The Marketing Mix
To deliver the value of your product to the target consumers, you must design a particular marketing program
This program is called the marketing mix
The Marketing Mix refers to a tool used by the entrepreneur to position the product in the target market segment to efficiently and effectively deliver it to the consumers and to convince them about the benefits that they will derive from buying the product.
The marketing mix is also known as the Ps in marketing.
Originally, there were only 4Ps: Product, place, price, and promotion.
Eventually, 3 elements have been added: people, packaging, and positioning.
Product - refers to the tangible good or intangible service offered by the business to the target consumers.
For emphasis, the two basic entrepreneurial tenets (important ideas) relative to product are as follows:
1.The product is only produced once there is an existing need or want.
2.The product must satisfy the need or want better than the competing products.
The product, therefore, is the nucleus of the marketing mix.
Once the product fails to satisfy the needs and wants of the consumers, the other Ps may no longer be considered essential in the buying decision.
Big businesses adopt the concept of Product Mix where they make different products or services available to the consumers on top of the primary product.
- Experts in the field of marketing and entrepreneurship also call this product strategy as differentiation strategy.
Place - refers to the place where the target consumers are.
The entrepreneur must establish his/her business or product in the most strategic place or location.
Strategic place is relative. What may be considered strategic for a convenience store may not be considered strategic for bookstore.
The presence of many people does not assure the presence of target consumers.
The basic entrepreneurial concept relative to place in the marketing mix is to put your business where your consumers are willing to buy the product.
The nature of the business and the type of the product significantly determine the most appropriate place for the business.
Price - is the amount of money expected, required, or given in payment for something.
- is the quantity of payment or compensation given by one party to another in return for goods or services.
Pricing plays a key role in the marketing mix. The reason for this importance is that where the rest of the elements of the marketing mix are cost generators, price is a source of income and profits. Through pricing, the organization manages to support the cost of production, the cost of distribution, and the cost of promotion.
Although there are no rigid rules as to how prices are set, there are some variables that highly influence the setting of prices of goods and services.
1. Availability of the competing products
2. Cost of making the product
3. Type of product
4. Presence of substitute products
5. Stages of the product in the market
6. Demographic profile of the target market.
1. Availability of the competing products
When the supply of the competing products is high, the price of the product is usually low. Producers tend to gradually pull down the prices when the supply is high, and adapt a reverse mechanism when the supply is low.
2. Cost of Making the Product
In manufacturing the product, cost is involved.
The manufacturing cost includes the direct materials, direct labor, and factory overhead.
The basic rule is that the entrepreneur should not set a price lower than the cost involved in making the product.
Direct labor refers to the wages paid to the workers who are directly involved in manufacturing the product. Factory overhead includes indirect materials and labor and other expenses like the cost of light, water, fuel, or machinery maintenance. Direct materials pertain to the materials that form part of the finished product. Direct labor, factory overhead, and direct materials are the three elements of cost. They must be present in all instances in the process of determining the cost of the product.
3. Type of Product
Products are broadly classified into industrial products and consumer products.
Industrial products are used as raw materials of other manufacturing entities. These product usually have higher prices compared to consumer products. Prices of industrial product remain fixed for a long period, while consumer products may undergo several price changes within a very short span of time.
On the other hand, consumer products are used and consumed by individual consumers. These products may be further classified into convenience product, shopping product, and highly priced product. The classification of consumer products is entirely dependent on the consumers. Hence, the same product may be classified as convenience product by one consumer but classified as shopping product by another.
4. Presence of Substitute Products
The presence of substitute products is a threat to the primary product. Substitute products basically set the limit to the selling price of the primary product. The consumer can easily switch and buy the substitute products with lower prices especially when the primary product is not available. The threat of substitute products is strongly felt in the realm of consumer products. Since the prices of consumer products are relatively low, competitors can easily join the market, and the resulting competition is expected to be stiff.
The entrepreneurs must continuously monitor and study the entrepreneurial opportunities that may be provided by substitute products as these likewise position themselves in the market.
5. Stages of the Product in the Market
The product usually undergoes the following stages:
1. Introductory stage
2. Growth stage
3. Maturity stage
4. Decline stage
During the introductory stage, the entrepreneur may adopt the price skimming approach in which the new product is highly priced when introduced in the market, but is gradually reduced as competitors increase.
The entrepreneur may also adopt the price penetration approach in order to build a well-founded consumer base. In this approach, the product is introduced with a low price.
