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  1. 1. Luke Deakin Unit 3 - Marketing Creating Strategies that meet Customer Needs The Marketing Mix The marketing mix is basically combining the 4 aspects of an organisation’s marketing policy in order to meet its objectives. The 4 aspects of an organisation’s marketing policy can also be referred to as ‘The 4 Ps’, these include: • Price • Product • Promotion • Place Pricing Influences on Pricing There are two types of pricing decisions to be made: • Setting a price for a completely new product • Setting a price for an existing product When an organisation has decided to develop and market a new product, or are producing and marketing an existing product, there are a number of internal and external factors that have an influence on the pricing strategy used: Internal Factors • The objectives of the organisation • The pattern of direct and indirect costs • Existing prices of similar and other products produced internally by the organisation External Factors • The strength and behaviour of the organisation’s competitors • The attitudes and influences of others involved in the chain of production and distribution • Pressure from suppliers of raw materials and components used in the product’s production • Elasticity of demand for the product • Motivation of customers • Existing and anticipated government policies • General conditions in different markets
  2. 2. Luke Deakin Unit 3 - Marketing Pricing Strategies Cost-plus Pricing This pricing strategy is used by organisations that want to maximise their profits. Price = Cost of production + Mark-up (Profit) For this method to be successful all the organisation’s costs need to be accurately accounted for. However, a disadvantage of this pricing strategy is it ignores the demand for the product and competition. Positioning Pricing This is where prices are set that reflect the consumers’ views of the product. E.g. Champagne prices would be set quite high as if the prices was low consumers would think that the product was of a poor quality and therefore not buy the product. Demand-based Pricing This pricing strategy is where prices are set coordinating with their perception of what consumers are prepared to pay for the product. Meaning prices will go up and down according to demand. E.g. Easy Jet sell flight seats very cheaply when demand is low. Competitive Pricing This is where the organisation sets their prices roughly relating to their competitors’. This strategy depends on the extent of the competition and the number of consumers. Penetration Pricing This method is where the organisation purposely sets their prices low to make their product or service competitive. Once the company has established itself the organisation may decide to start to slowly raise prices. This method is effective if the demand for the product or service is elastic meaning that customers are tempted away from the usual product or service by the cheap price. Skimming Pricing This pricing strategy can be described by the term ‘skim the cream’. The price is set high to take advantage of people’s desire for the product. This method is often used in fashion where a high fashion item is sold at an extremely high price. This is effective if the price is inelastic.
  3. 3. Luke Deakin Unit 3 - Marketing Discount Pricing This is where discounts are offered below the normal price, this sort of pricing is used in business-to-business transactions where the organisations will deal with the supplier in the future. This is good for quickly boosting sales. Differential Pricing This strategy is where different prices are charged for the same product/service at different times. E.g. mobile phone calls, public transport and holidays. Product A product can either be a good or service provided by an organisation. A good is tangible, meaning it can be touched and passed on to other people, e.g. trainers. A service cannot be touched or passed on to others, e.g. a haircut; as once the service has been performed it cannot be passed on to another person. There are three different types of goods these include: • Producer Goods, where an organisation manufactures a good for another organisation to use in the production of their product, e.g. Pirelli may supply the tyres for Ford cars. • Consumable Goods, these are goods that are used up quickly, for example food and toiletries are the ain areas of consumable goods. • Durable Goods, these are goods that don’t need to be purchased on a regular basis as they last for a long time, e.g. kitchen appliances such as dishwashers and fridge freezers. Adidas football boots fall into two categories, durable and consumable goods, as they can last for a long time, but they can also last for a short amount of time depending on how often they are used. For example, a person that plays football three times a week would use up the product in a maximum of six months, which would fall into the consumable goods category. Whereas someone that only plays football once a month would probably be able to use the same pair for 3 or 4 years, which would fall into the durable goods category.
