Marketing Mix

Marketing Mix ROLE OF PROMOTION IN THE MARKETING MIXAs briefly mentioned in the introduction, promotion is the communication aspect of the marketing mix. It is creating a channel for conversation with the targeted consumer base. Through promotion, the company aims to attract the customer’s attention and give them enough information about the product to foster enough interest to motivate them to purchase.The team tasked with these activities will begin by understanding the dynamics of the target audience and deciding which modes of promotion are likely to help meet targets. Once the channel is decided, information from other elements of the mix is incorporated to ensure that the message sent corresponds to the actual product features, benefits and user experience. None of the elements of the marketing mix work in isolation. Instead a unified body of information acts as the source for all activities within these 4P’s. The available information is filtered to include those areas which will be mos t relevant to the target audience.OBJECTIVES OF PROMOTIONAL ACTIVITIES As part of the marketing mix, promotion includes all activities that involve communicating with the customer about the product and its benefits and features. Once a company has worked on the product and price elements, it is time to start a conversation with the consumer about the product. This includes raising awareness through different mediums to increase sales, as well as to create and foster brand loyalty.Information provided to the customer at this stage helps them in making purchase decisions regarding the product. Often, there is substantial cost associated with promotional activities. But since the result is often an increase in sales or customer loyalty, there is thought to be long term return on this investment. There are many ends that a company may try to reach through a promotion including but not limited to an increase in sales, acceptance of new products, brand equity creation and brand positioning, addressing competitor actions and rebranding. © Entrepreneurial InsightsIn this article we will look at 1) role of promotion in the marketing mix, 2) objectives of promotional activities, 3) major targets of promotional campaigns, 4) the promotional mix, 5) types of promotional strategies, 6) managing promotion through the product life cycle, and 7) an example of the promotion mix in action.ROLE OF PROMOTION IN THE MARKETING MIXAs briefly mentioned in the introduction, promotion is the communication aspect of the marketing mix. It is creating a channel for conversation with the targeted consumer base. Through promotion, the company aims to attract the customer’s attention and give them enough information about the product to foster enough interest to motivate them to purchase.The team tasked with these activities will begin by understanding the dynamics of the target audience and deciding which modes of promotion are likely to help meet targets. Once the channel is decided, information from other elements of the mix is incorp orated to ensure that the message sent corresponds to the actual product features, benefits and user experience. None of the elements of the marketing mix work in isolation. Instead a unified body of information acts as the source for all activities within these 4P’s. The available information is filtered to include those areas which will be most relevant to the target audience.OBJECTIVES OF PROMOTIONAL ACTIVITIESDifferent organizations have different expectations from their promotional activities. These expectations are developed into objectives which then shape the selection and execution of these activities. Some possible objectives of promotion for any company may include:Building AwarenessOften, a product or brand may need to create an identity within the market. For the most part, this applies to a new company, a new brand or a new product. But often it may also be needed in times of rebranding or building up a failing product. The aim then is to select those promotional act ivities that help inform the customer about the company and the product.Creating InterestIf the customer is already aware of the product or has been made aware through some activities, it becomes necessary to move them along to actual purchasing behavior. The aim here is to identify a need that the product fulfills and make sure that the customer recognizes this need as something that is unfulfilled for them.Providing InformationSometimes, a company may just need to provide necessary information regarding the product, its benefits, features or usage to the consumer. This may be the case if a new product is introduced into the market.Unique features or benefits may need to be explained. In other cases, a new feature on an existing product may need to be highlighted. In some cases, such as in instances where environmental impact or health scares may be in play, information about a change in business practices and company policy may need to be communicated.Stimulate DemandA company may seek to enhance its sales through promotion. If sales have been lower than usual, then the aim may be to get them back up to target level by re-engaging old customers and encouraging new ones to try a product out. In other instances, the aim may be to increase sales further at certain times of the year such as near a major holiday. Free demonstrations or special deals may be used to reach these ends.Differentiate productIn situations where there are many competitors in the market, a company may seek to use promotional activities to differentiate its product in the market and make it stand out from the crowd. The focus here remains on those features, functionalities or benefits that may not be offered by a competitor or may not be offered so well.Reinforce the BrandOne basic aim of a promotional activity may be to further strengthen the brand and its place in the market. This helps turn a first time purchases into a life time purchaser. This can also help create advocates for the pr oduct from within the customer base.[cp_modal id=cp_id_75506] [/cp_modal]MAJOR TARGETS OF PROMOTIONAL CAMPAIGNSAny promotional activity is usually designed with a specific target audience in mind. The activity is therefore created using messages, cues and information that they will respond to. Realistically, the major portion of any promotional budget is aimed at this specific targeted audience. However, there may be important fringe groups who may have an influence over the intended target or stake in the product. Some of these fringe groups may include:The Actual Audience â€" These are the current customers of the product as well as former customers and any potential new customers. The activity is created for these people specifically.Influencers â€" People or organizations that may have their own sphere of influence over the target audience make up this category. If a positive impact is made on these people, they may then use this influence to encourage sales. The media, opinion leaders, Trade associations and special interest groups are som e of these influencers.Distribution Channel Members â€" The product is handled and provided to the customer through this channel making them an important category of targets. A retailer may choose to display a certain product in a more prominent position than the others if they believe in the product and its benefits.Other Companies â€" Communicating with other companies may open up opportunities to collaborate on joint ventures.THE PROMOTIONAL MIXThere may often be a tendency to narrow down the focus of promotional activities to only advertising. Quite the opposite, there are a number of ways to approach the audience with information about the product. Increasingly, businesses feel the need to use both one directional and two sided means of communications to reach the customer.Through the promotional mix, a company aims to fulfill two basic objectives. One is to make the customer aware that the product and brand exist. The other is to persuade them to actually pick this product ove r all others and continue to buy it.  