The four tools a business can use to persuade customers to buy its product or service: Product,...
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Marketing Mix The four tools a business can use to persuade customers to buy its product or service: Product, Price, Promotion, Place Ms. Marshall 6th Year Business 1
The four tools a business can use to persuade customers to buy its product or service: Product, Price, Promotion, Place Ms. Marshall 6th Year Business1
The four tools a business can use to persuade customers to buy
its product or service: Product, Price, Promotion, Place Ms.
Marshall 6th Year Business1
Slide 2
Overview of Marketing Mix Ms. Marshall 6th Year Business2
Product 1. Brand Name 2. Packaging 3. Product Life Cycle
Slide 3
Brand Name For this topic you will need to know the definition,
the benefits, and some examples of global brands. Branding means
creating an identity for a product that makes it easily
identifiable and clearly distinguishes it from competitors. It
usually consists of a brand name and logo. E.g. McDonalds and their
Golden Arches. Ms. Marshall 6th Year Business3
Benefits of Branding 1. Recognition: Branding improves
recognition of the product and the business name and differentiates
them from competitors. This makes it easier to advertise a
particular product. It is cheaper and easier to launch new products
if they are associated with an existing well-known brand name. e.g.
Johnsons & Johnsons would be best known for baby care products
but have diversified into products for adults too. 2. Desire:
Branding helps to promote a desired image of a product to the
target market. E.g. J&J look after sensitive skin Ms. Marshall
6th Year Business5
Slide 6
Benefits of Branding 3. Loyalty: Easy recognition and
familiarity to consumers increases sales and promotes long-term
customer loyalty. Brand loyalty occurs when customers
repeat-purchase a particular product on a regular basis. They stick
with the product even when the price goes up, which helps defend
against price wars with competitors. E.g. Coca-Cola has a high
level of brand loyalty in the soft drinks market. 4. Higher Price:
Businesses can charge a higher price, thus increasing profits. Many
customers perceive branded goods to be of better quality than own
brands so they are willing to pay more. E.g. you would pay more for
Coca-Cola than Tesco Cola Ms. Marshall 6th Year Business6
Slide 7
Branding- Benefits 5. Bargaining tool: Branding can be used as
a bargaining tool against retailers. Businesses can get a good
price from shops for their goods because they know customers expect
the product to be in stock. Pepsi and Coke will often enter into
contracts whereby if you stock one you cannot stock the other, e.g.
Coke and Mc Donalds. Ms. Marshall 6th Year Business7
Slide 8
Own Brands Own Brands: brand names which are registered by
retailers rather than manufacturers, e.g. Dunnes Stores (Savida) to
put on products which are for sale exclusively in their shops.
Benefits of own brands Retailers benefit from cheaper products
which helps to attract extra customers. Consumers benefit from
lower prices and a greater choice of products. Producers benefit
from extra sales which are achieved with lower manufacturing and
marketing costs. Drawback lower profit margin Ms. Marshall 6th Year
Business8
Slide 9
Packaging Packaging involves designing and making the container
or wrapper for the product. Functions of Packaging: Protection:
products must be protected from damage as they change hands through
the channel of distribution. E.g. Tetra Pak makes sure liquids do
not spill. Image: packaging should look good to encourage consumers
to buy the product. Design has been referred to as the silent
salesperson because it can strongly influence sales. E.g. Pepsi
carefully researched packaging for Pepsi Max. Research showed that
red, blue and silver were the most appealing combination to the
young male market. Ms. Marshall 6th Year Business9
Slide 10
Packaging Information: the packaging often contains information
on the use of the product or the ingredients. E.g. most food
products now display the calorie content on the box. Convenience:
it is used to make the product a convenient size or shape for the
consumer. E.g. 2 litre bottle of coke for home, 500 ml for carrying
around. Protecting Product Design Patent: provides legal protection
of an invention or a design of a product to the inventor or
designer. Trademarks: are logos that are registered by businesses
to distinguish them and their products from competitors. Ms.