In the growth and maturity stages, the entrepreneur may adopt the commonly used pricing strategy which is the cost-based model, in which the price is simply equal to the cost plus the desired profit margin.
Cost-based pricing is the easiest way to calculate what a product should be priced at.
This appears in two forms: full cost pricing and direct-cost pricing.
1. Full cost pricing takes into consideration both variable, fixed costs and a % markup.
2. Direct-cost pricing is variable costs plus a % markup.
Cost Plus Pricing - is a cost-based method for setting the prices of goods and services.
- the company determines the cost of producing, distributing, and promoting the product and then they add a mark-
up.
unit cost = variable cost + fixed cost
unit sales or expected unit sales
Toaster unit cost = $10 + $300,000
50,000
Toaster unit cost = $10 + 6
Toaster unit cost = $16
Markup price = unit cost
1 - desired return on sales
Markup price = $16
1- .20
Markup price = $20
Fixed costs and variable costs comprise the total cost.
Variable costs are those costs that vary depending on a company's production volume; they go up when a company produces more goods or services, and go down when it produces fewer goods or services.
Raw materials like sugar, flour, milk and eggs are examples of variable costs when making donuts.
Fixed costs are costs that does not change with an increase or decrease in the amount of goods or services produced or sold.
Fixed costs like rent, advertising, insurance and office supplies are expenses that have to be paid by a company, independent of any business activity.
In the decline stage, the product experiences a decreased or negative growth in sales. This leads to lower profits or eventual losses for the business, and ultimately, the discontinuance of production and distribution of the product.
6. Demographic Profile of the Target Market
The demographic profile of the consumers highly influence the process of setting the most appropriate prices of the goods and services. For instance, consumers who belong to the higher economic status in the community usually buy products that are highly priced. This type of consumers tends to always protect their social status. Buying low-priced consumer goods may tarnish their social image in the community where they belong. Hence, products that are intended for them are competitively priced. The pricing strategy may be completely different when the income of the target consumers is merely enough to sustain the basic needs of the family.
The pricing strategies most often used by retail businesses include psychological pricing and discount pricing.
Psychological pricing:
1. Promotional pricing - where products are sold at a lower price in a limited temporary period like midnight sale, Christmas sale, or anniversary sale.
2. Odd or even pricing - where products are sold at prices that end in odd number 5 like 99.95, 199.95, or 399.95 to appear cheaper compared to products with prices that end in even number 0 like 100, 200 or 400.
3. Prestige pricing - where products are purposely sold at a higher price in order to create a high or superior image like a skin lotion sold at 700 whereas other similar products are sold between 150 and 200.
The entrepreneur may resort to discount pricing to keep up with the competition in the market, recreate interest in the product, and get rid of the old stock.
Other demographic factors that must be considered by the entrepreneur in pricing his/her product are age, gender, civil status, education, occupation, race, and religion of the target consumers.
Promotion
In marketing mix, the term promotion refers to the mode of conveying the presence and attributes of the product to the target consumers.
Through promotions, the business communicates to the target consumers the pertinent information about the product including its benefits, price, and position in the market. It creates an awareness of the product in the minds of consumers and elicits their desire to buy it.
Promotion utilizes the most appropriate media to reach the consumers. These include the following:
1. Advertising
2. Publicity
3. Personal selling
4. Sales Promotion
5. Direct marketing
Advertising
The most common medium of promoting a product or service is through advertising in the following forms:
1. Television or radio commercials
2. Print advertisements like those on billboards, magazines, telephone directories, or newspapers
3. Online advertising
4. Packaging ads
Since advertising is a paid promotional activity, small businesses usually create and handle their own advertising. On the other hand, large businesses use advertising agencies since they have the financial capability to pay the high cost of advertising.
Publicity
Publicity is another way of promoting the product or service to the target consumers through media coverage. Members of media are usually informed through a formal statement or press release about a particular event where the product or service will be presented or endorsed by some well-known personalities.
Personal Selling
Personal selling involves a salesperson who has personal and direct contact with the prospective consumers. This approach may not cover consumers who have not visited the business establishment or have not been approached by the sales force.
In personal selling, the salesperson is in a competitive position to influence the consumers to buy the product. In his/her informal conversation with them, he/she can roughly identify their needs and wants. Thus, it is a must for the entrepreneurs who undertakes personal selling to have full knowledge of the product, particularly its features and benefits.
Sales Promotion
Sales promotion aims to influence the target consumers to buy the product or avail of the service now and not tomorrow. This strategy involves giving incentives to consumers so they will acquire the product or service. The most popular promotional tools adopted in sales promotion category are discounts, coupons, cash rewards, and gift certificates.