Five Elements of the Promotional Mix © Entrepreneurial InsightsThere are five methods that make up a promotional mix. A company may choose to use one or more of these in harmony to ensure a clear, effective and direct message reaches the customer. The selection of the portfolio of activities may depend on the company’s marketing and sales strategies and budget allocations. These five methods are:Advertising â€" This mode of promotion is usually paid, with little or no personal message. Mass media such as television, radio or newspapers and magazines is most often the carrier of these messages. Apart from these, billboards, posters, web pages, brochures and direct mail also fall in the same category. While this method has traditionally been one sided, advertisement over new media such as the internet may allow for quick feedback.Public Relations Sponsorship â€" PR or publicity tries to increase positive mention of the product or brand in influential media outlets. These could include newspapers, magazines, talk shows and new media such as social networks and blogs. This could also mean allowing super users, or influencers to test the product and speak positively about it to their peers. This type of advertisement may or may not be paid. For example, sponsoring a major event and increasing brand visibility is a paid action. Sending free samples to a blogger then depends on their discretion and opinion and is not usually swayed by payment.Personal Selling â€" Opposite of the one directional promotional methods, direct selling connects company representatives with the consumer. These interactions can be in person, over the phone and over email or chat. This personal contact aims to create a personal relationship between the client and the brand or product.Direct Marketing â€" This channel targets specific influential potential users through telemarketing, customized letters, emails and text messages.Sales Promotions â€" These are usually short term strategic activities which aim to encourage a sur ge in sales. These could be ‘buy one get one free’ options, seasonal discounts, contests, samples or even special coupons with expiration dates.Important Considerations in Promotional Decisions Whenever a company sets out to design its promotional mix, it needs to consider the following points:Stage in the Product Lifecycle â€" During the beginning of the lifecycle, there may need to be more aggressive and informational advertising, while a slowdown in promotions may be seen during the later stages.Nature of the Product â€" If a product is not new in its usage or function, there may be less need for information and more focus on brand equity creation as well as on emotional aspects of the product.The Allocated and Available Budge â€" A certain total budget is set for promotional activities and these then need to be designed and executed within these constraints.Cultural Sensitivity â€" If a product is to be launched in a new international market or translated across markets, it becomes imperative to take into consideration local affiliations and sensitivities. These include both cultural and religious considerations. Often, these issues may even present themselves within one country.Target Market Composition â€" The people who make up the target market need to be considered before committing to a promotional mix. If a market is not tech savvy, then more traditional means may need to be employed. Conversely, an internet generation used to instant gratification may need to be provided more focused and targeted messages.    Competitor Actions â€" The methods a competitor uses need to be taken into account as well. There may not be a need to spend money on a radical advertising method if a customer is using rudimentary methods for example.TYPES OF PROMOTIONAL STRATEGIESA company may use different strategies to promote its products. These can be broadly categorized as push and pull strategies. Both strategies differ in how the customer is approached. © Entrepreneurial InsightsPush StrategiesAs the name indicates, this is when the product is taken to the customer by the company. This is mostly used when the product is an impulse purchase or if the company has an established relationship with the customer base. Companies may sell directly from their showrooms or at tradeshows etc. Essentially, there is less need to create an advertising buzz and more to make the product readily available at retail outlets and showrooms. Push marketing may focus primarily on short term sales.Pull StrategiesIn the opposite approach, there is an attempt to pull customers towards the brand or product. Through mass media campaigns to sales promotions and personal references, a company attempts to create brand loyalty and attractiveness. Pull strategies may attempt to focus primarily on long term brand loyalty then high sales in the short term. A lot of media hype and mass campaigns are required to create sufficient interest and encourage customers to s eek out the product on their own.Most companies will use a mix of these two strategies at different points in time.MANAGING PROMOTION THROUGH THE PRODUCT LIFE CYCLE © Wikimedia commons | Malakooti, B. (2013). Operations and Production Systems with Multiple ObjectivesAs briefly mentioned before, different stages of the product life cycle require different types of promotional activities and strategies. This will help prolong the life of the product.  Introduction â€" At this stage, major promotional campaigns and activities will be designed and executed. A comprehensive promotional mix will be designed with full input from the rest of the marketing mix. The aim here is to provide detailed information about the product, its features and benefits. Special offers and sales promotions may also be used to pull in customers while in some markets push strategies may be used simultaneously employed.Growth â€" Once the product is established and accepted, there will be a shift in strategy from information to more emotional aspects. The aim is to increase brand awareness, create strong brand equity and foster long term customer loyalty.Maturity â€" By now the market may have matured and there may be stiff competition and similar products available. Promotional activities will now turn more persuasive and there may be an attempt to create product differentiation by highlighting specific benefits and features that fulfill needs and are unique.Decline â€" At this point, promotional activities may wind down to the occasional reminder that the product exists in an attempt to forestall the product’s eventual decline.PROMOTIONAL MIX EXAMPLEHow Promotional Mix Helped Turn Skoda AroundSkoda has suffered dips and seen highs in its popularity as a brand over the course of its 100 year history. At its lowest point, there was a