3rd chapter Part-1 MARKETING MIX ByAsst Prof. Venkatesh.NKoshys Institute of Management Studies.

Key learning goals: This topic will continue the discussion of marketing management issues, especially marketing mix and product life cycle. Explain the four elements of marketing mix.State the difference between place and promotion.Explain the stages of product life cycle.Explain how a business can extend its product life.State the reasons why a business may analyze its product life cycle.

LEARNING GOALS*

What is marketing mix? Marketing mix refers to those four elements (product, price, promotion, and place) of a firms marketing strategy which are designed to meet the needs of customers. These are regularly known as the four Ps. Simply, to meet consumers needs, businesses must produce the right product, at the right price, make it available at the right place, and let consumers know about it through right promotion.

Marketing (2)-Marketing Mix

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Elements of Marketing Mix ProductPrice Place Promotion *

Product: Products must be ensured to meet the needs of customers in terms of the following aspects:Appearance Function Production Cost

Marketing (2)-Marketing Mix: Product

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Features of a product to meet the needs of customers

Marketing (2)-Marketing Mix: Product *

Aspects Brief explanations or examplesThe appearance Color, size, shape, etc. must meet the consumer needs.The function Able to be used Convenient for useMeeting special needs of customers The cost Production costs must be low enough to earn some profit.High cost, higher price.Too high price, customers unlikely to buy.

Product Mix Product mix, also known as product assortment(Mixture), refers to the total number of product lines that a company offers to its customers. For example, a small company may sell multiple lines of products. Sometimes, these product lines are fairly similar, such as dish washing liquid and bar soap, which are used for cleaning and use similar technologies. The four dimensions to a company's product mix include width, length, depth and consistency.*

Product Line A good way for a company to try to expand its business is by adding to its existing product line. This is because people are more likely to purchase products from brands with which they are already familiar. For example, a frozen pizza company may wanted to increase its market share by adding frozen breadsticks and frozen pastas to its product line.*

Product Line *

Marketing (2)-Marketing Mix: PricePrice: The pricing policy that a business chooses is often a reflection of the market at which it is aiming. The right price set must take into account of production costs, competitors prices and consumers purchase ability and demand level.

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Influences from the pricing factors

Marketing (2) -Marketing Mix: Price*

Factors Influences on the price of a productHigh production costs High production costs would mean the high sale price for the goods supplied by sellers. High customer demand High customer demand will lead to the increased price of the goods or services. Suppliers are more wiling to provide the goods or services as it is more profitable for them to supply. Low prices charged by competitors If the price of the substitute product offered by competitors decreases, the demand for a product will be decreased as well.

-Marketing Mix: Price

Attention: High-price strategy

In general, from the economic point of view, the higher the price of a product is, the less quantity demanded by consumers. Or there are few buyers who would like to high-price products. However, in practice, a business may charge a high price because it is aiming to sell to those customers who regard its products as unique and high quality although the production costs are not high. *

- Marketing Mix: Place Definition: Place refers to the means by which products can be distributed to the consumers. The product must get to the right place at the right time. Decision making may be based on the following:How the product is distributed physically, such as air, sea, rail, or road.How the product is sold, such as through retailers, wholesalers, or direct mailing, etc.

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- Marketing Mix: PromotionDefinition:Promotion refers to a number of promotional methods, such as advertising, sales promotion, competitions, and personal selling, etc. A business must choose a method of promotion which is the most effective in its particular market and for its own product. For example, TV advertising may be better for the product with a high sales turnover or a wide request. But for high-technology machines or equipment, it is better to choose personal selling methods. *

New-product development and product life-cycle strategies

Introduction: New productsNew products are the lifeblood of the organisation but they are extremely at risk and the majority never reach commercialisation.In competitive markets, the best and strongest firms sustain growth through the introduction of new products and services to meet the changing needs of the consumers. *

Introduction: New productsAll products have a fixed life span and this is influenced by the type of product, its innovativeness, the management of the product through its life cycle, as well as the markets in which it is sold.All products will finally decline and need to be replaced by new ones and companies need to be adept at adapting marketing strategies to respond to the dynamics of the environment, so as to manage the product through its life cycle effectively.*

Innovation and new product development

Unless companies develop new products, their business will certainly decline and die away. Innovation is a costly and risky activity. Some innovations are nothing more than a modification to an existing product range, while others are completely new productsSuccess in developing new products is mainly about correctly identifying what those needs are, and translating them efficiently into new products.*

Innovation and new product development strategy Product innovation covers a range of product development activities, including product improvement, development of new products and extensions to product lines.Classifications:New to company, new to market. New to company, significant innovation to market. New to company, minor innovation to market.*

Product innovations are not to be confused with inventions Innovations Ideas, services, technologies and products that have been developed and marketed to customers who perceive them as novel or new. It is a process of creating and delivering new product or service values that did not previously exist in the marketplace.