Marshall 6th Year Business10
Slide 11
Product Life Cycle The Product Life Cycle charts the six stages
of a products sales over time. Ms. Marshall 6th Year
Business11
Slide 12
Product Life Cycle 1. Development: much time will be spent
designing and testing the product concept. A prototype will often
be test-marketed, in order to assess the potential sales and
profitability of the new product. A decision will then be made
whether or not to launch the product based on the market research
conducted. The business will, therefore, incur many expenses during
the development stage of the product lifecycle and the product will
produce a large, negative cashflow. 2. Introduction: this is when
the product is first launched. Sales grow very slowly and large
amounts must be spent on advertising and promotion. Companies
usually are making a loss at this stage. Price Skimming may occur.
3. Growth: The product becomes known and sales and profits begin to
increase rapidly. New competition enter the market at this stage.
Ms. Marshall 6th Year Business12
Slide 13
Product Life Cycle 6. Decline: Sales of the product fall off
rapidly. This could be due to advances in technology, a change in
consumer tastes or increased competition. E.g. Walkman replaced by
Discman replaced by MP3 Players and Ipods 4. Maturity: The rate of
sales growth slows. Sales of the product are at their highest rate.
The business is making large profits. There is intense competition.
5. Saturation: Sales growth stops and sales remain at their peak
for some time. The market is now full of similar products. To
maintain sales businesses will cut their price or update the
product. Ms. Marshall 6th Year Business13
Slide 14
Extension Strategies Product Development Strategies: seek to
modify and revamp the existing product to make it more appealing or
to develop the number of products in the product line. New and
improved Market Development Strategies: attempt to find new markets
or new uses for existing products through market segmentation or
niche marketing. E.g. Lucozade used to be given to people who were
ill, and when sales began to decline it was targeted at athletes.
Ms. Marshall 6th Year Business14
Slide 15
Factors that influence the length of a product life cycle
Fashion Technology Marketing Ms. Marshall 6th Year Business15
Slide 16
Overview of Marketing Mix Ms. Marshall 6th Year Business16
Price 1. Factors that determine the price 2. Strategies for setting
the price 3. Break Even Chart
Slide 17
Factors that determine the price The price is the amount of
money the business charges the consumer for its product. 1. Cost of
the Product: The business must charge a price that is at least
equal to the total cost of making and selling the product. This is
called the breakeven price. It they charge less than this they will
make a loss. 2. Competitors Prices: If the competitor has a better
quality product, you must charge a lower price. If your product is
better, then you can charge a higher price than them. Ms. Marshall
6th Year Business17
Slide 18
Factors that determine the price Consumers Perception of
Prices: the business must be aware of what consumers are willing to
pay for the product. They should be aware that a high price is
often associated with high quality and a low price with low
quality. Legal Regulations: The government can set a maximum or
minimum price that a company can charge. For example, until March
2006 it was illegal to sell food below cost price. Ms. Marshall 6th
Year Business18
Slide 19
Strategies for setting the price Price Skimming Strategy: The
business charges a high price for the product when it comes out
initially. This helps recoup the cost of developing the product.
The price drops later on as competition enters the market. New
technology such as phones, Ipods, games consoles tend to adopt this
strategy. Penetration Pricing Strategy: the business deliberately
charges a low price so that it is cheaper than competitors. The aim
is to get as many customers to switch over as possible to increase
market share, e.g. Airtricity promise rates 20% lower than Bord
Gais if you switch both electricity and gas to them. Ms. Marshall
6th Year Business19
Slide 20
Strategies for setting the price Price Discrimination Strategy:
The business charges different prices to different consumers for
the same product. E.g. Going to the cinema the price changes
depending on whether you are a child, student, adult or OAP. Some
cinemas have now introduced an unemployed rate which operates 9
a.m. until 5 p.m., Monday to Friday. Loss Leader: The business
sells one product at below cost price in order to attract consumers
into the shop so they will buy other products. E.g. Supermarkets
selling beers below cost price. Ms. Marshall 6th Year
Business20
Slide 21
Strategies for setting the price Psychological Pricing: means
setting the price based on the expectations of the customers in the
target market. Many companies will charge a high price to create a
luxurious, exclusive image e.g. for perfume. Setting prices below
psychological barriers also exists, e.g. 9.99 seeming less than 10.
