Marketing Mix Extended

Why should we take the time to extend the marketing mix beyond where we have looked? To determine how to best position our products to consumers. The entire point of this exercise is to reaffirm our positioning in the market and ensure our marketing strategies will communicate clearly.

We have discussed how critical it is to understand the target market or people you are reaching out to many times. From creating personas to researching their habits and desires, understanding everything about your customer segments is critical to creating a successful marketing campaign. It is true, everything we do in marketing starts and ends with the consumer in mind.

“Product” refers to the goods and services you offer to your customers. Apart from the physical product itself, there are elements associated with your product that customers may be attracted to, such as the way it is packaged. Other product attributes include quality, features, options, services, warranties, and brand name. Thus, you might think of what you offer as a bundle of goods and services. Your product’s appearance, function, and support make up what the customer is actually buying. Successful managers pay close attention to the needs their product bundles address for customers.

• Product - Idea, good or service being sold to customers.
• Product Variety - Versions, models, class or category
• Product Appearance - General look and feel, as well as options existing size, color.
• Product Quality - Based on previous reports, and ratings for quality.
• Product Features - Distinctive attribute(s) or aspect(s) of the product.
• Product Functionality - Specific activity(ies) or purpose(s) natural to or intended for the product.
• Services - Are there additional services that come with the product, assuming it is not a service?
• Brand Equity - Commercial value that derives from consumer perception of the brand name of a particular product or service, rather than from the product or service itself.
• Packaging - Does the packaging provide a unique design advantage? Eco-Friendly, Sleekness, etc.
• Warranties - a written guarantee, issued to the purchaser of an article by its manufacturer, promising to repair or replace it if necessary within a specified period of time.

• Cost-plus: Adds a standard percentage of profit above the cost of producing a product. Accurately assessing fixed and variable costs is an important part of this pricing method.
• Value-based: Based on the buyer’s perception of value (rather than on your costs). The buyer’s perception depends on all aspects of the product, including non-price factors such as quality, healthfulness, and prestige.
• Going-rate: A price charged that is the common or going-rate in the marketplace. Going-rate pricing is common in markets where most firms have little or no control over the market price.
• Competitive Pricing - consists of setting the price at the same level as one’s competitors or slightly below to gain traction in the market. This method relies on the idea that competitors have already thoroughly worked on their pricing.
• Skimming: Involves the introduction of a product at a high price for affluent consumers. Later, the price is decreased as the market becomes saturated.
• Discount: Based on a reduction in the advertised price. A coupon is an example of a discounted price.
• Loss-leader: Based on selling at a price lower than the cost of production to attract customers to the store to buy other products.
• Psychological: Based on a price that looks better, for example, $4.99 per pound instead of $5.00 per pound.

After you decide on your pricing strategy, the amount of money you will actually receive may be complicated by other pricing aspects that will decrease (or increase) the actual amount of money you receive. You will also have to decide how to determine:

• Payment period: Length of time before payment is received.
• Allowance: Price reductions given when a retailer agrees to undertake some promotional activity for you, such as maintaining an in-store display.
• Seasonal allowances: Reductions given when an order is placed during seasons that typically have low sales volumes to entice customers to buy during slow times.
• Bundling of products/services: Offering an array of products together.
• Trade discounts (also called “functional discounts”): Payments to distribution channel members for performing some function such as warehousing and shelf stocking.
• Price flexibility: Ability of salesperson or reseller to modify price.
• Price differences among target customer groups: Pricing variance among target markets.
• Price differences among geographic areas: Pricing variance among geographic regions.
• Volume discounts and wholesale pricing: Price reductions given for large purchases.
• Cash and early payment discounts: Policies to speed payment and thereby provide liquidity.
• Credit terms: Policies that allow customers to pay for products at a later date.

Remember, price is the one “P” that generates revenue, while the other three “P’s” incur costs. Effective pricing is important to the success of your business.

“Place” refers to the distribution channels used to get your product to your customers. What your product is will greatly influence how you distribute it. If, for example, you own a small retail store or offer a service to your local community, then you are at the end of the distribution chain, and so you will be supplying directly to the customer. Businesses that create or assemble a product will have two options: selling directly to consumers or selling to a vendor.

Direct Sales

As a producer, you must decide if supplying direct is appropriate for your product, whether it be sales through retail, door-to-door, mail order, e-commerce, on-site, or some other method. An advantage of direct sales would be the contact you gain by meeting customers face to face. With this contact you can easily detect market changes that occur and adapt to them. You also have complete control over your product range, how it is sold, and at what price.

Direct sales may be a good place to start when the supply of your product is limited or seasonal. For example, direct sales for many home-produced products can occur through homebased sales, markets, and stands.

However, direct sales require that you have an effective retail interface with your customers, which may be in person or electronic. If developing and maintaining this retail interface is not of interest to you or you are not good at it, you should consider selling through an intermediary.