  4. 4. Luke Deakin Unit 3 - Marketing Promotion There are several different method that organisations use to promote their products, these include: • Advertising • Sales Promotion • Point of Sale • Sponsorship • Branding • Direct Selling • Direct Mail • Public Relations Advertising Advertising can be varied widely, from visual and audio advertisements to paper- based ads. Generally, advertising is a public promotion of a product or service through many different mediums, these mediums include: Newspapers Advantages of newspaper advertisements are the ads will get high exposure as lots of people read newspapers, there will be even high exposure on national newspapers as they are available to everyone in the country, so potentially the whole population could see the advert. Secondly, a high scope of detail can be used, where a lot of information can be input into the advert. In addition to these advantages, it can be easily aimed at the right audience. For example, if the product being advertised was an expensive, high quality pen, aimed at higher class people, then the ads would be put in papers like The Times and The Independent, as these papers are read generally by higher class people, therefore the ad would be placed in these newspapers. Also, the timing that the adverts are published in newspapers is flexible, as newspapers are produced on a daily basis and therefore ads can be put in on any day and at any time of year. Disadvantages of newspaper advertisements include, the advertisement may be in black and white, meaning that it may lack impact. Also there is no movement in a newspaper, therefore products cannot be demonstrated as easily as a TV advertisement. Flyers Advantages of flyers include lots of people will get to see them if they are put up/given out in the right places, products and their price can be displayed on the flyer. Finally, they can be very colourful therefore may have a high impact on potential customers. Disadvantages of flyers are if they are handed out a lot of people may just drop them on the floor and not look at them, wasting the company’s money on what could have
  5. 5. Luke Deakin Unit 3 - Marketing been spent on another medium of advertising. Also, the amount of information that can be put onto flyers is limited as they need to be eye catching and if there is too much text on them they won’t appeal to people. Finally, they are only suitable if the product/service is being aimed at a lot of people. Magazines The main advantage of advertising in a magazine is that your product can be aimed at a specific audience, for example if you wanted to advertise a computer game you would put the advert in a specialist computer magazine, so that the audience the product is aimed at are seeing the advertisement. Secondly, the advertisement will have a long lifespan as most magazines are released weekly, monthly or bi-monthly, therefore the advertisements will be viewed for a long period of time in comparison to a newspaper, which is released on a daily basis. In addition to this, the advertisement will be in colour, therefore will be more eye-catching than a newspaper advertisement. Finally, if the magazine reviews the product as one of its articles then this will be very good for sales if it receives a good review as the more good information a customer receives, the more likely they are to buy the product. Disadvantages of magazines include, the timing of the advertisements is less flexible due to the fact that magazines are only released every week, month or 2 months generally, as I mentioned above. Also, another disadvantage is the advertisement doesn’t move, for the same reason as in the newspaper section. Billboards Advantages of a billboard advertisement are it will be viewed by a lot of people as anyone going past will see it, the product and its price can be displayed on it, it is high impact as it is so big and can be in colour. Also, these advertisement are straight to the point so that people know what the product is even when they drive past and don’t have chance to properly look at the billboard. Disadvantages of this method of advertising include it costs a lot of money, there is no movement, with the odd exception, where movement is limited. Most people that drive past billboards don’t pay much attention to them as they are concentrating on driving. TV The main advantage of a TV advertisement is the amount of people that will see the advertisement, especially at peak times such as evenings and weekends. Secondly, the product/service being advertised can be fully demonstrated. These adverts are also very high impact as there is sound, movement and colour all at once. Also, adverts can be aimed at the right type of people as if a company wanted to advertise a pair of football boots they could advertise in between a football match as the right sort of audience will be watching. Disadvantages of TV advertisements are a lot of people either change the channel when adverts come on, or go and do something else, such as make themselves
  6. 6. Luke Deakin Unit 3 - Marketing something to eat or drink. Also, people don’t pay much attention to the adverts in between programmes. Cinema Advantages of cinema advertisements include high quality picture and sound quality on the adverts. The adverts can be aimed at specific categories of people depending on what sort of film the advert is before. Also, the product/service can be demonstrated. Disadvantages of cinema advertising includes, it is expensive and not as many people see them as TV adverts. Also, people may arrive late for the film and miss the adverts. Radio Advantages of radio advertising include high exposure, as lots of people hear the ads, also the advert can be aimed at different segments of people by using local radio rather than national radio. People listen to radio advertisements while they are driving and take in lots of facts. Finally, it is relatively cheap to advertise on the radio. Disadvantages include, there is no visual content so products cannot be demonstrated. There is a smaller audience than TV. Sales Promotion This method of promotion involves a series of planned events, which take place throughout the year to attract customers, using special offers. There are two main types of sales promotion: Trade Promotion This form of sales promotion is aimed at distributors (retailers), this basically covers numerous offers on products sold to traders, such as trade discounts when bought in bulk, bonuses and competitions. Consumer Promotion The type of sales promotion is aimed at potential customers to attract them to buy a product, this is done by offering customers things like: • Special offers • Free gifts • Loyalty cards • Loss leaders • Free Samples • Personality promotion • Coupons