Mark-up: Cost-plus pricing, means adding a percentage profit to the
cost of sales. Ms. Marshall 6th Year Business21
Slide 22
Recent Exam Questions 2013/2009 Q7 Outline the factors a
marketing manager might consider in determining the selling price
of products at All Weather Wellies Ltd. (20 marks) 2012 Q7. Within
the product element of the marketing mix, evaluate product
packaging. 2011 Explain the meaning of the term own brand products
(b) Outline two reasons why retailers use own brand products(10
Marks) Ms. Marshall 6th Year Business22
Slide 23
Recent Exam Questions 2011 Draw and label the product life
cycle diagram Illustrate the methods a business could use to extend
a products life cycle. 2010 Many businesses spend large sums of
money developing a brand name. Illustrate the benefits of branding
for the business and the consumer. (25 marks). 2007 Explain four
pricing policies that businesses can adopt as part of their
marketing strategy and apply one of them to a product of your
choice. (30 marks) Ms. Marshall 6th Year Business23
Slide 24
Recent Exam Questions 2006 Deirdre Moloney hopes to start up
her own cosmetics and personal beauty products business aimed at
the consumer market. She has approached you as a marketing
consultant for some marketing advice. In a report, explain to her:
The significance of packaging branding and product life cycle with
reference to this business. Ms. Marshall 6th Year Business24
Slide 25
Break-Even Chart Definitions: Fixed Costs: are the costs that
remain the same, regardless of the number of products produced,
e.g. rent, insurance. Variable Costs: are costs that vary depending
on how many units are produced, e.g. raw materials. The break-even
point is the minimum price a business must charge for its product,
it shows the amount of sales needed to cover its costs and break
even. The Margin of Safety refers to the amount by which a firms
sales can drop before reaching the break-even point. Ms. Marshall
6th Year Business25
Slide 26
Break-Even Formulae Break-even Point in units: Fixed Costs
Sales price pu VC pu Contribution per unit: Price VC Break-even
point in : BER in units * Price Total revenue: Sales * Price Total
Costs: FC + VC Margin of Safety: Forecast Sales in units BEP in
units Ms. Marshall 6th Year Business26
Slide 27
Break-Even Example 2008 Q7 (B) Motor Manufacturing Ltd. is
considering the introduction of a new product. The business has
provided the following figures. Fixed Costs 200,000 Variable Cost
PU 5 Selling Price15 Forecast Output (Sales) 30,000 Units (i)
illustrate by means of a break-even chart: (a) The Break Even
Point. (b) Profit at forecast output. (c)The Margin of Safety at
forecast output. Ms. Marshall 6th Year Business27
Slide 28
Calculations 2008 B/E Formula: 200,000/(15-5)= 20,000 units (or
300,000). Ms. Marshall 6th Year Business28 Zero SalesB/E
PointForecast Sales (as per Q) Sales020,00030,000 Price15
TR0300,000450,000 FC200,000 VC (units*5) 0100,000150,000
TC200,000300,000350,000 Profit(200,000)0100,000
Slide 29
To Draw the B/E Graph Step One: Draw your horizontal (units)
axis and vertical () axis. Step Two: Draw a Fixed costs line. Step
Three: Draw a Total Costs line. Step Four: Draw a TR line starting
at 0. Step Five: B/E point is shown where TR=TC. Step Six:
Illustrate the Margin of Safety. Ms. Marshall 6th Year
Business29
Slide 30
Break-Even Chart Ms. Marshall 6th Year Business30 450,000
400,000 350,000 300,000 250,000 200,000 150,000 0 10,00020,000
30,000Units FC TC TR
Slide 31
Is the Break-Even Chart Useful? They work out how many products
you need to sell to break even. They give you an idea of the profit
or loss expected at different levels of sales. The Margin of Safety
shows you how much sales can drop before you no longer break even.
They can illustrate the effect a change in price would have on
profits. They can illustrate the effect a change in costs would
have on profits. Ms. Marshall 6th Year Business31
Slide 32
Overview of Marketing Mix Ms. Marshall 6th Year Business32
Promotion 1. Advertising 2. Sales Promotion 3. Public Relations 4.