strong perception of an outdated brand with obsolete manufacturing techniques. Through a combination of new techniques, a new partner and an effective PR strategy, the brand was turned around and a new image created.Public Relations at SkodaThere is no short term solution to change long held perceptions. If there is to be a long term change in perception, it needs to be achieved through sustained and consistent actions over a significant period of time. PR activities are an example of such a solution where positive messages are sent through different mediums to the public, eventually establishing a positive reputation over time.The Image ProblemSkoda needed an image makeover in the UK where it was not taken seriously at all. In 1991, the brand was purchased by Volkswagen. This enabled the company to redesign its manufacturing and bring product quality and brand image at par with competitors in the UK and eventually the world.Despite this shift, customer perception remained low, an unfortunate carry over from the past. Products were now updated and the brand able to offer more to the consumer. The challenge now was to educate the audience on these changes and bring about a change in perception.The ChallengeThe attempt at changing mindsets was divided up into two challenges. The first to move negati ve perceptions to neutral and the second to move neutral perceptions to positive. An integrated press and public relations plan was devised and rolled out to address the first challenge and communicate the changed company and product to the audience. Factory visits, meetings and interviews with designers and engineers, motor shows, sponsorships, displays at public arenas and well planned advertisement campaigns were part of this strategy. These efforts helped reduce the strong negative image and create the basis for further shift towards a positive image.In attempting to address the second challenge, the company needed to encourage consumers to think about buying the product. This is not possible only through advertising for example, but needs a focus on building up the brand and what it stands for. This was done by emphasizing Skoda’s brand values through cars that were practical, reliable, functional and robust. This was also reiterated through a focus on quality and value for m oney for the customer among other things. The ResultThrough this PR effort, and subsequent important brand launches, the modern Skoda brand name was established allowing the company to step successfully into the future.Image credit:  Wikimedia commons | Malakooti, B. (2013). Operations and Production Systems with Multiple Objectives under Attribution-ShareAlike 4.0 International. Marketing Mix WHY IS PRICING IMPORTANT? After product, pricing plays a key role in the marketing mix. The reason for this importance is that where the rest of the elements of the marketing mix are cost generators, price is a source of income and profits. Through pricing, the organization manages to support the cost of production, the cost of distribution, and the cost of promotion.Simplistically, price is the value measured in money term in the part of the transaction between two parties where the buyer has to give something up (the price) to gain something offered by the other party or the seller. Pricing is a complicated element, which needs to reflect supply and demand, the actual value of the object, and the perceived value of it in the mind of the consumer. A price that does not reflect these factors and is either too high or too low will lead to unsuccessful sales. This is why an organization’s pricing will change according to circumstances and time. © Entrepreneurial InsightsIn this article, we look at 1) why is pricing important, 2) pricing objectives, 3) types of pricing strategies, 4) how to price, and 5) pricing issues. WHY IS PRICING IMPORTANT?There is often a tendency for marketers to focus more on activities like promotion, product development, and market research while prioritizing their responsibilities. These are often perceived as the more interesting aspects of the product and marketing mix. However, pricing needs to be given its due attention since it has great impact on the rest of the activities and the company. Pricing is of vital importance because of the following reasons.Pricing as a Flexible VariablePricing changes can be made quickly and with almost no lead time if the business needs to make some product positioning changes or to counter a competitor’s activities. In comparison, a change to the product or to a distribution channel can take months and sometimes significant cost inputs. Similarly any promot ion decisions will also require additional financial input. Though it is important to plan for pricing changes and their impact on the brand and product perception, this can still be accomplished much faster than any other changes.Define the Right PricingAny pricing decisions for a product need to be made through proper research, analysis and an eye on strategic objectives for the organization and the product. A decision made too quickly with superficial assessment can result in a loss of revenue. A price below the perceived value can lead to both a loss in potential additional revenue and a target audience that judges the quality of the brand through price points. If this price is raised later on, the existing customers may feel like they are being unfairly burdened. A price set too high can result in potential buyers staying away altogether. Pricing is often done by a team of experts who spend time conducting research that considers all variables of the market and brand.Pricing as a Trigger for First impressionsIn some product categories, a consumer will form a perception about its quality and relevance as soon as they see the price. Eventually, the decision to buy or not may be based on the perceived value of the entire product or marketing mix offering. But there is always a danger that the first impression triggered by the price point will either make the rest of the offering irrelevant or it will be a biased assessment.Pricing as a Key to Sales PromotionsSales promotions are often a short time price based offering such as a percentage reduction or a two in one type offer. These are meant to generate interest in the product or make use of a special occasion or event. Used wisely, this can be a useful method of increasing sales but the company must avoid the temptation to offer these special prices too often. In this scenario, buyers will put off purchasing the product till the next sales promotion of price reduction.