Reseller Sales (Sales Through an Intermediary)

Instead of selling directly to the consumer, you may decide to sell through an intermediary such as a wholesaler or retailer who will resell your product. Doing this may provide you with a wider distribution than selling direct while decreasing the pressure of managing your own distribution system. Additionally, you may also reduce the storage space necessary for inventory. One of the most important reasons for selling through an intermediary is access to customers. In many situations, wholesalers and retailers have customer connections that would not be possible to obtain on your own.

However, in selling to a reseller you may lose contact with your end consumer. In some cases, you may also lose some of your company identity. For example, your distributor may request that your product be sold under the reseller’s brand name.

One factor that may influence whether you can find an intermediary to handle your product is production flow. Wholesalers want a steady year-round supply of product to distribute. If you can deliver a steady year-round supply that is of consistent quality, then selling through an intermediary may be a good strategy for you.

Market Coverage

No matter whether you sell your product direct or through a reseller, you must decide what your coverage will be in distributing your product. Will you pursue intensive, selective, or exclusive coverage?

• Intensive distribution is widespread placement in as many places as possible, often at low prices. Large businesses often market on a nationwide level with this method. Convenience products—ones that consumers buy regularly and spend little time shopping for, like chewing gum—do better with intensive (widespread) distribution.
• Selective distribution narrows distribution to a few businesses. Often, upscale products are sold through retailers that only sell high-quality products. With this option, it may be easier to establish relationships with customers. Products that people shop around for sell better with selective distribution.
• Exclusive distribution restricts distribution to a single reseller. You may become the sole supplier to a reseller who, in turn, might sell only your product. You may be able to promote your product as prestigious with this method, though you might sacrifice sales volume. Specialty products tend to perform better with exclusive distribution

Other Place Decisions

Product characteristics and your sales volumes will dictate what inventories to maintain and how best to transport your products. Additionally, the logistics associated with acquiring raw materials and ensuring that your final product is in the right place at the right time for the right customers can comprise a large percentage of your total costs and needs careful monitoring.

You may decide to have a combination of all the distribution methods. Whatever you decide, choose the method which you believe will work best for you.

“Promotion” refers to the advertising and selling part of marketing. It is how you let people know what you’ve got for sale. The purpose of promotion is to get people to understand what your product is, what they can use it for, and why they should want it. You want the customers who are looking for a product to know that your product satisfies their needs.

To be effective, your promotional efforts should contain a clear message targeted to a specific audience reached via an appropriate channel. Your target audience will be the people who use or influence the purchase of your product. You should focus your market research efforts on identifying these individuals. Your message must be consistent with your overall marketing image, get your target audience’s attention, and elicit the response you desire, whether it is to purchase your product or to form an opinion. The channel you select for your message will likely involve use of a few key marketing channels. Promotion may involve advertising, public relations, personal selling, and sales promotions.

Advertising

• Advertising methods to promote your product or service include the following.
• Radio: Radio advertisements are relatively inexpensive ways to inform potential local customers about your business. Mid-to-late week is generally the best time to run your radio ad.
• Television: Television allows access to regional or national audiences, but may be more expensive than other options.
• Print: Direct mail and printed materials, including newspapers, consumer and trade magazines, flyers, and a logo, allow you to explain what, when, where, and why people should buy from you. You can send letters, fact sheets, contests, coupons, and brochures directly to new or old customers on local, regional, or national levels.
• Electronic: Company Web sites provide useful information to interested consumers and clients. Password-protected areas allow users to more intimately interact with you. Advertisements allow broad promotion of your products. Direct e-mail contact is possible if you have collected detailed customer information.
• Word of Mouth: Word of mouth depends on satisfied
• customers (or dissatisfied customers) telling their acquaintances about the effectiveness of your products.
• Generic: Generic promotion occurs when no specific brand of product is promoted, but rather a whole industry is advertised. For instance, generic advertising is commonly found for milk, beef, and pork.

Public Relations

Public relations (PR) usually focuses on creating a favorable business image. Important components of a good public relations program include being a good neighbor, being involved in the community, and providing open house days.

• News stories
• Press Releases

Personal Selling

Personal selling focuses on the role of a salesperson in your communication plans. Salespeople can tailor communication to customers and are very important in building relationships.

While personal selling is an important tool, it is costly. So you should make efforts to target personal selling carefully.

Sales Promotions

Sales promotions are special offerings designed to encourage purchases. Promotions might include free samples, coupons, contests, incentives, loyalty programs, prizes, and rebates. Other programs might focus on educating customers through seminars or reaching them through trade shows. Your target audience may be more receptive to one method than another.

Vocabulary

• 4 Ps of Marketing

Additional Reading

• Marketing Mix: Understanding How to Position Your Market Offering on Mind Tools

Student Activity

Complete the 5 Ps of Marketing for the Apple iPhone 6. You will need to identify the primary competitor and complete the 5 Ps worksheet.