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Product innovations are not to be confused with inventions New product development The development of new brands, original products, product improvements or modifications, through the efforts of the firms R&D.

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Why do new products fail?New product development is too expensive Unexpected delays and time to market too longInsufficient demand for the product or serviceNot as well designed as it should have beenIncorrectly positionedIncorrectly pricedCompetitors fight back more aggressively than expected.

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What influences new product success?Development of a unique superior productBetter quality, new features and greater valueClearly defined market and product conceptMeeting market needsSenior management commitmentNew product planningSystematic new product development process

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9 Steps of new product development*

1. Idea generationSystematic search for new-product ideas. In pharmaceutical companies it can take 6000-8000 ideas to produce one commercial success. Generally only 1 out of 100 new-product ideas will reach their objectives.CustomersCompetitorsObserving the competition is an excellent source of new-product ideas.Distributors, suppliers and others*

2. Idea screening(Viewing )Process of screening the new-product ideas in order to spot good ideas and drop poor ones as soon as possible. exact evaluation is necessary.*

3. Concept development and testingProduct idea converted into a product concept Converted into meaningful consumer terms of a product imageHow the consumers will perceive the product.Concept testing is essential to judge the strength of the new-product concept and ascertain if it will have commercial appeal.Consumers may like the idea but would they be prepared to pay for it?*

4. Marketing strategy developmentDevelop the suitable marketing strategybased on the marketing logic by which the business unit hopes to achieve its marketing objectives *

5. Business analysisReview of the sales, costs and profit projections.Establish the viability of the project and whether it will satisfy the companys objectives.Explore strategic fit with entire business.*

6. Product developmentLogical developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable product.*

7. Test MarketingTest marketing is a technique used during product development to determine how people respond to a product. It can be used at many different phases of development to see whether or not the public will buy the product, how the product may need to be adjusted to make it appealing to the public, and how members of the public interact with the product. Using information from test marketing, product developers can refine products to make them more commercially viable before embarking on a widespread project launch.*

8. Commercialisation Commercializationis theprocessor cycle of introducing a newproductor production method into themarket. The actual launch of a new product is the final stage ofnew product developmentand the one where the mostmoneywill have to be spent foradvertising,sales promotion, and othermarketingefforts.the company needs to decide the following:When?Where?To Whom?How?

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9. Organising for new-product development Sequential(ordered) product development slow and many companies encourage the concept of simultaneous product development: departments work together, overlapping the steps in the product development process so as to save time and increase effectiveness.Successful new-product development is based upon an fixed culture of innovation within the company that is supported from senior management downwards. *

Product life-cycle strategiesFollowing the launch of the new product, the challenge to management is ensuring that the product achieves its potential over its projected life span. This involves understanding the product life-cycle and developing appropriate marketing strategies and interventions(act of involving).*

The product life-cycleThe product life-cycle (PLC) is the course of a products sales and profits over its lifetime. It involves five stages:Product developmentIntroductionGrowthMaturityDecline

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Figure 14.2Sales and prots over the products life from inception to demiseThe product life cycleFrklarar ven varfr mnga fretag vljer att kopiera.*

The PLC as an effective marketing toolThe PLC can be applied to product classes as well as styles, fashions and fads. The PLC will reflect these aspects in the length and type of PLC as illustrated:

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Product / concept development stage

Product concept converted into meaningful consumer terms of a product image.Concept tested to establish commercial appeal.

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Introduction stageThe phase where the new product is distributed and made available for purchase.The market initiate has much responsibility when devising the appropriate strategy as it sets the stage for the products introduction to the consumer.Characterised by high promotional costs.*

Introduction stage strategiesStrategies are based upon the product and the dynamics of the marketSkim the market slowly using high price and relatively low promotional activity.Skim rapidly by using a high price and high promotion strategy if the market is price insensitive.