[cp_modal id=cp_id_75506] [/cp_modal]PRICING OBJECTIVES Before any pricing decisions are made, a company must establish what it means to achieve through pricing. Often, these objectives include:1. Profit Maximization: Keeping in mind revenue and costs, a company may want to maximize profits. Profit maximization objectives should be long term and not focus only on the short term.2. Revenue Maximization: With less focus on profits, a company may focus on increasing revenues in order to increase market share and lower costs in the long term.3. Maximize Quantity: A company may want to sell a specific number of items to decrease long term costs.4. Maximize Profit Margin: Another objective may be to increase the profit margin for each unit and not focus on the total number of units sold.5. Quality Leader: A company may want to use price to signal high quality and establish itself as the quality leader.6. Partial Cost Recovery: If an organization has multiple revenue streams, it may not be too focused on recovering a hundred percent of its costs .7. Survival: Sometimes, the best a company may want to do is to cover costs and to remain in the market. If the market is in decline or there are too many competitors, survival may take temporary priority over profit.8. Status Quo: There may be a need to avoid price wars with competitors. So a company may maintain a stable price to continue a stable profit level.TYPES OF PRICING STRATEGIES There are a number of pricing strategies that a company can use to sell its product. The strategy used at any time will depend on the company’s strategy and objectives. Some of these pricing strategies are the following.Penetration PricingA low price is set by the company to build up sales and market share. This may be done to establish position in a market with preexisting similar products on offer. Once a position is created, the prices may be raised. A satellite channel provider may offer an introductory price and then increase as business grows.Skimming PricingHere, the initial price is set high and may slowly be brought down. This will allow the company to introduce the product step by step to different layers of the market. Electronic and tech gadgets often start at a very high price which is subsequently lowered with the lowest point reached right before a new model is launched.Competition PricingWhen trying to go head to head with competitors offering similar benefits, a co mpany may decide to: a. price higher to create a higher quality perception or to target a niche market b. price the same to show more benefits for the same price c. price lower to try to gain a wider customer baseProduct Line PricingHere, different products in the same range may be set at different prices. Television sets are priced differently depending on whether they are HD or not, whether they have wifi features of not and whether they are 3D or not.Bundle PricingA group of products may be bundled together and sold at a reduced price. Supermarkets often use this method through their ‘buy one get one free’ offers.Psychological PricingOften a company will make small changes to prices to make a customer think the item is priced lower than it is. This is often seen in prices ending in 99. For example, an item market 199 will be perceived as closer in price to 100 than 200.Premium PricingA high price is set to establish an exclusive product of high quality. Designer cars and prem ium brand stores are a good example of this type of pricing.Optional PricingA company may add optional extra items within the price to increase a product’s attractiveness. Car sellers may offer car insurance for the first year for example.Cost Based PricingSimply, a company may determine the exact cost of producing and selling an objective, add a markup that may be desirable for profits and price accordingly. This method may be used in a changing industry where even costs of production are unpredictable.Cost Plus PricingA percentage is added to the costs as a profit margin to determine final price.HOW TO PRICEBasic Pricing ProcessAs previously mentioned, a company’s pricing strategy and method changes with circumstances and time. This is why there is no fixed methodology to aid a company in its pricing endeavors. However, the following steps can act as a general guideline:1. Develop Marketing StrategyA detailed market analysis acts as a logical starting point for pricing decisio ns. A business follows up a market analysis with a division and definition of the market into segments each with its distinct requirements and needs. After this, a decision needs to be made regarding the desired segments to be targeted. The product and brand positioning is then based on these identified segments.2. Make Marketing Mix DecisionsOnce the segments and positioning is somewhat in place, the marketing mix planning comes into effect. Here the product, distribution, and promotional elements are decisions to focus upon and to finalize.3. Estimate Demand CurveAnother market analysis needs to be conducted at this point. In this one, there needs to be specific information gathered about how the price affects the quantity of the product demanded.4. Calculate CostsA company can now get an accurate assessment of the total fixed and variable costs associated with the product. These are a necessary inputs for pricing decisions as the final price needs to at least cover these costs.5. Assess EnvironmentAnother vital element that feeds into pricing is the environment. This means an understanding of the competitor’s strategies, their product and its value as well as an understanding of any industry or legal constraints.6. Set Pricing ObjectivesAs detailed above, there are several objectives that a company can have from its pricing strategy. This is the point in the process that those objectives need to be discussed and agreed upon.7. Determine PriceUsing all the information collected and analyzed till this point, a company is now in a good position to set the best price for its products. A pricing method and structure can be formulated along with any possible sales promotions or discounts.These steps are no necessarily all followed in this sequence. Some steps might be skipped or bundled together, while others performed at different stages in different order depending on several factors, like product or business model.Factors That Affect PricingThere are several basic factors that affect pricing for almost all companies and industries. These can be categorized as internal factors and external factors.Internal FactorsThese are those elements that are under the control of the organization. However, it is vital to note that though they may be within the company’s domain of control, changing them may not be as easy as it seems. For example, production process changes may require significant cost, time and process redesign. Internal factors include:Fixed and variable CostsCompany objectives and strategiesMarket segments, targeting and positioning decisionsExternal FactorsThose factors which have a significant impact on pricing decisions but are not completely controllable by the company are known as external factors. Since these are very important to the pricing method, a company can exert some control by conducting detailed analyses to understand in depth how these factors will behave. External factors may include:CompetitorsTarget market be havior and willingness to payIndustry trendsIndustry or legal ConstraintsPRICING ISSUESIn business, there are often grey areas that may seem simple but are often difficult to address. Some issues such as minimum wage, worker benefits and safe work environment are easy to understand, others such as pricing strategies can sometimes become quite blurry and difficult to judge on an ethical scale. Though there are legal measure in place to prevent unethical pricing methods, there are many areas not controlled by laws that can nonetheless create negative situations for buyers. For example, misleading promotional campaigns or the use of harmful or low quality materials can lead to incorrect buying decisions.It is often impossible to prove that a misstep by a company is deliberate or not. These grey areas can be entered upon accidently by a company as well. Some of these grey areas to watch out for are:Price FixingIn a competitive market, prices are