The monetary or financial benefits offered by the product attract the consumers to buy it. Sometimes, window shoppers who do not have any plans to buy a product may eventually do so because of the discounts. This is very evident in the "buy-one-take-one" sales promotion strategy, which is already a popular technique even among small merchandising businesses. The "eat-all-you-can" promotion strategy is likewise gaining a wide acceptance among consumers.
Direct Marketing
Promoting a product or service through direct marketing is undertaken through the internet.
People
The modified model of the marketing mix has added people as another element that assists in product positioning. The term people refers to individual employees or workers who are directly involved in the production, marketing, and sale of the product or service. Hence, the entrepreneur must be sure to hire the right person for the position.
The term right in this context simply means that the educational qualifications and expertise of the person to occupy the position match the specifications and requirements of the job. For example, an entrepreneurial venture that is in need of a marketer who will promote the product in the whole island of Mindanao must hire a graduate of marketing or business course and not a graduate of an engineering or information technology course. The technical expertise that the job requires must also be given due consideration in the process of hiring an employee.
Finding the right person for a position entails cost on the part of the business venture. The amount of salary is dependent on the educational qualifications, technical expertise, and professional experiences of the applicant. The higher the requirement for the job, the higher the salary level.
Big businesses have an edge over small ones in the aspect of financial capability to recruit the best people for the job.
Packaging
In the context of marketing mix, packaging refers to the process of putting the product in a package or container. It includes the kind of material used for the wrapper or container and the label and product information printed on the package. The basic purpose of packaging is to protect the product from spillage, damage, or spoilage. Spilled, damaged, or spoiled products create impressions that are disadvantageous to the product or business. The type of product basically determines the kind of packaging whether it will be plastic container, breakable bottle, tin can, carton or box, or paper or cellophane wrapper.
The packaging of a product must be user-friendly, that is, it must be easy to open, handle, and store it. It can be resealable and reusable. It can also be environment-friendly. The label printed on the packaging material must be attractive, readable, and complete with the necessary product information.
Positioning
Positioning, as an additional element in the modified model of the marketing mix, refers to the place occupied by the product in the minds of the consumers. It is a marketing strategy that defines the target consumers. It is the last marketing stage in the customer identification process.
To deliver the value of your product to the target consumers, you must design a particular marketing program
This program is called the marketing mix
The Marketing Mix refers to a tool used by the entrepreneur to position the product in the target market segment to efficiently and effectively deliver it to the consumers and to convince them about the benefits that they will derive from buying the product.
The marketing mix is also known as the Ps in marketing.
Originally, there were only 4Ps: Product, place, price, and promotion.
Eventually, 3 elements have been added: people, packaging, and positioning.
Product - refers to the tangible good or intangible service offered by the business to the target consumers.
For emphasis, the two basic entrepreneurial tenets (important ideas) relative to product are as follows:
1.The product is only produced once there is an existing need or want.
2.The product must satisfy the need or want better than the competing products.
The product, therefore, is the nucleus of the marketing mix.
Once the product fails to satisfy the needs and wants of the consumers, the other Ps may no longer be considered essential in the buying decision.
Big businesses adopt the concept of Product Mix where they make different products or services available to the consumers on top of the primary product.
- Experts in the field of marketing and entrepreneurship also call this product strategy as differentiation strategy.
Place - refers to the place where the target consumers are.
The entrepreneur must establish his/her business or product in the most strategic place or location.
Strategic place is relative. What may be considered strategic for a convenience store may not be considered strategic for bookstore.
The presence of many people does not assure the presence of target consumers.
The basic entrepreneurial concept relative to place in the marketing mix is to put your business where your consumers are willing to buy the product.
The nature of the business and the type of the product significantly determine the most appropriate place for the business.
Price - is the amount of money expected, required, or given in payment for something.
- is the quantity of payment or compensation given by one party to another in return for goods or services.
Pricing plays a key role in the marketing mix. The reason for this importance is that where the rest of the elements of the marketing mix are cost generators, price is a source of income and profits. Through pricing, the organization manages to support the cost of production, the cost of distribution, and the cost of promotion.
Although there are no rigid rules as to how prices are set, there are some variables that highly influence the setting of prices of goods and services.
1. Availability of the competing products
2. Cost of making the product
3. Type of product
4. Presence of substitute products
5. Stages of the product in the market
6. Demographic profile of the target market.
1. Availability of the competing products
When the supply of the competing products is high, the price of the product is usually low. Producers tend to gradually pull down the prices when the supply is high, and adapt a reverse mechanism when the supply is low.
