product.

e.g.
Total cost of brought-in materials = $40
50% mark-up on cost = $20
Selling price = $60
TARGET PRICING

Setting a price that will give a required rate of return at a certain

level of output/sales

e.g.
Total output costs for 10,000 units = $400,000
Required return of 20% on sales = $80,000
Total revenue needed = $480,000
Price per unit 480,000/10,000 = $48
COMPETITION BASED PRICING
Setting the price of the product based on the price set by its competitors.
This type of pricing can be used for in various scenarios:

 Existence of one market leader exists and other firms simply charge a price based on the market leader.

 In a market, number of firms of the same size, prices are generally similar to avoid price wars.

 Market-oriented pricing- The price is charged based upon the conditions prevailing in that market.

• Perceived value pricing- If the product has a higher perceived value, higher is the price that can be set (e.g. Audi
Car series)

• Price discrimination- Price set for a product is different for different group’s of customers- e.g. air fare for an adult
is different from that of a child

• Dynamic Pricing: Offering goods at a price that changes according to the level of demand and the customer’s
ability to pay. E.g. The airline industry is often cited as a dynamic pricing success story. In fact, it employs the
technique so artfully that most of the passengers on any given airplane have paid different ticket prices for the
same flight. Pricing for airline tickets can vary depending on frequent flier mile usage, special promotions or travel
site discounts.
PRICING STRATEGIES FOR NEW
PRODUCTS
Penetration
Pricing
Market
Skimming
PENETRATION PRICING
 You often see the tagline "special introductory offer" – the classic sign of penetration pricing
 The aim of penetration pricing is usually to increase market share of a product, providing the
opportunity to increase price once this objective has been achieved.
 Penetration pricing is the pricing technique of setting a relatively low initial entry price, usually lower
than the intended established price, to attract new customers.
 Penetration pricing is most commonly associated with a marketing objective of increasing market
share or sales volume

e.g. A Friday night trip to a video or DVD rental shop was a family tradition across the nation for at least
a generation. When Netflix entered the market, it had to convince consumers to wait a day or two to
receive their movies. To accomplish this goal, it offered introductory subscription prices as low as a
dollar. The pricing strategy was so effective that traditional providers such as Blockbuster soon were
edged out of the market.
MARKET SKIMMING
 Price skimming involves setting a high price before other competitors
come into the market.
 Generally done by companies to maximize short-term profits before
competitors enter the marker with a similar product and to project an
exclusive image for the project.
 E.g. Pharmaceutical firms- Set a high price for a new drug which has
been considering the fact the amount of money spent of R&D of the
product. – Many a times such firms are given monopoly for certain years
.
FACTORS THAT INFLUENCE PRICING DECISIONS:

 Level of competition- In an oligopolistic market- price wars to gain market share (few leaders
has price wars- small firms may be forced out of the market.
 Loss Leaders: A loss leader is a pricing strategy where a product is sold at a price below its
market cost to stimulate other sales of more profitable goods or services.
 Psychological Pricing: To trick the consumer’s brain and attempt to appear much lower than it
is. Classic example of $999 instead of $1000. In many places in India, 1$ balance is given in
the form of chocolates which many consumer’s do not prefer.
PRICING DECISION- EVALUATION
 It would be incorrect to know that one firm will use one
pricing method for all its products.
 Level of price can have a powerful influence on consumer
behavior- careful research must be done
 Low price strategy always does not work, good value is
what customers look at.
 In assessing whether a product offers good value, price is
not only one factor- brand image, quality, marketing mix