often lowered to the benefit of the consu mer. If these competitors were to get together and decide to sell at a fixed price, it would mean more expensive products for the user and more benefits for the company. It is therefore, a good idea for a company to study the competition and the market, but not to enter agreements to the detriment of the consumer.Price DiscriminationWhen the same product is sold at different prices to different sets of consumers, it is called price discrimination. This is a tricky category, as special offers for seniors and children are acceptable while presenting only high cost options to higher income consumers may not be well received.Price SkimmingWhen a product is priced high initially and then eventually sold at lower prices, it is called price skimming. The company aims to gather maximum benefit from premium users first and then slowly move down the chain to access all levels of consumer groups. Usually employed in the tech industry, if not managed well it can create a negative impression in the consumer’s mind. Eventually, some people may catch on to the pattern and stop buying till a lower price is introduced.Opportunistic PricingSometimes, the value attached to a product may be much higher than its cost. This allows a company to charge a premium price for their products. The grey area here is whether the company should follow this practice in all instances. If there is a shortage of a necessary good, or a special situation such as a natural disaster, then this opportunistic pricing may be very unethical.However, software products that may be less expensive to produce but offer great benefit may not be similarly frowned upon. It is a good idea for a company to assess whether their premium pricing limits a consumer’s access to a necessary item such as food or medicine.Pricing plays a very important role in determining a products perceived value, in building brands and in ensuring long term profits and sales for the company. It is therefore important to give it due importance and allow in depth analyses to become the basic of pricing decisions.Marketing Mix Pricing[slideshare id=292680doc=marketing-mix-priced-1204668120106339-5w=710h=500] Marketing Mix PRODUCT The marketing mix is a tool that is made up of four unique but interconnected and interdependent variables. These are called the 4P’s and are product, price, promotion, and place. These four components help determine a clear and effective strategy to bring a product to market. Each element is crucial in its own right and needs to be given due focus. © Entrepreneurial InsightsIn this article, we look at 1) product, 2) product classification, 3) the product in Four Ps (marketing mix), 4) product decisions, 5) hallmarks of successful products, 6) product development, and 7) Starbucks a strong product example.PRODUCTWhat is a Product?A product is an item that satisfies a need or a desire. This can be a physical item, a service or a virtual offering. It is produced at a cost and is subsequently made available to the right audience at a price. Whatever the nature of the product, it will follow a lifecycle and through reasonable predictions of this lifecycle, a company can increase its competitive edge. A brand can be revamped or re-launched to remain relevant in a changing market or at the end of its lifecycle.A successful product has to fulfill a specific need in the market. Functionally, it must be able to perform its function as promised. There also needs to be clear communication to users and potential customers regarding its be nefits and features. Branding is another important feature for a product. Developing a product into a brand helps foster customer loyalty and recall and differentiate itself in the market.Features and Value creationEvery product should have certain characteristics that separate it from its competitors. These characteristics should be foremost inputs to the product’s marketing mix. When a product is envisioned, it is an answer to an identified market need. This need is translated into a product with particular characteristics. These characteristics help determine all subsequent actions such as pricing, communication strategy and additional features or add-ons. For this reason, it is vital to try to create a unique set of characteristics for any product.Unique Selling PropositionA factor that is shown to be the basis of why one product is better than its competitors is called a unique selling proposition or a USP. This characteristic or set of characteristics helps solidify a compan y’s market position and allows them to stand apart from competition. There are very few products that have no clear competition in the market. Most often, there are identical products with almost the same features. In this situation, differentiation becomes of the utmost importance for the success of any product. The company needs not only to identify an USP, but also to clearly communicate this to the potential audience so that it is understood why the product is superior to other similar ones.[cp_modal id=cp_id_75506] [/cp_modal]PRODUCT CLASSIFICATIONAll products can be broadly classified into 3 main categories. These are:Tangible products: These are items with an actual physical presence such as a car, an electronic device, and an item of clothing or a consumer good. Intangible products: These are items that has no physical presence but can be felt indirectly. An insurance policy is an example of this. Online items such as software, applications or even music and video files are also intangible products. Services: Services are also intangible products but they are the result of an economic activity that does not result in ownership. It is a process that creates benefits for customers. Services depend highly on who is performing them and remain difficult to reproduce exactly.Both tangible and intangible goods and services can be further defined and divided into the following groups:Consumer Goods â€" Items that are used directly by the end user such as food, clothing, cars, etc,Consumer Services â €" Services that are for the benefit of end users directly such as education, courier services, grooming services, etc.Producer Goods â€" Items that act as part of another company’s operations such as machinery or parts.Producer Services â€" Services that support another company’s operations such as accounting, human resource, etc.THE PRODUCT IN FOUR PS (MARKETING MIX)An understanding of the elements that make up a product and those necessary to successfully sell is called the product marketing mix. Product has a vital role in developing the strategy for the overall marketing mix which includes place, price and promotion. Through a definition of the product features and benefits, the rest of the marketing mix elements are determined and agreed upon.Understanding the Product MixA company’s portfolio of products makes up its product mix. Within this mix are Product lines which are closely linked groups of products. These may offer the same benefit or have shared characteristics. A product line is made up of product items which are individual units that have unique appearances, functions or price points.Each product item will have three main elements that need to be focused on. These are the brand, the packaging, and the associated services.Before these three elements can be defined and used as inputs to the rest of the marketing mix, product benefits and USPs need to be