Direct Selling
Slide 33
Promotion - Advertising Promotion: refers to all the efforts
(excluding price) made by the seller to communicate and influence
the target market to buy a product. Promotion helps with Product
Positioning, i.e. creating an image for a product in the mind of
the consumers in the target market. Advertising: consists of
messages designed to inform, persuade or remind people to buy a
product or service. Functions of Advertising: To provide
information about the product. To remind consumers that the product
is still available. To persuade consumers to buy the product. To
offset competitors advertising (defensive). To increase sales and
profits. Ms. Marshall 6th Year Business33
Slide 34
Types of Advertising Reminder: keeps the product in the
consumers mind. E.g. Guinness keep the product in peoples mind
through a combination of TV ads, sponsorship and Guinness
merchandise. Informative: gives factual information to the
consumer. E.g. the science bit of the ads for hair products.
Persuasive: convinces the consumer the product will make him/her
happier. E.g. because youre worth it from LOreal associates the
product with being a worthwhile person. Generic: advertises the
product for an industry not just one company, e.g. Buy Irish
campaign. Comparative: the ad directly compares the product to a
competitors. E.g. Tesco, Dunnes, Supervalu now show each others
prices for the goods they are cheapest for. Ms. Marshall 6th Year
Business34
Slide 35
What type of promotion??
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=Ygf0gRQsUb4&NR=1
http://www.youtube.com/watch?feature=endscreen&v
=Ygf0gRQsUb4&NR=1 http://www.youtube.com/watch?v=Wy52yueBX_s
http://www.youtube.com/watch?v=xwndLOKQTDs
http://www.youtube.com/watch?v=69MpLiYhsXw
http://www.youtube.com/watch?v=3MUVMl2aE4E
http://www.youtube.com/watch?v=YYixDPfTn_c
http://www.youtube.com/watch?v=HuHV4gwSXn4
http://www.youtube.com/watch?v=LbHVH9_EZu0 Ms. Marshall 6th Year
Business35
Slide 36
Product Placement http://www.youtube.com/watch?v=wACBAu9coUU
http://www.youtube.com/watch?v=naBRz1Y0cc8 Ms. Marshall 6th Year
Business36
Slide 37
Advertising Media The advertising media refers to the
communication channels available to a business for its advertising.
Ms. Marshall 6th Year Business37
Slide 38
Advertising Media TV Advantages: appeals to sense of sight and
sound. Shows the product in action. Watched by a lot of people.
Easy to get to target market by choosing what programmes to
advertise during. Disadvantages: very expensive. Less effective now
that most people change the channel during ads. Radio Advantages:
costs less than TV. Can reach people when they are driving or
working unlike TV. Good for reaching your target market, e.g.
geographic segmentation advertise on a local station.
Disadvantages: only appeals to sense of hearing. Competing with
other radio ads within the same few minutes. Ms. Marshall 6th Year
Business38
Slide 39
Advertising Media Newspapers Advantages: good for detailed
information, e.g. job ads, technical information, e.g. car ads.
Cost less than TV. Can reach target market, either geographically
or by interests often particular segment in the paper such as
appointments part of the Independent. Disadvantages: quality of
picture may not be great. Newspaper thrown out after one day.
Magazine: Advantage: Kept longer than newspaper. Easy to reach
target market, e.g. beauty products advertise in womens magazines.
Good quality pictures. Other media includes billboards, Direct
Mail, Internet etc Ms. Marshall 6th Year Business39
Slide 40
Media Mix The combination of media chosen will depend on: The
Target Market: advertise through media most likely to be seen by
your target market. E.g. Toys advertised during a childrens show.
The Nature of the Product: If the product needs to be seen working
then TV is the best option. Some products are restricted from
advertising on TV, e.g. cigarettes. Alcohol ads are banned from
portraying the user as being enhanced in some way by the product.
