4.5 The 4 Ps:
Product, Price, Promotions and Place
"Awareness, Interest, Desire & Action"
- Mr E. Owen (circa 2018)
Product
What makes the difference between product success and product failure?
The success of a product is dependent with a lot of factors such as:
Is there enough demand for the product?
Is the market too saturated (too much competition)?
The product life cycle shows the sale output of a product. There are six stages to this:
Stage 1: Development
Generates ideas, budgets, planning. No inflows, as they haven't released the product yet.
Stage 2: Introduction
Slow release, low sales and low output. Cash flow may still be negative/outflow
Stage 3: Growth
Gradual increase in sales and output. Cash flow begins to increase, therefore may be positive/inflow.
Stage 4: Maturity
Sales are still increasing but slower as most consumers have already bought the product (less demand unless the consumer is loyal)
Stage 5: Saturation
The market is made out of many competitors and and becomes saturated. Sales plateau and level out. Sometimes it starts to decline.
Stage 6: Decline
Steady drop in sales as consumer change to other products
Example of a Product's Life Cycle: LEGO Case Study
Created by: ValkrieJJ ('19)
Example of a Business' Boston Matrix: LEGO Case Study
Created by: ValkrieJJ ('19)
Fad vs Fashion
Case Study: Fidget Spinners (a Fad)
The fidget spinner is a good example of a 'fad' product life cycle. You can see that the introduction and growth period rapidly rose however the maturity and saturation period was very short. The decline was a meteoric decline period due to the incredibly fast turnover of mass-market fads.
Case Study: Apple Products (a Fashion)
Apple products tend to follow the trend of a 'classic' product life cycle but every year or every other year, there is a spike in the product's life cycle due to a release of a new model in the product's line. Apple tends to release a new model of an existing product whenever mass-market attention falls.
Price
Price refers to the monetary amount paid by the customer to purchase a good or service.
Cost plus (mark-up)
Cost + %markup
i.e. table cost $10; 20% markup; 10*1.2 = $12
Market Penetration
Prices lower than your competitors
Often "limited amount of time"
Captures market share
Often used by new products
Loss Leader
A product sold at less than cost (or sold at a loss to the company) in order to entice consumers to buy their other products
i.e. Cruise ships offer low prices on rooms but on a cruise you are forced to buy goods and services on the cruise i.e. expensive food, gambling, drinks, etc.
Price Discrimination
Same product has different prices in different sectors
Student rates, children in buffets,
Economy vs Business vs First Class seats
Price leadership
When the leading company in a market sets the standard price for a product
Often it's rival competitors are left with no choice but to follow the same price or to price slightly lower to try Market Penetration pricing strategy
Predatory
Very low pricing to knock out competition until you have a monopoly and increase prices again
Example: Walmart US which sold products at an incredibly low rate to drive competition down then raised prices after Walmart market share rose
Psychological
$9.99 (bruh)
Skimming
When a company sets the introductory price quite high then steadily lowers the price of the product over time
It is a version of price discrimination
Competitive
Placing your price in line with your competitors
Promotion
Promotion refers to methods of communicating messages to the market, usually with the intention of selling a firm's products.
The purpose of promotion is to inform, to persuade and to remind the market about the firm's products.
Information promotion aims to alert the market about the firm's products
Persuasive promotion aims to encourage customers to make a purchase, to switch from rival customers (called brand switching) and create brand loyalty.
Reminder promotional techniques are used to retain customer awareness, and interest in, of an existing product.
Above-The-Line Promotion
Above The Line (ATL) Promotion is any form of paid-for promotional method through mass media sources to promote the business and it's goods or services.
These are examples of above the line promotion:
Television Advertising
Advantages
Exploits sound and moving pictures
Can reach target audience e.g. children ads can be aired during children broadcast/shows
Possibility to air to global audience
Television is still a huge market (worth $8 billion)
Disadvantages
Expensive for producing and broadcasting television advertisements (for example, an advertising slot during peak time for 30 seconds can cost $60,000 in the UK and Hong Kong)
Cinema
Advantages
Audiences can be directly targeted
Promotion can be tailored to specific market segments
Size of cinema screens can exert more impact compared to others
Audiences are guaranteed to watch it
Disadvantages
Limited audience size
Magazines
Advantages
Able to use high quality photos (visual stimuli)
More effective at targeting specific market segments due to specialised magazines
Longer shelf life than newspapers
Disadvantages
Static pictures
Readers can be overwhelmed by the amount of advertisements, they might ignore it
Long lead time between publication and submitting the advertisement
Radio Advertising
Advantages
Able to reach a larger audience
Cheaper than television
Advances in technology mean that radio advertising can be broadcasted to anyone in the world
Disadvantages
Only communicate through sound meaning customers can't see the actual product
Retain memory is low (research shows that it is easier to retain memory when there is visual stimuli)
Newspaper Advertising
Advantages
Potentially reaching large audiences
Can be targeted to specific market segments (sports stories and sports brands)
As some newspapers have their own website, they can have a wider reach
Disadvantages
High cost, particularly for smaller businesses
Newspapers have a short shelf life
Newspaper companies vary on how they price their advertisement slots, making it more expensive as businesses have to make their ads stand out
Outdoor advertising
Advantages
High exposure depending on location
Disadvantages
Difficulty in monitoring effectiveness because targeting is very difficult
Traditional billboards are prone to damage caused by bad weather, vandalism and graffiti
There can be high levels of competition depending on location
Below-The-Line Promotion
Below The Line Promotion refers to the use of non-mass media promotional activities, allowing the business to have direct control. Therefore, these methods might be relatively cheaper than ATL.
These are examples of BTL promotion:
Branding
Branding refers to how the firm manages their brands. Hence, successful brands are more recognisable.
Slogans
Slogans are memorable catchphrases used to gain and retain the attention of consumers.
Logos
Logos are visual symbols meant to represent the business.
Packaging
Packaging can be a powerful component to the marketing mix. Good packaging may be able to be re-used, which in effect helps promote the business.
Word-Of-Mouth Promotion
Word of mouth promotion refers to the spread of information from one person to another through oral or text communication.
Direct Marketing
Direct marketing refers to promotional strategies that aim to sell directly to the customer rather than using a medium (e.g. stores)
Direct Mail
Direct mail is a type of direct marketing that involves sending promotional material to a customer in hopes to
Sales Promotion
Point of Sale Promotion
Publicity
Created by: A. Winter ('19)
Place
Refers to the distribution of products, i.e. how products get from the producer to the consumer.
Getting the right products to the right customers at the right price, place and time.
Advantages of Wholesale
To Producers:
Producers sell in bulk (marketing economies)
Sometimes provide transport
Keep producers updated on consumer trends
To Retailers:
Saves retailers from the trouble of searching out goods from several manufacturers
Informs the retailers about the new products
Reduces need for retailer storage space
Retailer can buy in smaller quantities
Credit and delivery services
Channels of Distribution