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Growth stageThe product sales begin to increase rapidly.Profit is generated as a result of effective promotional activity and the spread of costs over larger volume of sales.

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Maturity stageThe phase where sales growth slows or levels off.Marketers then seek to resuscitate or extend the life of the brand by the following methods;New market developmentNew usage and applicationProduct development and modificationMarketing innovation

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Decline stageSales decline.Marketers need to determine the value of retaining the product versus the cost of divesting from the product. This is weighed up against the market dynamics.

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Branding and PackagingWhat is Branding?:What is Branding? Branding is the process of stamping product with some identifying name or mark or combination of both*

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Reasons for Branding

Identify the particular product or service Easy advertising and publicity Standard quality and satisfaction to buyers Increases the sales Sale promotion in competitive market Reduces personal believable selling efforts*

Various terms relating to brandingA brand is a name, term, sign, symbol or design used to identify the products of one firm and to differentiate them from the products of the competitors. Bata, LG, Samsung, levis are some examples of common brand Brand name: It consists of words, letters or numbers which may be vocalized or pronounced. for example: LG, BPL, Onida, SONY, 501 Soaps etc. Brand mark: It is that part of the brand which can be recognised but not utter able, such as symbol, design or distinctive coloring or lettering. *

Contd..Trade mark: when a brand is registered and legalized it becomes a trade mark. Trade mark v/s brand Registration Scope Legal protection Nature*

Brand classification:Brand classification On the basis of ownership: Manufactures brand Middlemens brand On the basis of market area: Local brand Regional brand National brand International brand On the basis of number of products: Family brand Individual brand Product line brand On the basis of use: Fighting brand Multiple brand *

Factors affecting the selection of good brand

Simple and short Easy pronunciation Recognizable Suggestive Economical Legally protectable Helpful in advertising *

Advantages of branding :Advantages of branding to the manufactures : Builds up reputation and image Helpful in advertising Easy to identify Personal contact with customers Creation of separate market Advantages of branding to the middlemen: Helps in understanding the consumer behaviour No need of extra advertising and sales promotion Increase in goodwill Quick moving products Reduces distribution cost

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Contd..Advantages of branding to the consumers: Easy identification Quality products Easy shopping Easy to fix complaint and make claims*

Disadvantages of branding:Disadvantages of branding to the manufactures: Increases cost Expensive Opposed by middlemen

2. Disadvantages of branding to the consumers: Greater confusion Discourages from trying other products Commands premium Increase in price*

Conclusion:

If we compare its advantages and disadvantages, we may confirm that its advantages are much powerful. So I conclude that the use of brand is necessity in modern era.. *

What is packaging?:

A package is a wrapper or container in which a product is enclosed, encased or sealed. For example: a wrapper, box, cartoon, can, crate, bottle, jar, tube, barrel, drum etc. for convenient distribution*

Objective of packaging:

Protection Identification Convenience Promotion Attraction Economy Reputation

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Advantages of packaging:1.Advantages of packaging to the manufacturers: Keep the product safe Facilitate storage Enhances goodwill Promotes product Prevents adulteration Helpful in advertising and sales promotion Increase profit 2. Advantages to the middlemen Facilitates storage Self advertising Easy display Help in transit*

Advantages to consumers:Minimum possibility of adulteration.(being mixed with extraneous material) Convenient handling and storage. Provide necessary information about the products. Helps memory and recognition. Protects the contents. Payment of appropriate price. *

Essential of good packaging:

It should be protective It should be attractive It should be informative It should be pollution free Durability Suitability Cost material*

Example of packaging:-:

Function of packaging:Protection, Convenience, Identification Promotion, Attractive, Differentiation Dependability, Profit ,Communication *

Packaging decisionsPackage design Package size Package cost Package test. Further four kind of test are made for package test Engineering test Appealing test Consumer test Middlemens test*

Reason for growth of packaging:Self-service Consumer need Company image Large scale production Increase in variety*

PRICING

Price is only one element in the marketing mix that creates sales revenue the other elements as costs.