  7. 7. Luke Deakin Unit 3 - Marketing Point of Sale Point of sale is also know as Product Presentation, and is basically the point where a customer decides whether they are going to buy a product or not. There are a range of point of sale techniques used to get customers to buy the product. These point of sale techniques used include demonstrations of products, banners, posters, leaflets and free samples. Point of sale displays are also used in areas such as entrances and checkouts in supermarkets. Sponsorship Sponsorship is where a one company gives money to another company, and the company that pays the money has its name on the other company’s product/service and advertises. E.g. Birmingham City are sponsored by Flybe, and this means that Flybe promote themselves via having their name on the Birmingham City kit. Purposes of this method of promotion include; to raise customer awareness of their product/service, to gain more customer and increase their sales, and also create, enhance and change the company’s image. Companies can sponsor a range a different things such as; events, products, sports teams, plays, films and TV programmes. Sponsorship is good for small companies to get noticed and great for larger, established companies to make more money through boosted sales. Advantages of sponsorship is if you sponsor a successful company then you will get noticed more, e.g. Manchester United were in the Champions League final with over 2 billion viewers, therefore Vodafone, who sponsor Manchester United, will have been seen by these 2 billion viewers. Also, sales can go up after a successful campaign. A disadvantages of sponsorship is if you sponsor a company with a bad image, or who are not successful, then your companies image will be in the same bracket as the unsuccessful one. Branding Branding is what companies use so that customers can identify their product from another companies. Branding is also used to give off an image for the product or company. This is done in a number of ways including: • Slogans, e.g. the McDonalds slogan is ‘I’m lovin’ it’. • Logos, e.g. Nike’s logo is the swoosh, this instantly identifies their products from other companies’. • Advertising, products are advertised in a way which gives customers the image that the company want to give off. Ultimate branding is where people call a product by a manufacturer’s name rather than the name of the product, e.g. people sometimes say Levi’s when they mean jeans.
  8. 8. Luke Deakin Unit 3 - Marketing Branding is what determines the public image of a product/company. E.g. The public view Nike as a high quality sportswear company, this is due to the logo and advertising. Direct Mail Direct Mail is of form of direct marketing, in which mail is sent to potential customers through the post, this form of promotion includes things like leaflets, flyers and catalogues sent through the post. This method of promotion requires a database of potential customers, who are either previous customers or have signed up to receive information from the company, the flyers/leaflets/catalogues are then addressed with these addresses and sent off. The idea of this is that these potential customers will then reply via order forms, prepaid response envelopes, company cards or free phone numbers. An advantage of direct mail is the customers are receiving information that they have an interest in, as they are either a previous customer or have signed up to receive posted information. A disadvantage is that people treat it as junk mail and throw it away. Direct Selling This method of promotion is one where the goods are sold directly from the company to the customer, cutting out people like, retailers, wholesalers and agents, who are sometimes referred to as ‘the middle man’. This is good as it means the company can either maximise their profits or offer lower prices to the customers, as this eliminates the costs that the ‘middle man’ imposes. There are three main methods of direct selling that organisations use, these are: Home Parties This method of direct selling requires an employee of the company to go to potential customers’ homes and demonstrates/displays the company’s range of products. If the customer likes the product(s) then they can buy/order the product via the employee. An example of this is door-to-door salesmen who sell Tupperware. However, Adidas is too large is size to use this method of direct selling, as this is generally used by smaller, local firms. Mail Order Mail order requires a company to send out catalogues by post to customers. The customer can then browse through the catalogue and if they wish to purchase a product they can either send their order by post, place an order over the phone or sometimes they can use the companies Internet site to place an order. This could be a successful method for Adidas, as customers could see an image of the football boots and also a product specification, including things like new technologies used.
  9. 9. Luke Deakin Unit 3 - Marketing Telephone Sales Telephone sales is the final method of direct selling, this requires an employee of a company phoning a list of numbers, which will be given to them by their boss, and trying to entice customers to buy their products over the phone. An example of where telephone sales occur is double-glazing companies, who try and sell their windows over the phone. Adidas would tend not to use this method, as again this is associated with smaller firms. Public Relations This is where a company communicates its activities, such as upcoming products, to the public. An example of this is when a games console is released, days are organised where the public can come and test out the games consoles. This is good for a company as the people that attend these events will pass on information about the console and these events will get a high media coverage therefore promoting the product even more.
  10. 10. Luke Deakin Unit 3 - Marketing Place Different places where an organisation’s products can sell their products include: • Shops • Markets • Internet • Mail Order Catalogues • Warehouses • Direct from the manufacturer • Auctions • Door to door salesmen • Wholesalers • Factory Outlets Distribution Channels A distribution channel is all the stages a product goes through to get from the manufacturer to the customer. There are five main stages that a product can pass through, these include: • Manufacturer • Agent • Wholesaler • Retailer • Customer