Marketing Mix

Md Ahad Ali KhanDepartment of PharmacySUB

Marketing Mix – 7 Ps

The tools available to a business to gain thereaction it is seeking from its target market inrelation to its marketing objectives

7Ps – Price, Product, Promotion, Place,People, Process, Physical Environment

Traditional 4Ps extended to encompassgrowth of service industry

Blend of the mix depends upon Marketing objectives Type of product Target market Market structure Rivals’ behaviour Global issues – culture/religion, etc. Marketing position Product portfolio◦ Product lifecycle◦ Boston Matrix

Marketing objectivesMarketing objectives define what you wantto accomplish through your marketing activities.There are several important factors to considerwhen establishing effective marketing objectives.

SMART Approach = Setting specific, measurable,achievable, realistic and time specific objectives

Specific - are your objectives stated in a way that isprecise about what you are hoping to achieve?

Measurable - Can you quantify each objective, i.e. can you use a unit of measure such as market share in percentage or dollars or other to provide a way to check your level of success?

Realistic - Do you have sufficient employees and resourcesto achieve the objectives you have set, if you don't then theyare likely to be unrealistic?

Time specific - When are you hoping to achieve theseobjectives, you need to define a timing plan with targettiming for each specific objective?

Achievable - Are your objectives reasonable in terms of what you can actually achieve or are you setting your sights too high?

Products to as a family have their branches and are classified under different sections on the basis of their features. Types of product -

The differentiated product – a distinction from other similar products/brands in the market.Differential claimed may be ‘real’ > on ingredient, quality, utility, or service, or it may be ‘psychological’

The customised product - Customer specific requirements > while developing the product. Commonly practice > in industrial product marketing > user are in direct contact > product customised to the requirements

The augmented product – Result of voluntaryimprovements by the manufacturer > to enhance thevalue of the product > neither suggested by thecustomer nor expected by them > by adding an extrafacility or an extra feature to the product.

The potential product – Tomorrow’s product >all the improvements and finesse possible under thegiven technological, economic and competitivecondition > no limits to the ‘potential product’, Onlythe technological and economic resources of the firm

Market structure: Number of firms producing identical products. Types of market structures -Monopolistic competition > Competitive market – a large number of firms, each having a small proportion of the market share and slightly differentiated products.Oligopoly: A market is dominated by a small number of firms that together control the majority of the market share.Duopoly: An oligopoly with two firms.Monopsony: Only one buyer in a market.Oligopsony: Many sellers > only a few buyers.Monopoly: One provider of a product or service. Perfect competition: Theoretical market structure

> no barriers to entry> An unlimited number of producers and consumers > A perfectly elastic demand curve.

Rival: A person or thing competing with another for thesame objective or for superiority in the same field of activity.

Product portfolio: Collection of businesses and products that make up the company. Fits the company's strengths and helps exploit the most attractive opportunities.

The company must:(1) Analyse its current business portfolio and decide which businesses should receive more or less investment, and(2) Develop growth strategies for adding new products and businesses to the portfolio, whilst at the same time deciding when products and businesses should no longer be retained.

Product life-cycle (PLC): From birth to death, human beings pass through various stages e.g. birth,growth, maturity, decline and death. A similar life-cycle is seen in the caseof products. The product life cycle goes through multiple phases, involvesmany professional disciplines, and requires many skills, tools andprocesses.

The four main stages of a product's life cycle and the accompanyingcharacteristics are:

Stage 1: Market introduction stage• Costs are very high• Slow sales volumes to start• Little or no competition• Demand has to be created• Customers have to be prompted to try the

product• Makes no money at this stage

Stage 2 - Growth stage:•Costs reduced due to economies of scale•Sales volume increases significantly•Profitability begins to rise•Public awareness increases•Competition begins to increase with a few new players in establishingmarket•Increased competition leads to price decreases

Stage 3 - Maturity stage: •Costs are lowered as a result of production volumes increasing and experience curve effects•Sales volume peaks and market saturation is reached•Increase in competitors entering the market•Prices tend to drop due to the proliferation of competing products•Brand differentiation and feature diversification is emphasized to maintain or increase market share•Industrial profits go down

Stage 4 - Saturation and decline stage: •Costs become counter-optimal•Sales volume decline•Prices, profitability diminish•Profit becomes more a challenge of production/distribution efficiency than increased sales

The Boston Matrix

• Origin > Boston Consulting Group in the early1970s.

• Devised as a clear and simple method forhelping corporations decide which parts of theirbusiness they should allocate their available cashto.

• A good tool for thinking about where to applyother finite resources: people, time andequipment.