PRICE DETERMINATION PROCESSPricing is the process of determining what a company will receive in exchange for its products.Pricing factors are manufacture cost, market place , competition , market condition, and quality of product. pricing is a fundamental aspect of financial modeling and is one of the 4ps of the marketing mix.

PRICING POLICY Policies are guidelines for achieving the objective.Different pricing policies may be adopted to meet the different long term objectives.When decisions are made to fit the changing competition situations met by the specific product are called pricing policies.

Contd. Considering the competitive situation various price strategies may be followed. In the absence of the competition the prices may be fixed very high and high profit may be earned.

On the other hand, if the market is highly competitive, the very low price, probably near the cost policy may be adopted to throw out the competitors if the price may have a suitable appeal to the consumer

FACTORS INFLUENCING PRICING POLICYCostObjectiveDemandCompetitionDistribution channelGovernment Economic condition Ethical Consideration Types of buyersProduct differentiation

METHODS/TYPES OF PRICING POLICY

DISCOUNT AND ALLOWANCES Discounts and allowances are reductions to a basic price of goods or services. they can occur anywhere in the distribution channel, modifying either the manufacturers list price, the retail price.They are many purpose for discounting, including to increase short-term sales, to move out-of-date stock, to reward valuable customer, to encourage distribution channel members to perform a function.Discounting is common in many industries-in some it is so common as to give normal price lists practically meaningless.

Contd..This is not to say that there is anything particularly wrong with price discounting provided that you are getting something specific that you want in return.Common form of discounts Trade discount Cash discount Quantity discount Seasonal discount

Contd..Allowances:- the manufacturer may offer promotional allowances like advertising allowances, window display allowances, free sample, free display material, free training in sales demonstration etc..

Pricing approaches and strategiesThere are three main approaches a business takes to setting price:Cost-based pricing: price is determined by adding a profit element on top of the cost of making the product.

Customer-based pricing: where prices are determined by what a firm believes customers will be prepared to pay.

Competitor-based pricing: where competitor prices are the main influence on the price set*

KINDS OF PRICINGOdd pricingPsychological pricingCustomary pricesPrestige pricingPrice liningGeographic pricing Dual pricing Administered pricing

Even-Odd PricingWhy do marketers use the following prices?

Customary PricingAmethodof determining thepricefor a good orservicebased on the perceivedexpectationsofcustomers. Customary pricing is generally used forproductswith a relativelylongmarkethistory of being sold for a particularamount, and is driven by intuitive notions ofvalueon the part ofbuyers. *

Product Line Pricing Where there is a range of products or services the pricing reflects the benefits of parts of the range. e.g.- car washes; a basic wash could be $2, a wash and wax $4 and the whole package for $6

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Prestige PricingMarketing strategywherepricesare set higher than normal because lower prices will hurt instead of helpingsales, such as for high-end perfumes, jewellery, clothing, cars, etc. Alsocalledimage pricing. *

Geographical Pricing:-Geographical pricing sees variations in price in different parts of the world.e.g. rarity value, or where shipping costs increase price. More tax on certain types of product which makes them more or less expensive.*

Product Bundle Pricing:-Sellers combine several products in the same package. This also serves to move old stock. Blu-ray and videogames are often sold using the bundle approach once they reach the end of their product life cycle.

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Dual PricingThe practice of setting prices at different levels depending on the currency used to make the purchase. Dual pricing may be used to accomplish a variety of goals, such as to gain entry into a foreign market by offering unusually low prices to buyers using the foreign currency, or as a method of price discrimination.*

Product Bundle Pricing

Definition:Multiple products sold together for one priceCreates of savingsEases decision-making and ordering for consumersExamples:Computer package: PC, monitor, software, and printer.McDonalds Value Meal: Burger, Fries and DrinkVacation package: Flight, hotel and meals

Optional Product Pricing:-Companies will attempt to increase the amount customers spend once they start to buy. Optional extras increase the overall price of the product or service. e.g.- airlines will charge for optional extras.