defined.Understanding and Creating BenefitsGiven the importance of product in the marketing mix, it is good practice to understand who is the target group, what are the benefits of an offer, how is this product to be positioned in the market, and what will the USP be?Philip Kotler proposed one way of understanding product benefits in his popular academic work “Principles of Marketing.” He says that a product can be looked at three different levels.Core This is the first level to be defined and explored. What is the main or core benefit that a product offers to its consumers? In the cas e of a camera, they are able to capture memories forever through the purchase of a productActual Here, any additional benefits are added on to differentiate the product and highlight its USP. In our example, all cameras offer the same core benefit. But any additional features or strong branding can offer a better product.Augmented Finally, there needs to be an assessment of what further benefits can be offered to the customer to ensure a loyal purchasing customer. In our example, these can be after sales service, extended warranties or product support blogs or helplines.PRODUCT DECISIONSWith an understanding of the basic product mix and benefits, a company can now begin to make important product decisions. These include:Design Decisions: The basic decision here to identify how strong the design will be in the entire product mix. Will it be a supplement to the features or will the features be designed around a unique design.Quality Decisions: The quality of the proud needs is kept with the other elements of the marketing mix. A high price can be charged if the product has superior quality.Features Decisions: What will be the final features of the product? Will they add to the perceived and actual benefits of the product? Here also, the company can charge a premium price for additional desirable benefits from features.Branding Decisions: Branding decision remain some of the most important as it turns a product into something beyond just a good. A brand can have the power to generate instant sales as well cement confidence in the product’s quality and reliability.PRODUCT DEVELOPMENTProduct development is the creation of a new or different product that offers innovative new benefits to the end user. This includes both the creation of an entirely new product and modifications to an existing product. These changes or new introductions may be targeting a newly defined customer requirement or a niche category in the market. Product development traditionally includ es the following steps:Generate IdeasScreen IdeasDevelop and Test IdeasAnalyze for Profitability PotentialConduct market or Beta TestsFinalize Technical AspectsFinalize Commercial AspectsConduct Post Launch ReviewFor more information on Product Development, consult this post.Product Development Considerations for New BusinessesThe step wise process for product development may not be an option for entrepreneurs who have limited resources at their disposal. Often, they may need to manage several steps simultaneously to ensure a quick product development process at a lower cost. They may also need to go through a comprehensive product planning phase where they can understand the market potential of an idea before actually committing to development. This plan can include a thorough analysis of the market, competing products, pricing strategies and potential, and manufacturing costs and logistics. These analyses, if positive can help set a strong stage for the product development plan. I f they are not encouraging, then the product idea may have to be reevaluated.Product Life CycleAn important consideration for any product is the logical stages of its lifecycle. A typical product goes through the following stages:Introduction â€" Slow growth period following product launchGrowth â€" Fast growth phase once the product is establishedMaturity â€" A period of slowdown in sales as the product becomes ubiquitous in the marketDecline â€" A downward sales as the product is no longer fulfilling a need or there are better options.A keen eye needs to be kept on the product’s journey through the lifecycle. A close to reality prediction of this path may help the company relaunch or redesign an existing product or work on introducing a new one to the market. A detailed look at the product life cycle can be found here.HALLMARKS OF SUCCESSFUL PRODUCTSFor a product of any nature to be successful, it needs to:Satisfy identified customer needs or wantsBe of the right quality to allo w higher price pointsBe low cost in production and delivering to a customer to ensure better profit marginsBe durable and attractive in its appearance to match the price and the brand imageAble to stimulate new needs or unidentified desiresKey Questions in Developing Successful ProductsIn order to develop products that meet the criteria specified above, a product development team can ask the following questions during the brainstorming and design process.What does the customer want from the product?What hidden need does it address?What features does it need to have to meet these wants and needs?Are there any overlooked features that can add value?Are there any added features that add no value?How will the product be used by the consumer?Where will the product be used?What does the product look like? How big or small? Colors and materials?What should the product be named?What will the branding strategy be?What will be the product’s USP?How will it be communicated to the audience?Wh at will the cost of production be? Can the features, benefits and branding bring in a logical price to offset the cost and make a profit? These questions will help any organization critically evaluate a product plan or an existing product due for a revamp.STARBUCKS A STRONG PRODUCTStarbucks has managed to create an extremely strong brand over the years. A constant focus on marketing, brand development and the product has enabled the company to become the largest coffee shop chain in the world. The company takes customer feedback very seriously and makes it a point to meet and exceed customer demands in keeping with core brand values.The USP and the core business for Starbucks is the extremely good coffee. The company has refined their business model to keep a focus on this product and ensure that the customer always gets the best possible cup of coffee through the Starbucks experience. The company allows customers to build their own recipe online and then have a barista in a store make it for them.There is also a policy in place to provide a free cup of coffee if a customer is not satisfied with what they have gotten. This shows a strong focus on the customer.A few years ago, the company made the decision to eliminate the breakfast sandwich business to focus on the core product: Coffee. This was determined to lead to a significant reduction in cost. One reason for this was also that the breakfast sandwich smell clashed with the traditional signature coffee smell, thus taking away from the experience. This shows a focus on the core product and the adaptability to change product lines when needed.This focus on core product and customer needs have enabled the giant brand to stay ahead in its industry and become the benchmark for competitors.Product: A Tool of Marketing Mix[slideshare id=29634373doc=product-140102100045-phpapp02w=710h=500] Marketing Mix PLACE â€" AN INTRODUCTION The last element of the