The Boston Matrix categorizes opportunities into four groups, shown on axes of Market Growth and Market Share:

• Dogs: Low Market Share / Low Market GrowthMarket presence is weakA lot of hard work to get noticedDifficult to make a profitMarket growth is lowRequires hard work to improve

• Cash Cows: High Market Share / Low Market GrowthWell-established > easier to get attention and exploit new opportunitiesExpending a certain amount of effortMarket isn't growingOpportunities are limited

• Stars: High Market Share / High Market GrowthWell-established > Growth is excitingShould be some strong opportunitiesShould work hard to realize them

• Question Marks (Problem Child): Low MarketShare / High Market GrowthOpportunities no one knows what to do withRevenue not much higher > right now, don't have a largemarket share.In high growth markets so the potential to make money

Question Marks might become Stars and eventual CashCows, but they could just as easily absorb effort withlittle return. These opportunities need serious thought asto whether increased investment is warranted.

Price

A value that will purchase a definitequantity, weight, or other measure of agood or service.

As the consideration given in exchangefor transfer of ownership, price formsthe essential basis of commercialtransactions.

Price skimming

A pricing strategyMarketer sets a relatively high price for a

product or service at first, then lowers theprice over time.

It is a temporal version of pricediscrimination/yield management.

It allows the firm to recover its sunk costsquickly before competition steps in andlowers the market price

Penetration pricingPricing technique of setting a relatively low initial

entry price, often lower than the eventual marketprice, to attract new customers.

The strategy works on the expectation thatcustomers will switch to the new brand becauseof the lower price.

Penetration pricing is most commonly associatedwith a marketing objective of increasing marketshare or sales volume, rather than to make profitin the short term.

Psychological pricingPrice ending is a marketing practice based on

the theory that certain prices have a psychological impact.

The retail prices are often expressed as "odd prices": a little less than a round number, e.g. $19.99 or £2.98.

This pricing is one cause of price points

Cost-plus pricing• Cost-plus pricing is a pricing method used by

companies to maximize their profits.• Objective of profit maximization > increasing their

production until marginal revenue = marginal cost, and then charging a price which is determined by the demand curve.

• Also known as markup pricing• There are several varieties, but the common thread is

that • One first calculates the cost of the product, then adds a

proportion of it as markup.

• Basically, this approach sets prices that cover the cost of production and provide enough profit margin to the firm to earn its target rate of return.

• It is a way for companies to calculate how much profit they will make.

• direct costs, indirect costs, and fixed costs whether related to the production and sale of the product or service or not.

• These costs are converted to per unit costs for the product and then a predetermined percentage of these costs is added to provide a profit margin.

Pricing Strategy

Importance of : Knowing the market/Market analysisElasticityKeeping an eye on rivals

• Measurement of how changing one economicvariable affects others. For example:

• "If I lower the price of my product, how muchmore will I sell?"

• "If I raise the price, how much less will I sell?"• "If we learn that a resource is becoming scarce,

will people scramble to acquire it?"• In more technical terms, it is the ratio of the

percentage change in one variable to thepercentage change in another variable.

• It is a tool for measuring the responsiveness of afunction to changes in parameters in a unitlessway.

Elasticity

Product

New product development• In business, new product development

(NPD) is the term used to describe the completeprocess of bringing a new product to market.

• Two parallel paths for NPD process –• One involves the idea generation, product design

and detail engineering• The other involves market research and

marketing analysis.• NDP - the first stage in generating and

commercializing new product• Strategic process of product life cycle

management used to maintain or grow theirmarket share.

NPD - process• Idea Generation• Idea Screening• Concept Development and Testing• Business Analysis• Beta Testing and Market Testing• Technical Implementation• Commercialization• New Product Pricing

Idea Generation• Using a SWOT analysis (Strengths, Weaknesses,

Opportunities & Threats)• Market and consumer trends• Company's R&D department• Competitors• Focus groups - employees, salespeople,

corporate spies, trade shows, or ethnographicdiscovery methods (searching for user patternsand habits) may also be used to get an insightinto new product lines or product features.

SWOT analysis• SWOT analysis / SLOT analysisA strategic planning method used to evaluate –StrengthsWeaknesses/LimitationsOpportunitiesThreatsin a project or in a business

• It involves –Specifying the objective of the business venture or

projectIdentifying the internal and external factors that

are favorable and unfavorable to achieve that objective.

