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Marketing theory

The marketing mixThe marketing mix is often referred to as the '4 Ps', i.e. product, price, place and

promotion. To meet customers' needs a business must develop products to satisfy

them, charge the right price, get the goods to the right place, and it must make the

existence of the product known through promotion.

Products or services

Must meet customer requirements whatever these might be. For example, an

important aspect is function - products should do what they say they can do and

what they are expected to do. For example, Audi cars are popular because of their

high performance.

Appearance is also important. This is why for example, consumers are prepared to

pay premium prices for some of Gillette's razors.

Place

Roughly one fifth of the cost of a product is spent getting it to consumers. Of course,

Keyw ords

the actual figure varies widely from product to product but generally distribution is a

very important element in the marketing mix. Different organisations use different

approaches to reaching their customers. For example, McDonald's uses a

franchising system enabling it to operate in a wide variety of geographical locations,

and Amway distributes through Independent Business Owners worldwide.

Promotion

Is the process of communicating with customers. For marketing purposes,

communication of products and services contributes to the persuasion process to

encourage consumers to avail themselves of whatever is on offer. The key

processes involved in promotion, include:

branding - creating a distinctive image and character to an organisation/and or its products and services

advertising - to inform and persuade the public

packaging - presenting the product in a desirable and appropriate way

public relations activities and other forms of publicity

sponsorship

special promotions - e.g. buy one get one free.

Price

Needs to be relevant to the product/service and the market. For example, BIC the

manufacturer of razors, pens and lighters seeks to provide the world's markets with

products at affordable prices. A firm's pricing decision is often aimed at attracting a

particular market segment. For example, if it wants to sell at the top end of the

market it will charge a high price, at the bottom a low price, and so on.

Pricing strategies

Pricing strategy is an important part of the marketing mix. The price of a product

should reflect its image and the need to give a consumer what they want. For

example, upmarket products are associated with premium prices.

There are a number of popular pricing techniques to choose from:

1. Cost-plus pricing. A common way to make pricing decisions is to calculate how

much it costs to do a particular job or activity, and then add on a given percentage as

a return for the job or activity. This is sometimes known as mark-up.

For example, a business may decide that it will cost £100 to do a small repair job on

a car, including parts, labour, use of premises, equipment, etc. The business works

on the basis of making a return of 20% on all the work that it does. It therefore

charges the customer £120.

2. Hour-based pricing. Many small businesses are able to work out what their typical

costs are for every hour of work they do, e.g. for gardening, sign writing,

photography, etc. The business owner is then able to charge a standard rate per

hour.

3. Penetration pricing. When a firm brings out a new product into a new or existing

market, it may feel that it needs to make a lot of sales very quickly in order to

establish itself and to make it possible to produce larger quantities. It may therefore

start off by offering the product at quite a low price. When market penetration has

been achieved, prices can be raised.

4. Skimming. When you bring out a new product, you may be able to start off by

charging quite a high price. Some customers may want to be the first to buy your

product because of the prestige of being seen with it, or because they want to be

associated with your product before anyone else.

An exclusive dress could be sold initially at an exclusive price to wealthier

customers. The next season, the price could be lowered making it accessible to a

less wealthy group of customers. Later on, the dress could be mass produced and

made available at low prices to the mass market.

A premium price is an exclusive price charged for upmarket products.

The marketing mix for a bank account might include:

the product/service itself - the account and what the customer can do with it - e.g. overdraft facilities, direct debit payment etc

the place - either online/ over the telephone or in a physical location

the promotion - for example attractive offers to students who open the account when first going to university such as an interest free loan, or money to buy books

the price - the rate of interest paid on positive balances and charged on negative balances.

The 4 Ps - Product, Price, Place and Promotion make up the marketing mix. Each of these elements should be designed to meet customer needs and requirements.

Find marketing case studies

The use of social media in promotion

Edition 17

This case study looks at how the National Trust is now adopting a new strategy and modern marketing techniques to excite a younger audience, generate new members and enhance its position as an employer with young people.

Creating a winning marketing mix

Edition 16

This case study describes how JD (part of the JD Sports Fashion PLC Group of companies), a large and well-known retailer, manages the balance of its marketing mix around its consumers' needs in order to achieve business growth.

Using sports marketing to engage with consumers

Edition 16

This case study illustrates how Kia, a South Korean motor company, has used sports marketing to develop its brand identity in the European motor market.

Using the marketing mix to drive change

Edition 16

This case study explores how Parcelforce Worldwide responded to increased competition by using the marketing mix or 4Ps.

The marketing mix in the food industry

Edition 15

This case study shows how McCain combines all four parts of the marketing mix to develop its marketing strategy.

Live, breathe and wear passion

Edition 15

This case study looks at how Diesel promotes its products and the brand.

Protecting the marketing mix through intellectual property rights

Edition 14

This case study looks at how one technology company, Forensic Pathways, has used these legal safeguards for a new development.

The use of the marketing mix in product launch

Edition 13

This case study shows how a carefully balanced marketing mix provides the platform for launching and re-launching a brand onto the market.

Using the marketing mix in the fashion industry

Edition 13

This case study examines how Ben Sherman uses the marketing mix to help the business remain competitive and extend its market share and influence.

Entering a new market with a new product

Edition 12

This case study helps students understand the range of choices available to companies for market and product development.

Sponsorship as part of the marketing mix

Edition 11

This case study helps students understand how effective sponsorship involves all 4Ps of the marketing mix.

Creating the right marketing mix

Edition 11

This case study helps students understand the marketing mix including product, price, place and promotion.

Re-focussing a company's culture and marketing mix

Edition 9

As a result of carefully reading the Case Study, students should be able to: understand the cultural change brought about at Argos to boost sales, be able to identify the 7 Ps of the extended marketing mix, understand the changes made to the marketing mix at Argos,

Meeting customers' needs in growth markets - online gaming

Edition 9

As a result of carefully reading the Case Study, students should be able to: explain how broadband meets customers’ need for speed, identify key segments in the gaming market, explain how BT has developed a marketing mix for broadband gaming.

Using new product development to grow a brand

Edition 9

As a result of carefully reading the Case Study, students should be able to: appreciate the need to make decisions that help to manage, maintain and develop the value of brands, appreciate the importance of market research processes and the questions that market researchers seek to answer, link processes of market research with a range of products that closely meet consumers’ needs.

Meeting customers' needs

Edition 9

As a result of carefully reading the Case Study, students should be able to: identify how the business maintains sustained financial growth through acquisition and development of the existing business, understand how a customer service programme can help to improve performance and ensure long term financial stability, explain the key components of the marketing mix and how implementation of the mix will enhance customer satisfaction.

Innovation in infant nutrition

Edition 7

This case study focuses on the way in which one of the world’s leading nutrition companies used a science-based research approach to develop a healthy milk product for babies and toddlers.

Leading a revolution in banking

Edition 7

This case study examines how technology has enabled Intelligent Finance to revolutionise banking.

Positioning the brand

Edition 2

This case study focuses upon just one of the many products from the diverse businesses of American home products - Chap Stick. From its early origins as a simple health care product, it has become, today, a highly sophisticated and successful product in an extremely competitive market.

Glossary »Related Theory

Marketing mix (Price, Place, Promotion, Product)

The extended marketing mix (7Ps)

Creating strategies that meet customer needs (the marketing mix)

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