The Message: if the message is detailed or technical a written form
of ad may be best. The Cost: some media are more effective than
others in term of cost per 1,000 customers. E.g. if you are a local
shop it is more cost-effective to advertise in your local paper
than the Irish Times. Ms. Marshall 6th Year Business40
Slide 41
Ethics in Advertising The Advertising Standards Authority of
Ireland (ASAI)is a voluntary organisation set up by people who work
in the advertising industry. It does not have the legal powers to
stop ads but if an ad is found to be offensive they ask a company
to withdraw it. Most companies will comply. E.g. Hunky Dorys ad
with the female rugby players. National Consumer Agency: a State
agency which can ban advertisements that break the Consumer
Protection Act 2007 by misleading a consumer. E.g. Irish bakeries
were describing some bread as light despite the fact all bread is
low fat. Ms. Marshall 6th Year Business41
Slide 42
Dasani Coca-Cola would be in the saturation stage of the
product life cycle. This is one reason why they have introduced new
products. When the market for bottled water was increasing they
launched Dasani. However, it later emerged that it was actually tap
water which became contaminated at a bottling plant. The product
had to be withdrawn from the market, losing Coca-Cola millions in
wasted marketing and production expenditure. Ms. Marshall 6th Year
Business42
Slide 43
Sales Promotions Incentives that a business offers customers to
encourage them to buy more of its product and to buy it sooner than
they normally would. Techniques include: free samples, money-off
vouchers, free gifts e.g. Happy Meals, Competitions, Loyalty Cards
e.g. Dunnes Value Club, Merchandising. Merchandising refers to
point- of-sale promotional displays designed to attract attention
to a product and increase sales. It relies on impulse buying. Ms.
Marshall 6th Year Business43
Slide 44
Sales Promotion Sales promotion techniques involve some contact
between the customer and the seller. It lasts for a short period of
time and may be repeated at a later date. Sales Promotion is
popular in the large multiples such as Tesco, Dunnes, Superquinn in
the current climate in an effort to increase market share. It adds
to the attractiveness of the product. It is useful for stimulating
sales It aims to attract new consumers for the product, rewarding
loyal consumers and increasing buying frequency among occasional
consumers. Ms. Marshall 6th Year Business44
Slide 45
Public Relations PR means communicating with the media using
news stories to create good publicity for a firm or its products or
to respond to negative publicity. Functions of PR To attract
publicity when launching new products. E.g. Apple when launching
the new Iphone. To target certain customers. To build an image that
reflects well on the company. To defend the product/ company from
bad publicity. Negative product publicity can be a nightmare for
businesses e.g. Toyota recall of cars. It can lead to loss in the
market share and customers losing trust in the quality of the
product/service being offered. Ms. Marshall 6th Year
Business45
Slide 46
Public Relations Techniques Events: roadshows, exhibitions,
open days. E.g. UCD Open Day is held to encourage potential
students to put the college as their first choice. Media Relations:
(i) Press releases: news items about the company, sent to the
media. (ii) Press Conferences : meetings where statements are made
and reporters can ask questions about specific events. E.g.
McDonalds after Super Size Me. Public Service/ Charitable
Activities: Tescos Computers for Schools Initiative increases sales
as people shop there to support their local school. Goodwill
improves because Tesco is seen as part of the community. McDonalds
Ronald McDonald Childrens Charities donates money to Crumlin
Hospital. Sponsorship: the firm donates money to an event or team
in return for exposure of their name and logo. E.g. SuperValu and
the GAA. Ms. Marshall 6th Year Business46
Slide 47
Direct Selling Personal Selling: a salesperson meets with the
customer face to face to give them information about a product and
to persuade them to buy it. E.g. Representatives from different
publishers talk to teachers to get them to try their school books.
Telemarketing: means communicating with customers by telephone to
generate sales and deal with customer queries and complaints.
Direct Mail: involves sending promotional messages directly to
target customers, door to door leaflets or e-mail. Considered junk
mail or spam by many consumers. Ms. Marshall 6th Year
Business47
Slide 48
Place Place focuses on where customers will be able to access
the goods or services. Channel of Distribution describes the
various paths that goods may follow from producer to consumer.
