7.3. Implementing the Marketing Mix

What is the marketing mix?

When consumers buy a product, they are attempting to satisfy a wide range of desires. The marketing mix refers to the combination of elements within a firm’s marketing strategy which are designed to meet or influence the wants of customers in order to generate sales. It is the role of the marketing department in any organisation to co-ordinate the planning, organisation, and implementation of the marketing mix across the whole organisation.

The marketing mix of any organisation will be made up of four main components: Product, Price, Place, and Promotion.

If a firm is to be successful it must get all four elements right.

A good marketing mix will encourage customers to build up loyalty to a particular product or product range. Additionally, many firms producing items such as hi-fi and video equipment ensure repeat purchases for their products through built-in obsolescence. This means that products either last for a limited time span and then wear out, or have to be frequently updated.

Product

The product is central to the marketing mix. Consumers buy goods and services to satisfy a variety of desires. A firm must be aware of these desires if it is to operate successfully in the market. A firm is not just selling a product, but a whole concept to the consumer.

Consumer wants are always changing because of various factors – fashion, social and cultural change, growing incomes, new legal requirements, and many more. It is important that firms keep pace with changing wants and develop existing or new products that people will continue to buy.

Price

The prices of all goods and services are likely to vary over time as market conditions alter and marketing objectives change from – say – launching a new product to maximising profit from it. Three major factors influence the pricing policies of firms: costs of production, the level and strength of consumer demand, and degree of competition in supply.

Short-term objectives, such as responding to the threat of new competitors, or the need to extend the life of the product, may also affect pricing strategies.

Cost-based pricing strategies involve setting price with reference to the costs of production. Firms will normally calculate the average cost of producing each item before adding a mark-up over cost for profit. However, in the short run, a firm may price below costs, thereby sustaining a loss, in order to promote a new product or fend off competition from rival firms. The aim will be to expand sales and market share. As sales expand, the firm will be able to increase output and reduce the cost per unit. Cost savings associated with an increase in the size of a firm – for example, the ability to buy in bulk and receive discounts – are known as economies of scale.

Instead of basing price on what the product costs to produce, demand-based pricing asks the question: ‘At what price will the product sell?’ To answer this, the firm will need to look carefully at consumers’ perceptions of the worth of a product – i.e. their willingness to pay – and at the pricing policies of competitors. Only then will they be able to produce a good or service with the right design and quality to fit the market, and at the right cost to yield a profit.

Place

For the consumer to want to make a purchase the right product must be transported to the right place at the right time – otherwise the customer will not buy. It will also be necessary for a producer to hold stocks of their product to respond quickly to consumer demand.

Distribution refers to the methods by which consumers obtain products from producers. It is a significant element in a firm’s costs, and so requires careful management. The firm will need to consider physical distribution, the storage and transportation of goods and services, and the various methods and outlets through which the good or service can be sold to the consumer. These methods will include selling direct to the consumer or selling through intermediaries such as wholesalers, retail outlets, or specialist sales agents.

Choosing the distribution channel

Business will need to choose the most efficient channel of distribution for its products: one that will allow them to make their products available to consumers quickly, when they want them, and at minimum cost. Factors to consider will include the following:

How big is the market? Large markets spread over a wide area will usually require intermediaries. International sales may require agents with knowledge of overseas markets and trade regulations.

How large is the producer? Large firms may have the finance and personnel necessary to run their own distribution network of vehicle fleets, warehouses, and even retail outlets.

Who are the consumers? Consumers of low-value, mass-produced goods normally expect to obtain them quickly and easily at retail outlets. Industrial consumers will often require technical details and will deal directly with a manufacturer or agent. They may be willing to wait some time for their order to be fulfilled.

What is the product? Highly specialized or personalized goods and services will require direct contact between producer and consumer. Perishable goods will need to be sold quickly, so speed will be a key factor. Low-value goods sold in bulk are likely to be distributed through intermediaries, thus relieving the producer of the need for, and cost of, storage. New products may meet with some resistance from retailers and may require alternative means of distribution.

What is the product image? Sometimes a firm may wish to restrict the sale of its products to certain shops and stores in order to preserve an exclusive product image.

Promotion

Promotion involves providing information to consumers about products through a variety of media, and attempting to influence buying decisions by stressing certain features. Influence may become ‘persuasion’ when firms attempt to stress product features which may be more imaginary than real.

Most forms of promotion seek to create an image to go with the product. Brand imaging is an important part of a firm’s marketing strategy. Underlying all successful branding is the principle that people not only buy products, they also buy images. For example, Volkswagen advertised the typical VW driver as an affluent, carefree, attractive, professional type of person. The advertising slogan spoke of ‘VW people’. The campaign was successful as a large market segment identified with or wanted to be like the kind of people portrayed as ‘VW people’. Sales of the cars rose accordingly.

If branding can make consumers believe that the branded product is better than others, they will be willing to pay a higher price for it. As many rival products are virtually identical, the only way in which a particular one can be made to stand out is often through aggressive branding. This is usually achieved through the use of a brand name, catch phrase, distinctive packaging, and, in the case of soap powders, a scented or coloured powder.

A firm can choose a separate brand name for each of its products or use one name for the whole range. For example, brand names like McDonalds, Sainsbury, and St Michael cover a range of products. Marketing using these brand names means that promoting one product helps the others in the range. However, if one product in the range is not up to standard, this can badly affect the image of the others.

Differentiated marketing

Not all consumers will want the same things from a product. For example, when buying a hi-fi system, some people may want very high-quality sound; others will look for features and gadgets, while others may desire maximum volume and the latest technology. In such markets, firms will need to adopt a differentiated marketing strategy. This involves marketing a product in different ways to different groups of people or market segments, so as to emphasise different aspects of the same product.

In an extreme form, a firm may use concentrated marketing aimed at only one market segment. This can often be a successful and cost-­effective method of marketing for small firms serving niche markets. Examples might include polo equipment aimed at high-income groups, student rail passes aimed at people under 26 years of age, or magazines such as Kerrang aimed at young people who like heavy metal music.

Undifferentiated marketing

The strategy of broadcasting a single message about a product to the whole market is known as undifferentiated marketing. This tends to be used where the product is homogenous - that is, where the prod­uct cannot be differentiated by producers to suit the needs of different market segments. For example, potatoes are advertised by the Potato Marketing board on behalf of all potato producers, because the product satisfies a basic need for food which is common to all consumers.

Contracting and expanding markets

If consumer demand for a particular good or service is falling over time the market for that product is said to be shrinking or contracting. Firm making that good or service will suffer declining sales and profits. Competition for remaining customers will be fierce among firms and some may close down.

If, on the other hand, consumer demand for a particular good or service is rising over time, the market for that product is said to be expanding. Those firms already producing the good or service will attract new customers and experience rising sales and profits. They may have to expand production to meet demand and it is likely that other firms will be attracted to the market.

Entering a new market will often require a firm initially to charge a relatively low price for its products to attract customers away from established rivals. Heavy advertising and in-store promotions to raise customer awareness about the product will also be necessary. For example, advertising for a new drink called Red Bull was prolific in the summer of 1995 with a number of humorous cartoons being shown on prime time television and posters with the catchy slogan ‘It's amazing what a Red Bull can do!’. In this way marketing was being used to gain a foothold in the large canned soft drinks market and to build sales and market share.