Support your ideas in the Idea Screening Phase

Albert Humphrey > led a convention at the Stanford Research Institute/ SRI International in the 1960s and 1970s

• Setting the objective > after the SWOT analysis > allowachievable goals or objectives to be set

• Strengths: characteristics of the business, or projectteam that give it an advantage over others

• Weaknesses (or Limitations): are characteristics thatplace the team at a disadvantage relative to others

• Opportunities: external chances to improveperformance (e.g. make greater profits) in theenvironment

• Threats: external elements in the environment thatcould cause trouble for the business or project

• Identification > SWOTs > essential > subsequent steps -process of planning > selected objective > derived fromSWOTs

Idea ScreeningObject - to eliminate unsound concepts prior to

devoting resources to them.Finding answers of several questions: ▫ Will the customer in the target market benefit from the

product?▫ What is the size and growth forecasts of the market

segment / target market?▫ What is the current or expected competitive pressure

for the product idea?▫ What are the industry sales and market trends the

product idea is based on?▫ Is it technically feasible to manufacture the product?▫ Will the product be profitable when manufactured and

delivered to the customer at the target price?

Concept Development and Testing• Develop the marketing and engineering details ▫ Investigate intellectual property issues and search

patent databases▫ Who is the target market and who is the decision

maker in the purchasing process?▫ What product features must the product incorporate?▫ What benefits will the product provide?▫ How will consumers react to the product?▫ How will the product be produced most cost

effectively?▫ Prove feasibility through virtual computer aided

rendering and rapid prototyping▫ What will it cost to produce it?

• Testing the Concept by asking a number of prospective customers what they think of the idea -usually via Choice Modelling.

• Intellectual property (IP) > a term referringto a number of distinct types of expressions forwhich a set of rights are recognized under thecorresponding fields of law.

Under intellectual property law, owners aregranted certain exclusive rights to variousmarkets, machines, musical, literary, and artisticworks; discoveries and inventions; andapplications.

Common types of intellectual property rightsinclude copyrights, trademarks, patents,industrial design rights, and trade secretsin some jurisdictions.

A legal concept, enacted by most governments,giving the creator of an original work exclusiverights to it, usually for a limited time.

"the right to copy“Gives the copyright holder the right –

to be credited for the workto determine who may adapt the work to other

formswho may perform the workwho may financially benefit from itother related rights.

Copyright

• A trademark, trade mark, or trade-mark -• A distinctive sign or indicator used by –▫ an individual▫ business organization ▫ other legal entity Purpose: to identify for consumers > products or services > originate

from a unique source > designated for a specific market to distinguish its products or services from > other entities.

• A trademark may be designated by the following symbols:

• ™ - for an unregistered trade mark > a mark used to promote or brand goods

• ℠ - for an unregistered service mark > a mark used to promote or brand services

• ® - for a registered trademark

Patent

• A patent is a form of intellectual property. Itconsists of a set of exclusive rights granted by asovereign state to an inventor or their assigneefor a limited period of time in exchange for thepublic disclosure of an invention.

Industrial design right• An intellectual property right that protects the

visual design of objects that are not purelyutilitarian.

• An industrial design consists of the creation of ashape, configuration or composition of patternor color, or combination of pattern and color inthree dimensional form containing aestheticvalue.

Trade secret• A formula, practice, process, design, instrument,

pattern, or compilation of information which is not generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers.

• The process of using –• Quantitative methods and qualitative methods > to evaluate

consumer response to a product idea prior to the introductionof a product to the market.

• To generate communication designed to alter consumerattitudes toward existing products.

• These methods involve –the evaluation by consumers of product concepts having

certain rational benefitsExample - a detergent that removes stains but is gentle onfabrics

or non-rational benefitsExample - "a shampoo that lets you be yourself.“

CT performed using –• Field surveys• Personal interviews• focus groupscombination with various quantitative methodsto generate and evaluate product concepts.

Concept testing

Choice modeling

• Model the decision process of an individual or segment in a particular context.

• Used to estimate non-market environmental benefits and costs.

• Well specified choice models > ableto predict with some accuracy how

individuals would react in a particular situation

Business Analysis

• Business Analysis Estimate likely selling pricebased upon competition and customer feedback

• Estimate sales volume based upon size of marketand such tools as the Fourt-Woodlock equation

• Estimate profitability and break-even point

Fourt-Woodlock equation

• A market research tool to describe the totalvolume of consumer product purchases per yearbased on households which initially make trialpurchases of the product and those householdswhich make a repeat purchase within the firstyear.

• Since it includes the effects of initial trial andrepeat rates, the equation is useful in newproduct development.

• The left-hand-side of the equation is the volume of purchases per unit time (usually taken to be one year).

• On the right-hand-side, the first parentheses describes trial volume, and the second describes repeat volume.

• HH = total number of households in the geographic area• TR ("trial rate") = percentage of those households which will

purchase the product for the first time in a given time period.• TU ("trial units") = number of units purchased on this first

purchase occasion.• MR = "measured repeat," = percentage of those who tried the

product who will purchase it at least one more time within the first year of the product's launch.

