What is the Marketing Mix?
The marketing mix is the combination of product, price, place and promotion for any business venture:
The marketing mix deals with the way in which a business uses four factors price, product, place and promotion to reach customers.
The marketing mix is often referred to as the “Four P’s” since the most important elements of marketing are concerned with:
- Product: the product (or service) that the customer obtains
- Price: how much the customer pays for the product
- Place: how the product is distributed to the customer
- Promotion: how the customer is found and persuaded to buy the product
An effective Marketing Mix
An effective marketing mix is one which:
- Meets customer needs
- Achieves the marketing objectives
- Is balanced and consistent
- Allows the business to gain an advantage over competitors
- The marketing mix for each business and industry will vary; it will also vary over time.
Products are at the heart of the marketing mix. The product needs to exist for the other elements of the mix to happen.
What is a product?
A product is: “Anything that is capable of satisfying customer needs”.
This definition therefore includes both:
- Physical products – e.g. trainers, games consoles, DVD players, take‐away pizzas
- Services – e.g. dental treatment, accountancy, insurance, holidays, music downloads
The main methods of promotion are:
- Public relations & sponsorship
- Personal selling
- Direct marketing
- Sales promotion
Promotion is the business of communicating with customers. It will provide information that will assist them in making a decision to purchase a product or service. The razzmatazz, pace and creativity of some promotional activities are almost alien to normal business activities.
The cost associated with promotion or advertising goods and services often represents a sizeable proportion of the overall cost of producing an item. However, successful promotion increases sales so that advertising and other costs are spread over a larger output. Though increased promotional activity is often a sign of a response to a problem such as competitive activity, it enables an organisation to develop and build up a succession of messages and can be extremely cost-effective.
A business must take many factors into account before deciding on the price of a product.
Remember there is a big difference between costs and price. Costs are the expenses of a firm. Price is the amount customers are charged for items.
Firms think very carefully about the price to charge for their products. There are a number of factors to take into account when reaching a pricing decision:
- Customers. Price affects sales. Lowering the price of a product increases customer demand. However, too low a price may lead customers to think you are selling a low quality ‘budget product’.
- Competitors. A business takes into account the price charged by rival organisations, particularly in competitive markets. Competitive pricing occurs when a firm decides its own price based on that charged by rivals. Setting a price above that charged by the market leader can only work if your product has better features and appearance.
- Costs. A business can make a profit only if the price charged eventually covers the costs of making an item. One way to try to ensure a profit is to use cost plus pricing.
- Price – the value a customer is prepared to pay in exchange for taking ownership of a product, or receiving a service
- Price directly affects revenue
- Revenue = number of units sold x price
- But how much a customer buys (“demand”) is also affected by price
- So an increase in price doesn’t always mean an increase in revenue
- Various methods of setting a price
- Pricing strategy is important
- Products need to be “competitive”
- Price needs to be consistent with the overall objectives of the business
- Not really a “P” – since Place is all about distribution
- Channels of distribution – the method by which goods or services are transferred from producers to consumers
- In most markets there are several distribution channels
- E.g. wholesalers, agents, retailers
- Business may use one or more channels
- Direct selling (i.e. from producer direct to consumer) is an increasingly popular method of distribution
- E-commerce (selling via the Internet) is another kind of distribution channel