marketing mix is the place. Also called placement or distribution, this is the process and methods used to bring the product or service to the consumer. © Entrepreneurial InsightsIn this section we will take a look at 1) an introduction of place, 2) distribution channels and intermediaries, 3) making channel decisions, 4) managing distribution channels, 5) the impact of the marketing mix on place, and 6) an example of Dell Computers’ distribution strategy.PLACE â€" AN INTRODUCTIONIn the marketing mix, the process of moving products from the producer to the intended user is called place. In other words, it is how your product is bought and where it is bought. This movement could be through a combination of intermediaries such as distributors, wholesalers and retailers. In addition, a newer method is the internet which itself is a marketplace now.Through the use of the right place, a company can increase sales and maintain these over a longer period of time. In turn, this would mean a greater share of the market and increased revenues and profits.Correct placement is a vital activity that is focused on reaching the right target audi ence at the right time. It focuses on where the business is located, where the target market is placed, how best to connect these two, how to store goods in the interim and how to eventually transport them.[cp_modal id=cp_id_75506] [/cp_modal]DISTRIBUTION CHANNELS INTERMEDIARIESWhat is a Distribution Channel?A distribution channel can be defined as the activities and processes required to move a product from the producer to the consumer. Also included in the channel are the intermediaries that are involved in this movement in any capacity. These intermediaries are third party companies that act as wholesalers, transporters, retailers and provide warehouse facilities.Types of Distribution ChannelsThere are four main types of distribution channels. These are:Direct In this channel, the manufacturer directly provides the product to the consumer. In this instance, the business may own all elements of its distribution channel or sell through a specific retail location. Internet sales and one on one meetings are also ways to sell directly to the consumer. One benefit of this method is that the company has complete control over the product, its image at all stages and the user experience.Indirect In this channel, a company will use an intermediary to sell a product to the consumer. The company may sell to a wholesaler who further distributes to retail outlets. This may raise product costs since each intermediary will get their percentage of the profits. This channel may become necessary for large producers who sell through hundreds of small retailers.Dual DistributionIn this type of channel, a company may use a combination of direct and indirect selling. The product may be sold directly to a consumer, while in other cases it may be sold through intermediaries. This type of channel may help reach more consumers but there may be the danger of channel conflict. The user experience may vary and an inconsistent image for the product and a related service may begin to take hold.Reverse ChannelsThe last, most non tradition channel allows for the consumer to send a product to the producer. This reverse flow is what distinguishes this method from the others. An example of this is whe n a consumer recycles and makes money from this activity.Types of Intermediaries Distribution channel intermediaries are middlemen who play a crucial role in the distribution process. These middlemen facilitate the distribution process through their experience and expertise. There are four main types of intermediaries:1. Agents The agent is an independent entity who acts as an extension of the producer by representing them to the user. An agent never actually gains ownership of the product and usually make money from commissions and fees paid for their services.2. Wholesalers Wholesalers are also independent entities. But they actually purchase goods from a producer in bulk and store them in warehouses. These goods are then resold in smaller amounts at a profit. Wholesalers seldom sell directly to an end user. Their customers are usually another intermediary such as a retailer.3. Distributors Similar to wholesalers, distributors differ in one regard. A wholesaler may carry a variety of competition brands and product types. A distributor however, will only carry p roducts from a single brand or company. A distributor may have a close relationship with the producer.4. Retailers Wholesalers and distributors will sell the products that they have acquired to the retailer at a profit. Retailers will then stock the goods and sell them to the ultimate end user at a profit.Importance of Distribution ChannelsIt may seem simplistically possible and smarter for a company to directly distribute its own products without the help of a channel and intermediaries. This is especially so because the internet allows sellers and buyers to interact in real time. But in actual practice it may not make business sense for a company to set up its own distribution operation. Large scale producers of consumer goods for example, need to stock items of basic necessity such as soap, toilet paper and toothpaste in as many small and large stores in as many locations as possible. These locations may be as close together as two on the same street. They may also be remote rura l convenience stores, rest stops and petrol stations. It would be counterproductive and costly for the company to attempt to achieve this without a detailed distribution channel.Even in cases where a company does sell directly, there remain activities that are performed by an outside company. A laptop may be sold from a company website to a consumer directly, but it will be sent out using an existing courier service. This is why, in some form or the other, all producers must rely on a distribution channel.MAKING CHANNEL DECISIONSSetting Goals and DirectionThe first step to deciding the best distribution channel to use, a company needs to:Analyze the customer and understand their needsDiscuss and finalize channel objectivesWork out distribution tasks and processes.Some key questions to ask in finalizing these three areas include:Where do users seek to purchase the product?If is a physical store, is it a supermarket or a specialist store? Is it an online store or a catalogue?What is t he access available to the right distribution channels?What are competitors doing? Are they successful? Can best practices be used in making channel decisions?Selecting Distribution StrategiesA company may need to use different strategies for different types of products. Three main strategies that can be used are:Intensive Distribution â€" This strategy may be used to distribute lower prices products that may be impulse purchases. Items are stocked at a large number of outlets and may include things such as mints, gum or candy as well as basic supplies and necessities.Selective Distribution â€" In this strategy, a product may be sold at a selective number or outlets. These may include items such as computers or household appliances that are costly but need to be somewhat widely available to allow a consumer to compare.Exclusive Distribution â€" A higher priced item may be sold at a single outlet. This is exclusive distribution. Cars may be an example of this type of strategy.Assessi ng Benefits of Distribution ChannelsWhile making channel decisions, a