The 4 p's
What is marketing mix?
"Marketing mix" is a general phrase used to describe the different kinds of choices organizations have to make in the whole process of bringing a product or service to market. The best known way is called the 4 P's of defining the market which is a combination of: price, product, promotion, and place.
The 4 P's:
Product - the features and appearance of goods and services
The product has to have the right features - for example, it must look good and work well.
The function of the product - products must address the needs of customers as identified through market research.
Physical products e.g:
cars, washing machines, DVD players, clothes, makeup.
dental treatment, accountancy, travel agents.
Price - how much customers pay for a product
The price must be right. Consumer will need to buy in large numbers to produce a healthy profit. 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.
A business can choose between two pricing strategies when launching a new product:
- Penetration pricing means setting a relatively low price to boost sales. It is often used when a new product is launched, or if the firm’s main objective is growth, in order to increase market share quickly.
- Price skimming means setting a relatively high price to boost profits. It is often used by well-known businesses launching new, high quality, premium products. Once the early adopters have bought the product and sales slow, the company then lowers their price to allow others to be able to afford the product. Many electronics products use this strategy. For example the iPad was launched in 2010 and originally cost £429. As time goes on the price will be lowered as the cream has been ‘skimmed’ off the top.
When a business is already involved in the market, it can choose between three additional short term pricing strategies:
Promotional pricing is used to increase flagging sales. It is a short time reduction in price for a specific time period. A common example is the January sales after Christmas. Companies have leftover stock, which is using up valuable and expensive storage space, so they decide on a clear out.
Destroyer pricing is an illegal practice where firms lower their prices to such a damaging level that they run at a loss. They do this in order to put their competitors out of the market. An infamous case was when The Times newspaper was on sale for just 10p. This damaged rivals and was deemed unfair.
Demand-orientated pricing is used when the demand for a product or service can fluctuate. This means that you may pay different prices for the same product or service at different times of the year. For example, flights to Australia and New Zealand are expensive during our winter because it is the summer in the Southern Hemisphere, whereas it is several hundred pounds cheaper to fly from April – August, because demand is lower and it is winter in the Antipodes.
Place - the point where products are made available to customers