Wholesaler: a business that buys products directly from the
manufacturer in huge quantities and then sells them on to the
retailer in smaller quantities. This is called breaking bulk.
Retailer: the shop that sells to consumer. Consumer: buys
products/services for their own personal use. Ms. Marshall 6th Year
Business48
Slide 49
Traditional Channel of Distribution Benefits: wholesalers take
responsibility for breaking bulk. Simplifies distribution for the
manufacturer. Costs are reduced for the manufacturer, e.g.
transport and storage costs, because they are selling in bulk to a
few wholesalers rather than many consumers. Problem: End product
may be more expensive for consumers as profit mark ups are added at
each stage. Ms. Marshall 6th Year Business49 Manufacturer
WholesalerRetailerConsumer
Slide 50
Alternative Channel of Distribution The growth of large
retailers such as Dunnes, Lidl, Tesco etc means that manufacturers
can bypass wholesalers and go straight to retailers. E.g. Own brand
goods. Costs can be reduced for the consumer as there are less
channels adding a mark up for profit. Large retailers may demand a
big reduction in price from the manufacturers, reducing their
profit. Ms. Marshall 6th Year Business50
ManufacturerRetailerConsumer
Slide 51
Direct Channel of Distribution Sells straight from the
factory/farm to the consumer. For instance, perishable goods such
as produce at a farmers market. The internet facilitates this
channel of distribution, e.g. Dell Computers. Profit is maximised
for producers by cutting out the middlemen. However, they must have
the marketing skills to sell the goods and provide an after sales
service. Ms. Marshall 6th Year Business51 ManufacturerConsumer
Slide 52
Choosing a Distribution Channel Ms. Marshall 6th Year
Business52
Slide 53
Class work Evaluate the marketing mix of a company/product of
your choice, e.g. Guinness, Ryanair, Apple, McDonalds. Consider the
following under each heading: Product: Stage in the Life Cycle (do
they use extension strategies?), Branding, Packaging Price: Pricing
strategies, factors that might determine the price Promotion:
Advertising, Sales Promotions, PR, Direct Selling which ones do
they engage in and to what extent? Place: The main channel of
distribution and why its chosen? Ms. Marshall 6th Year
Business53
Slide 54
Putting together a Promotional Campaign Step One: Analyse the
market situation. Step Two: Plan the campaign. Identify your target
market, set a budget and decide what medium to use. Step Three:
Implement the campaign. Monitor and review the campaign. Ms.
Marshall 6th Year Business54
Slide 55
Recent Exam Questions 2013 In Break-even analysis a distinction
is made between fixed costs and variable costs. Explain these
terms, and give one example in each case (10 marks). 2012 Outline
the factors a business should consider when choosing a suitable
Channel of Distribution. Provide examples to illustrate your answer
(20 marks). 2010 Evaluate Sales Promotion and Public Relations as
forms of promotion (20 marks). Ms. Marshall 6th Year
Business55
Slide 56
Ms. Marshall 6th Year Business56
Slide 57
Ms. Marshall 6th Year Business57
Slide 58
Recent Exam Questions Ms. Marshall 6th Year Business58
Slide 59
Recent Exam Questions 2007 Explain, using a diagram, the stages
in the product life cycle. (ii) In the case of each stage, describe
the implications for the cash flow of a business (20 marks).
Outline and illustrate the term niche market (10 marks). 2005 In
the case of a particular product/service of your choice, evaluate
the role of (i) Advertising (ii) Public Relations (iii) Personal
Selling in the promotion of the product/service (30 marks). Ms.
Marshall 6th Year Business59
Slide 60
Ms. Marshall 6th Year Business60
Slide 61
Marking scheme for previous question Question 7 (A) Stages in
new product/service development process : 6 @ 3 marks (2 + 1) (in
order) 20 (B) Significance of: Packaging Branding Product Life
Cycle 9 marks (5 + 4) 9 marks (4 at 2 marks + 1) 30 (C) Channel of
distribution and recommendation Note: Report structure divided (A ~
C) 9 marks (5 + 4) 6 marks (2 + 3 + 1) Ms. Marshall 6th Year
Business61