company may need to weigh the benefits of a partner with the associated costs. Some potential benefits to look out for include:Specialists â€" Since intermediaries are experts at what they do, they can perform the task better and more cost effectively than a company itself.Quick Exchange time â€" Being specialists and using established processes, intermediaries are able to ensure deliveries faster and on time.Variety for the Consumers â€" By selling through retailers, consumers are able to choose between a varieties of products without having to visit multiple stores belonging to each individual producer.Small Quantities â€" Intermediaries allow the cost of transportation to be divided and this in turn allows consumers to buy small quantities of a product rather than having to make bulk purchases. This is possible when a wholesaler buys in bulk, stores the product in a warehouse and then provides the product to re tailers located close by at lower transportation costs.Sales Creation â€" Since retailers and wholesalers have their own stakes in the product, they may have their own advertising or promotions efforts that help generate sales.Payment Options â€" Retailers may create payment plans and options for customers allowing easier purchases.Information â€" The distribution channel can provide valuable information on the product and its acceptability, allowing product development as well as an idea of emerging consumer trends and behaviors.Assessing Possible Channel CostsWith the benefits in mind, here are some costs that a producer may have to weigh in order to make channel decisionsLost Revenue â€" Because intermediaries need to be either paid for their services or allowed to resell at a higher price, the company may lose out on revenue. Pricing needs to stay consistent, so the company will have to reduce its profit margin to give a cut to the intermediary.Lost Communication Control â€" Alo ng with revenue, the message being received by the consumer is also in the hands of the intermediary. There is a danger of wrong information being communicated to the customer regarding product features and benefits which can lead to dissatisfaction.Lost Product Importance â€" When a product is handed over to an intermediary, how much importance it gets is now out of the company’s hand. The intermediary may have incentives to push another product first at the expense of others.MANAGING DISTRIBUTION CHANNELSChannel management is an essential activity for the manufacturer. Intermediaries need to be kept motivated and offered incentives to ensure timely and efficient delivery of products and services. Clear messages regarding products and their functionalities need to be passed on to attempt to keep clear communication regarding a product or brand all the way to the end user.Channel SegmentationJust as a customer base is segmented and addressed according to their specific needs and r equirements, distribution channels can also be segmented. Now all intermediaries or the markets they serve will be similar. There may be a need to foster stronger relationships with a retailer that sells in a knowledgeable and discerning urban market with high competition. Similarly, if a product is expensive and highly specialized, a retailer may need to be trained and given the relevant information.Benefits of Channel SegmentationA company may achieve one of more of the following benefits through channel segmentation:Product Management â€" Relevant products may be provided to the right channel which can help reduce cost of irrelevant stock as well as unnecessary logistical arrangements.Price Management â€" Local price differentiation may be possible.Promotion Management â€" More targeted and relevant promotional activities may be possible with more clear and consistent marketing messages.Efficiency in Operations â€" Time and resource wastage through the channel can be removed. Dev elopment needs of every channel segment can be addressed separately, in a more targeted manner.IMPACT OF MARKETING MIX ON PLACENo element of the marketing mix works in isolation. Information from each of them acts as input to the others. This is why when shaping a distribution strategy, input needs to be taken from all other elements of the mix and any considerations need to be addressed or incorporated. Product, price and promotion may have the following impacts on the distribution strategy:Impact of Product IssuesThe type of product being manufactured is often the deciding factor in distribution decisions. A delicate or perishable product will need special arrangements while sturdy or durable products will not require such delicate handling.Impact of Pricing IssuesAn assessment of the right price for a product is made by the marketing team. This is the price at which the customer will be willing to make the purchase. This price will often help decide the type of distribution chann el. If this price does not allow a high margin, then a company may choose to use less intermediaries in its channel to ensure that everyone gets their cut at a reasonable cost to the manufacturer.Impact of Promotion IssuesThe nature of the product also has an impact on the type of promotions required to sell it. These promotion decisions will in turn directly affect the distribution decisions. Disposable goods or those of everyday use do not require too many special channels. But for a car, there needs to be extensive salesperson and user interaction. For this type of product, a specialist channel may be needed.EXAMPLE DIRECT SELLING AT DELL COMPUTERSDell Computers was founded by a college freshman Michael Dell. By 1985, the company had developed its unique strategy of offering made to order computers. As a result of this, sales went from 6 million dollars in 1984 to 70 million in 1985. In another 5 years the sales jumped to 500 million dollars and by the end of 2000 they had cross ed 25 billion dollars.A superior supply chain and innovative manufacturing had an important role to play in this phenomenal success. Another important contributing factor was the unique distribution strategy employed by the company. Identifying and capitalizing on an emerging market trend, Dell eliminated the middleman or retailers from their distribution channel. This was done after studying and analyzing the personal computer value chain.Dell became a strong direct seller, by using mail-order systems before the spread of the internet. After the internet became more mainstream, an online sales platform was established. Early on in the internet era, Dell began providing order status reports and technical support to their customers online. Online sales reached 4 million dollars a day in 1997.While competitors sold pre-configured and assembled PCs in retail stores, Dell offered something new and attractive to the customers by providing the option to pick desirable features and that to o at a discounted price. This was possible because Dell did not have to bear the costs of the middleman.Another useful aspect of this model was the information available regarding customers and their needs and requirements. This helped the company predict market trends and segment its market. This segmentation helped product development efforts and an understanding of what creates value for each segment.Through careful analysis of the target market, a study of available channel options and effective use of a novel idea, Dell computers managed to reach early success in its industry.