9.3 Marketing Mix
Essential idea:
The marketing mix is often crucial when determining a product or brand’s offering.
Nature and Aims of Design
Nature of Design
Empathy for, and understanding of the target audience is developed through thorough analysis of the market chosen. This informs several factors: the standards that end users demand; how and where to distribute and sell the product; how much they are willing to pay for a certain product and its quality; and how to communicate the launch of a product. Correct analysis of these factors could determine the success or failure of a product, despite its quality. (3.8)
Aims
Aim 7: Marketing is often a new area for designers to consider. Exploring unfamiliar aspects of innovation improves their understanding of the market needs of the products they are designing.
Guidance
As DP Design Technology student you should:
Understand and apply the 4Ps of the marketing mix: product, place, price, promotion
Concepts and Principles
Marketing Mix: The Four P's
Understanding the target market is essential for a design to be successful. Through careful research, Designers can identify and understand the factors necessary fro success: How and where the product should be distributed and sold; What standards or expectations should be met; How much consumers are willing to pay for the product; and What types of promotional campaigns will best target the users. Together, these are called the 4Ps of Marketing:
Empathy for, and understanding of the target audience is developed through thorough analysis of the market chosen. This informs several factors: the standards that end users demand; how and where to distribute and sell the product; how much they are willing to pay for a certain product and its quality; and how to communicate the launch of a product. Correct analysis of these factors could determine the success or failure of a product, despite its quality. (3.8)
In Criterion F3 of your IA, the Marketing Mix is one tool that can be used to research and justify your scale of production.
The Four P's: Product
The product refers to the features, quality, packaging, branding, etc, that define the product.
From the perspective of the designer, they need to consider how these elements are incorporated into the overall design. For example:
How are the features of the product related to the target market? What features or functions are particular to this market?
How is the packaging used to market the product? Is it sustainable?How is it related to the experience of using the product (ie. unboxing)?
How are the values and aesthetics of the brand reflected in the product? What aesthetic elements connect the product to the brand?
How is the overall quality of the product connected with the brand and price? Do the materials and build quality reflect the brand (ie. higher quality materials = higher price and luxury brand)
How is the service (A/S), warranty, repair options, etc, related to the marketing? In what ways are these part of the brand or marketing? Are these elements important to the target market? Can the consumer repair the product themselves, or must they take it to a service center?
Product Standardization
Product standardization is an important concept for designers to consider. It refers to uniform or shared characteristics of a product. There are three types of product standardization.
Government Standards
Government regulations and policies may dictate certain aspects of a design. For example the “CE” mark on many portable electronics shows that the product meets standards set by the European Union for safety and quality of electronics. Many counties or regions have these certifications.
Other standards might relate to the labeling of materials to improve sustainability at the end of life. Recycling of batteries might be one such example. These are mandatory if the product is to be sold in the market place.
Examples:
Safety certifications
Recycling information
Component Standards
Component standards refer to the sharing of components across an industry. The USB plug is an example that illustrates this. A huge range of devices and accessories make use of this standard interface. This allows not only for ease of use and cross-device compatibility, but reduces manufacturing costs as no proprietary interfaces are being produced. From a consumer point of view, choosing a product that uses standardized components can make it easier to repair and more likely to work with existing systems or technologies.
These are voluntary and may be determined by market research, economics, or design strategies.
Examples:
Standardized components for computers
Bicycle wheel sizes
Industry Standards
Industry standards refer to the shared standards that an industry may adopt. These can be related to the manufacture or sale of the product. Most raw materials, for example, are sold in standard sizes. In North America, plywood panels are manufactured in varying thicknesses, but the same flat size of 1200mm X 2400mm. Designers need to design within these dimension constraints.
Examples:
Raw sizes of wood panels
Shoe sizes
Screw, nuts, and bolt sizes.
The Four P's: Place
Place refers to how the product will be distributed and sold. Companies have several options for how they sell their products, and each option or combination of options requires careful analysis in order to be successful.
Several questions guide this analysis:
Where will the product be sold?
The geographical area needs to be identified. Will the product be sold locally, nationally, or internationally?
Who will sell the product?
Will the product be sold direct from the manufacturer, or through a network of already established retailers?
How will it be sold?
What will be the customer experience of shopping for a product? As much shopping has moved from the physical to online platforms, companies need to consider how an online platform can help customers make a purchase. Some retailers explore online fitting rooms to help customers select clothing; and OpenDesk has started to use AR to help customers visualize how OpenDesk furniture will look in their own space
How will the product be distributed?
Some companies are experimenting with a hybrid of online and physical distribution channels. Many large retailers, for example, provide customers with a variety of ways to purchase their product. Consumers can order online and have it shipped to them, visit the store and pick what they want, or order online for delivery and pick up from the store. In other cases, some retailers may only exclusively sell online as a way to reduce overhead costs which they can pass on to consumers in the form of lower prices.
The Four P's: Promotion
Promotion is the method(s) of informing current, potential, and future customers of the availability of a product or service. Promotion aims to generate profit by converting interest in the product into actual sales.
When deciding on promotional strategies, companies might consider the following:
What strategies will be used to promote the product or service?
What media will be used to promote?
How are other products being promoted?
What is the budget for promotion?
What methods will best reach the target audience?
The Four P's: Price
Price is the amount of money a consumer pays to purchase a product or service. This is an essential aspect of the marketing mix as it determines whether or not a product will generate profit. Companies may use a variety of price-setting strategies.
Key Terms:
Cost: The amount of money a company spends to produce, distribute or market a product. See Unit Cost
Unit cost: The amount of money it costs to produce a single item. This cost may be determined by the scale of manufacture. See Cost. Cost and Unit Cost are sometimes used interchangeably.
Profit: The amount of money a company makes from selling a product, after it has paid the costs of manufacture.
Price: The amount of money a customer pays for a product or service.
Cost-Plus Pricing
A percentage is added to the total production costs to generate a profit margin.
Example: A company may decide that it wants to make a profit of 10% on every product it sells. If the unit cost to design, manufacture, and distribute a product is $100.00, then the Price would be set at $110.00. The company would make a profit of $10 for each item sold.
Demand Pricing
The price is set according to the demand for the product. A higher demand for the product can allow manufacturers to set a higher price. Conversely, lower demand may mean a lower price needs to be set.
Example: New and innovative products may command a higher price as they enter the market because of the higher demand for them. As demand decreases, or as newer products enter the market, the price may be lowered to stimulate more sales.
Psychological pricing
Psychological pricing is the setting of the price so that the consumer feels like they are paying less. The most common example of this is the pricing of items at $39.99 rather than $40.00. Monthly subscription services versus yearly plans at a discount can also appeal to consumers’ desire to save money. They may feel they pay less when being charged $10.00/month; or feel they are getting a deal by paying more money upfront for a whole year but at a discount of $100/year. ($8.33/month)
Product-line pricing
The price is set within a product line of a family of products. The price might differ according to the different features or qualities of a product.
Example: Each fitness tracker in the Fitbit family essentially uses the same technology but to different degrees and levels of performance. Each tracker in the product family is priced accordingly, with an obvious progression from simple to complex, novice to expert. In this way, a company can target a wider range of users by designing, and pricing, to each segment.
Competitor-based pricing
The price is set according to what other products are being sold for in the market place. Depending on the pricing and branding strategies, the price may be lower, the same, or higher than competitors. The existing price of competitors' products is the main influence on the price.