2. Cost of Making the Product
In manufacturing the product, cost is involved.
The manufacturing cost includes the direct materials, direct labor, and factory overhead.
The basic rule is that the entrepreneur should not set a price lower than the cost involved in making the product.
Direct labor refers to the wages paid to the workers who are directly involved in manufacturing the product. Factory overhead includes indirect materials and labor and other expenses like the cost of light, water, fuel, or machinery maintenance. Direct materials pertain to the materials that form part of the finished product. Direct labor, factory overhead, and direct materials are the three elements of cost. They must be present in all instances in the process of determining the cost of the product.
3. Type of Product
Products are broadly classified into industrial products and consumer products.
Industrial products are used as raw materials of other manufacturing entities. These product usually have higher prices compared to consumer products. Prices of industrial product remain fixed for a long period, while consumer products may undergo several price changes within a very short span of time.
On the other hand, consumer products are used and consumed by individual consumers. These products may be further classified into convenience product, shopping product, and highly priced product. The classification of consumer products is entirely dependent on the consumers. Hence, the same product may be classified as convenience product by one consumer but classified as shopping product by another.
4. Presence of Substitute Products
The presence of substitute products is a threat to the primary product. Substitute products basically set the limit to the selling price of the primary product. The consumer can easily switch and buy the substitute products with lower prices especially when the primary product is not available. The threat of substitute products is strongly felt in the realm of consumer products. Since the prices of consumer products are relatively low, competitors can easily join the market, and the resulting competition is expected to be stiff.
The entrepreneurs must continuously monitor and study the entrepreneurial opportunities that may be provided by substitute products as these likewise position themselves in the market.
5. Stages of the Product in the Market
The product usually undergoes the following stages:
1. Introductory stage
2. Growth stage
3. Maturity stage
4. Decline stage
During the introductory stage, the entrepreneur may adopt the price skimming approach in which the new product is highly priced when introduced in the market, but is gradually reduced as competitors increase.
The entrepreneur may also adopt the price penetration approach in order to build a well-founded consumer base. In this approach, the product is introduced with a low price.
In the growth and maturity stages, the entrepreneur may adopt the commonly used pricing strategy which is the cost-based model, in which the price is simply equal to the cost plus the desired profit margin.
Cost-based pricing is the easiest way to calculate what a product should be priced at.
This appears in two forms: full cost pricing and direct-cost pricing.
1. Full cost pricing takes into consideration both variable, fixed costs and a % markup.
2. Direct-cost pricing is variable costs plus a % markup.
Cost Plus Pricing - is a cost-based method for setting the prices of goods and services.
- the company determines the cost of producing, distributing, and promoting the product and then they add a mark-
up.
unit cost = variable cost + fixed cost
unit sales or expected unit sales
Toaster unit cost = $10 + $300,000
50,000
Toaster unit cost = $10 + 6
Toaster unit cost = $16
Markup price = unit cost
1 - desired return on sales
Markup price = $16
1- .20
Markup price = $20
Fixed costs and variable costs comprise the total cost.
Variable costs are those costs that vary depending on a company's production volume; they go up when a company produces more goods or services, and go down when it produces fewer goods or services.
Raw materials like sugar, flour, milk and eggs are examples of variable costs when making donuts.
Fixed costs are costs that does not change with an increase or decrease in the amount of goods or services produced or sold.
Fixed costs like rent, advertising, insurance and office supplies are expenses that have to be paid by a company, independent of any business activity.
In the decline stage, the product experiences a decreased or negative growth in sales. This leads to lower profits or eventual losses for the business, and ultimately, the discontinuance of production and distribution of the product.
6. Demographic Profile of the Target Market
The demographic profile of the consumers highly influence the process of setting the most appropriate prices of the goods and services. For instance, consumers who belong to the higher economic status in the community usually buy products that are highly priced. This type of consumers tends to always protect their social status. Buying low-priced consumer goods may tarnish their social image in the community where they belong. Hence, products that are intended for them are competitively priced. The pricing strategy may be completely different when the income of the target consumers is merely enough to sustain the basic needs of the family.
The pricing strategies most often used by retail businesses include psychological pricing and discount pricing.
Psychological pricing:
1. Promotional pricing - where products are sold at a lower price in a limited temporary period like midnight sale, Christmas sale, or anniversary sale.
2. Odd or even pricing - where products are sold at prices that end in odd number 5 like 99.95, 199.95, or 399.95 to appear cheaper compared to products with prices that end in even number 0 like 100, 200 or 400.