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Administered PricePrice set by themanagementof a firm, and not arrived at throughnegotiationsbetween abuyerand aseller. Most retail andindustrialpricesareadministeredprices, which are then adjusted inresponseto thecompetitors' prices. *

Contd..PSYCHOLOGICAL PRICINGA pricing strategy that specializes in inflicting psychological effects on consumers. It is a marketing strategy based on utilizing particular pricing techniques to form a psychological impact on consumers. Popular techniques that raise sales : Odd Pricing Prestige Pricing The opposite of odd pricing, e.g. pricing at $10 rather than $9.99. BOGOF*

CHANNEL OF DISTRUBUTION The channel of distribution is the pathway taken by goods and services as they flow from the point of production of the point of consumption and include a sequence of marketing agencies. After production the next problem faced by a producer is that of selling and distributing. Because production is made to satisfy the needs of the consumers so it must reach to the consumer for whom it is made

DEFINITIONSAccording to Philip Kotler, every producer seeks to link together the set of marketing intermediaries is called the marketing channel OR channel distribution.

NEED OF CHANNEL OF DISTRIBUTION

VARIOUS CHANNEL DISTRIBUTION Manufacturer-consumer-channelManufacturer-retailer- ultimate consumer Manufacturer-wholesaler-retailer-consumerManufacturer-agent-wholesaler-retailer-consumer Manufacturer-wholesaler-consumer/user

WHOLESALERWholesaler including all activities involved in selling goods and services to those buying for resale or business use.Types of wholesalers Merchant wholesaler Broker and agents

FUNCTIONS OF WHOLESALERS Selling and promotingBuying and assortment building Bulk breaking WarehousingTransportationFinancingRisk bearingMarket information Management service and advice

PROMOTIONPromotion is one of the four variables in the marketing mix. Basically it is communicating information b\w producer\seller and buyer or prospective buyer to change attitude and behaviour of consumer .When a company develops a new product, makes change in the old one or simply wants to increase sale of its existing product without making any change, it must transmit selling message to potential customer, it is promotion.

NATURE OF PROMOTIONPromotion activities are performed by the manufacturer. It is the responsibility of the producer to get information about the consumer and prospective consumer so that the necessary product may be served to meet their demands.

Promotion includes, advertising, personal selling and other sales promotion.

IMPORTANCE OF PROMOTION IN MARKETINGThe activity of promotion has become important because of the widening of the market .In modern times, there is a cut throat competition in every field.There are number of channel of distribution. (the producer should not only inform the consumer but also he should the middlemen)Promotion expenses are the highest of all the marketing expenses.

PROCESS OF COMMUNICATION IN MARKETINGMarketing communication involves sharing of meaning, information and concepts by the source and the receiver about the products and services and also about the firm selling through the device of promotion via, advertising, salesmanship and sales promotion.Selling processSales planning Sales territory:-sales territory is a basic unit of sales planning and sales control.

SALES PROMOTIONSales promotion is a parts of promotional mix, sales promotion refers to the activities which supplement and co-ordinate personal selling and advertising to attract customer to buy a product.Sales promotion methods include display, demonstration, expositions, exhibitions and other .

CHARACTERISTICS OF SALES PROMOTION Sales promotion does not include advertisement, personal selling and publicity.Sales promotion activities are not regular activities.These are purely temporary and are performed at certain times such as display, free samples, exhibitions, demonstration etc.Sales promotion encourages dealers, distributors and consumer.

TYPES OF SALES PROMOTIONS The different kinds of sales promotions are as fallows.Sales promotional lettersCataloguesPOP(point of purchase)DemonstrationsTrade fair and exhibitions(trade fairs and exhibitions provide companies with the opportunity of introducing and displaying their products) it is one of the oldest practice in sales promotion

ADVERTISING,DIRECT SELLING,SALES MANSHIP ETC.Advertisement:- it is a paid form of non- personal presentation of ideas, plans good and services which is identified by the particular sponsor.Different Medias Of Advertisement :Answer please Commercial Advertising:Non commercial advertising Who are the main key players of advertising: Answer please

What is a Marketing Channel?A set of interdependent organizations that ease(make easier) the transfer of ownership as products move from producer to business user or consumer.

Names for Marketing Intermediaries

Take Title to GoodsTake Title to GoodsDo NOT Take Title to GoodsCHANNEL INTERMEMDIARIES

CHANNELS FOR CONSUMER PRODUCTS DIRECT RESELLER WHOLESALER AGENTProducerProducerProducerProducer

***Notes:The most prominent difference separating intermediaries is whether or not they take title to the product. Taking title means they own the merchandise and control the terms of the sale.

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