• RR = repeats per repeater: the number of repeat purchases within that same year.

• RU = number of repeat units purchased on each repeat event.

Beta Testing and Market Testing

• Produce a physical prototype or mock-up• Test the product (and its packaging) in typical

usage situations• Conduct focus group customer interviews or

introduce at trade show• Make adjustments where necessary• Produce an initial run of the product and sell it

in a test market area to determine customeracceptance

Technical Implementation• New program initiation• Finalize Quality management system• Resource estimation• Requirement publication• Publish technical communications such as data

sheets• Engineering operations planning• Department scheduling• Supplier collaboration• Logistics plan• Resource plan publication• Program review and monitoring• Contingencies - what-if planning

• A quality management system (QMS) can beexpressed as the organizational structure,procedures, processes and resources needed toimplement quality management.

• Technical communication is a method ofresearching and creating information abouttechnical processes or products directed to anaudience through media. The information mustbe relevant to the intended audience. Technicalcommunicators often work collaboratively tocreate products (deliverables) for various media,including paper, video, and the Internet.

• A datasheet, data sheet, or spec sheet is adocument summarizing the performance and othertechnical characteristics of a product, machine,component (e.g. an electronic component), material,a subsystem (e.g. a power supply) or software insufficient detail to be used by a design engineer tointegrate the component into a system.

• Logistics is the management of the flow ofresources, not only goods, between the point oforigin and the point of destination in order to meetthe requirements of customers or corporations.Logistics involves the integration of information,transportation, inventory, warehousing, materialhandling, and packaging, and often security.

Commercialization

• Often considered post-NPD Launch the product• Produce and place advertisements and other

promotions• Fill the distribution pipeline with product• Critical path analysis is most useful at this stage

• Advertising is a form of communication usedto encourage or persuade an audience (viewers,readers or listeners; sometimes a specific groupof people) to continue or take some new action.

• Most commonly, the desired result is to driveconsumer behavior with respect to a commercialoffering, although political and ideologicaladvertising is also common.

• The purpose of advertising –• To reassure employees or shareholders that a

company is viable or successful.

Advertising

• Commercial advertisers often seek to generateincreased consumption of their products orservices through "branding," which involves therepetition of an image or product name in aneffort to associate certain qualities with thebrand in the minds of consumers.

• Non-commercial advertisers who spend moneyto advertise items other than a consumerproduct or service include political parties,interest groups, religious organizations andgovernmental agencies. Nonprofit organizationsmay rely on free modes of persuasion, such as apublic service announcement (PSA).

• Advertising messages are usually paid for bysponsors and viewed via various traditionalmedia; including –▫ Mass media such as Newspaper Magazines Television commercial Radio advertisement Outdoor advertising Direct mail

New media such as -BlogsWebsitesText messages

Promotion (marketing)• Promotion is one of the market mix elements.• The specification of five promotional mix or

promotional plan.• These elements are –▫ Personal selling▫ Advertising▫ Sales promotion▫ Direct marketing▫ PublicityA promotional mix specifies how much attention

to pay to each of the five subcategories, andhow much money to budget for each.

• Three basic objectives of promotion. These are:▫ To present information to consumers as well

as others.▫ To increase demand.▫ To differentiate a product.

• A promotional plan can have a wide range of objectives, including:▫ Sales increases▫ New product acceptance▫ Creation of brand equity▫ Positioning▫ Competitive retaliations▫ Creation of a corporate image.

• There are different ways to promote a product indifferent areas of media.

• Promoters use internet advertisement, specialevents, endorsements, and newspapers toadvertise their product. Many times with thepurchase of a product there is an incentive likediscounts, free items, or a contest. This is toincrease the sales of a given product.

Distribution• Product distribution (or place) is one of the

four basic elements of the marketing mix (4 p’s).

• Distribution is the process of making a product or service available for use or consumption by a consumer or business user, using direct means, or using indirect means with intermediaries.

Critical path method

• The critical path method (CPM) is analgorithm for scheduling a set of projectactivities.

• It is an important tool for effective projectmanagement.

PERT chart will number its events sequentially in 10s (10,20, 30, etc.) to allow the later insertion of additional events.

PERT chart for a project with five milestones (10 through50) and six activities (A through F). The project has twocritical paths: activities B and C, or A, D, and F – giving aminimum project time of 7 months with fast tracking.Activity E is sub-critical, and has a float of 1 month.

Program Evaluation and Review Technique

Methods used to improve/differentiatethe product and increase sales or targetsales more effectively to gaina competitive advantage e.g.

Extension strategiesSpecialised versionsNew editionsImprovements – real or otherwise!Changed packagingTechnology