3. Prestige pricing - where products are purposely sold at a higher price in order to create a high or superior image like a skin lotion sold at 700 whereas other similar products are sold between 150 and 200.
The entrepreneur may resort to discount pricing to keep up with the competition in the market, recreate interest in the product, and get rid of the old stock.
Other demographic factors that must be considered by the entrepreneur in pricing his/her product are age, gender, civil status, education, occupation, race, and religion of the target consumers.
Promotion
In marketing mix, the term promotion refers to the mode of conveying the presence and attributes of the product to the target consumers.
Through promotions, the business communicates to the target consumers the pertinent information about the product including its benefits, price, and position in the market. It creates an awareness of the product in the minds of consumers and elicits their desire to buy it.
Promotion utilizes the most appropriate media to reach the consumers. These include the following:
1. Advertising
2. Publicity
3. Personal selling
4. Sales Promotion
5. Direct marketing
Advertising
The most common medium of promoting a product or service is through advertising in the following forms:
1. Television or radio commercials
2. Print advertisements like those on billboards, magazines, telephone directories, or newspapers
3. Online advertising
4. Packaging ads
Since advertising is a paid promotional activity, small businesses usually create and handle their own advertising. On the other hand, large businesses use advertising agencies since they have the financial capability to pay the high cost of advertising.
Publicity
Publicity is another way of promoting the product or service to the target consumers through media coverage. Members of media are usually informed through a formal statement or press release about a particular event where the product or service will be presented or endorsed by some well-known personalities.
Personal Selling
Personal selling involves a salesperson who has personal and direct contact with the prospective consumers. This approach may not cover consumers who have not visited the business establishment or have not been approached by the sales force.
In personal selling, the salesperson is in a competitive position to influence the consumers to buy the product. In his/her informal conversation with them, he/she can roughly identify their needs and wants. Thus, it is a must for the entrepreneurs who undertakes personal selling to have full knowledge of the product, particularly its features and benefits.
Sales Promotion
Sales promotion aims to influence the target consumers to buy the product or avail of the service now and not tomorrow. This strategy involves giving incentives to consumers so they will acquire the product or service. The most popular promotional tools adopted in sales promotion category are discounts, coupons, cash rewards, and gift certificates.
The monetary or financial benefits offered by the product attract the consumers to buy it. Sometimes, window shoppers who do not have any plans to buy a product may eventually do so because of the discounts. This is very evident in the "buy-one-take-one" sales promotion strategy, which is already a popular technique even among small merchandising businesses. The "eat-all-you-can" promotion strategy is likewise gaining a wide acceptance among consumers.
Direct Marketing
Promoting a product or service through direct marketing is undertaken through the internet.
People
The modified model of the marketing mix has added people as another element that assists in product positioning. The term people refers to individual employees or workers who are directly involved in the production, marketing, and sale of the product or service. Hence, the entrepreneur must be sure to hire the right person for the position.
The term right in this context simply means that the educational qualifications and expertise of the person to occupy the position match the specifications and requirements of the job. For example, an entrepreneurial venture that is in need of a marketer who will promote the product in the whole island of Mindanao must hire a graduate of marketing or business course and not a graduate of an engineering or information technology course. The technical expertise that the job requires must also be given due consideration in the process of hiring an employee.
Finding the right person for a position entails cost on the part of the business venture. The amount of salary is dependent on the educational qualifications, technical expertise, and professional experiences of the applicant. The higher the requirement for the job, the higher the salary level.
Big businesses have an edge over small ones in the aspect of financial capability to recruit the best people for the job.
Packaging
In the context of marketing mix, packaging refers to the process of putting the product in a package or container. It includes the kind of material used for the wrapper or container and the label and product information printed on the package. The basic purpose of packaging is to protect the product from spillage, damage, or spoilage. Spilled, damaged, or spoiled products create impressions that are disadvantageous to the product or business. The type of product basically determines the kind of packaging whether it will be plastic container, breakable bottle, tin can, carton or box, or paper or cellophane wrapper.
The packaging of a product must be user-friendly, that is, it must be easy to open, handle, and store it. It can be resealable and reusable. It can also be environment-friendly. The label printed on the packaging material must be attractive, readable, and complete with the necessary product information.
Positioning
Positioning, as an additional element in the modified model of the marketing mix, refers to the place occupied by the product in the minds of the consumers. It is a marketing strategy that defines the target consumers. It is the last marketing stage in the customer identification process.