Marketing Mix
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Marketing Mix
P-BSBMX4-MKT-421
Robert Deer
January 28, 2006
Abstract
A Marketing Mix is a combination of product, packaging, price, channels of distribution, advertising, promotion, and personal selling to get the product in the hands of the customer. Throughout this paper we will be discussing the 4 Ps of Marketing and provide examples of Marketing Mix. (Kyle, Bobette).
Marketing Mix
The Marketing Mix is based on the fact that price is not the only factor that decides whether customers will buy from you or not. In fact, in some cases people never buy the cheapest! Do you know anyone who has taken 3 quotes and then decided to employ, or buy, from the middle priced quote. The error many new businesses make is to assume that if they are cheaper than the competition then customers will buy, which is not necessarily so. (Net MBA).
For many new businesses it is often better to consider an equal, or higher, price than the competition. Then, if you decide to lower the price, your existing customers will be happy, whereas if you charge too little and have to raise the price, your existing customers may leave you! So lets look at the factors that influence them to buy. There are five elements of your product, or service, that influence customers when they are deciding whether, or not, to buy. (Fast Link Solutions, 2000).
In 1964, Neil H. Borden published an article called, “The concept of the Marketing Mix”, which began the start of the 4 Ps such as, product planning, pricing, branding, Personal selling, advertising promotions, packaging, display and physical handling and service. E. Jerome McCarthy, grouped these into four categories, which is know today as the 4 Ps of marketing, which is shown below: (Net MBA).
(NetMBA.com)
The product is the central point on which marketing energy must focus. Finding out how to make the product, setting up the production line, providing the finance and manufacturing the product are not the responsibility of the marketing function. However, it is concerned with what the product means to the customer. The product range and how it is used is a function of the marketing mix. The range may be broadened or a brand may be extended for tactical reasons, such as matching competition or catering for seasonal fluctuations. Alternatively, a product may be repositioned to make it more acceptable for a new group of consumers as part of a long-term plan. (NetMBA.com)
The “product” can be thought of as the summation of the individual products physical and perceived attributes, which would include packaging. The product needs to have desirable characteristics, appropriate packaging and a perceived image consistent with demands of the targeted market. For example, if a business decides to employ a new product development marketing strategy, the product component of the marketing mix should depict the type of product i.e., the quality of product, a branded product or even unique product packaging. Packaging is a significant aspect of the product component. According to Larry Davenport with the International Jelly & Preserve Association, product packaging is essential to a products success because ninety percent of niche product purchases are based on product presentation. By limiting labeling, packaging and container size, you maybe excluding different segments of the population. For example, if you are currently producing a product for the East Tennessee Tourist market, you may want to position your product, through labeling and packaging, as a down-home, Appalachian hand- crafted product. However, this image may not be consistent with upscale retail outlets. By creating a secondary package and label that projects a more upscale image, the producer can market their product through both channels. (E.A. Estes and C.W. Coale, Jr., 1995).
The price – of all the aspects of the marketing mix, price is the one, which creates sales revenue – all the others are costs. The price of an item is clearly an important determinant of the value of sales made. In theory, price is really determined by the discovery of what customers perceive is the value of the item on sale. Researching consumers opinions about pricing is important as it indicates how they value what they are looking for as well as what they want to pay. An organizations pricing policy will vary according to time and circumstances. Crudely speaking, the value of water in the Lake District will be considerably different from the value of water in the desert. (NetMBA.com)
Determining a products price is a critical marketing tactic. A products price has to be high enough to cover the total cost of producing the product yet not too high so that it discourages potential customers from purchasing the product. Also pricing can help position a product. For example, a high priced gourmet food may suggest a quality product. There are numerous methods of determining a product price. The following are two commonly used price determination methods:
Mark-Up Percentage Pricing refers to the percent of total cost that is equal to profit. Markup percentage pricing allows the producer or retailer to specify a desired profit percentage they would like to obtain and then price their products accordingly. For example, if a profit equal to 30% of a products cost is desired, the total cost of getting the product to market would first need to be determined and then multiplied by 30%. The calculated figure is then added back to the products total cost. Thus, the products price would be set to ensure a 30% profit per unit sold. (E.A. Estes and C.W. Coale, Jr., 1995).
Gross Margin Percent Pricing is the percent of the selling price that is profit. Gross margin percentage pricing allows a certain profit margin (difference