When it comes down to the marketing mix, there are the 4 important P's. Product, Price, Promotion and Place. These 4 P's help decide your product/service you sell to the customer, your pricing strategy, the kind of promotion and advertising for your product you do and where will you sell it. While planning about your business you will need to take an A3 or A2 paper and divide it into 4 sections using a ruler and then in each section write about your product, price, promotion and place respectively
Product
Before you think about your product, you need to know what exactly defines a product. A product is the good or service that a customer is willing and able to buy because it satisfies a specific need or want. When you make 4 divisions in your A3 sheet, under the product section there will be a few things to consider no matter your business idea. What is your product, is it a physical product or a service, how does it function, why does the user need it, what is it's packaging, is the product of good quality. You have to ask your self questions about the product and answer them. Then you base your product around those answers. Even under "Product", there are several subtopics such as product life cycle, and packaging which will all be explained below
Product Life cycle: There are many stages involved while selling a product . These are referred to as the product life cycle. The five stages of product life cycle are, development, introduction, growth, maturity and decline. The development stage is when market research is done and prototypes are made and improved over time. The introduction stage is when the product is first introduced to the market, sales are usually slow at this stage and they gradually increase. The growth period is usually the market starts to accept the product as a result of marketing and advertising, the brand becomes popular and sales increase. The maturity stage is when the product achieves consistent sales because of a strong brand image and an increase in consumer awareness. However, a number of competitors might bring out similar products, filling the market with several different options. The decline stage is when the product is old, and the business will need a new and better product in its place. However in order to counter the decline stage of the product, there are a few strategies and methods such as reducing the price, doing more advertising, slightly updating it, and having promotional offers.
Packaging: The packaging of your product is very important to satisfy the customer. The purpose of packaging is to to make the product look more attractive, to give a satisfying feeling to the customer while unboxing, to enable easy stacking of the product, to keep it safe during transport etc. Packaging is a very important part of a product and is vital, so don't forget to package your product well.
Product Life cycle: There are many stages involved while selling a product . These are referred to as the product life cycle. The five stages of product life cycle are, development, introduction, growth, maturity and decline. The development stage is when market research is done and prototypes are made and improved over time. The introduction stage is when the product is first introduced to the market, sales are usually slow at this stage and they gradually increase. The growth period is usually the market starts to accept the product as a result of marketing and advertising, the brand becomes popular and sales increase. The maturity stage is when the product achieves consistent sales because of a strong brand image and an increase in consumer awareness. However, a number of competitors might bring out similar products, filling the market with several different options. The decline stage is when the product is old, and the business will need a new and better product in its place. However in order to counter the decline stage of the product, there are a few strategies and methods such as reducing the price, doing more advertising, slightly updating it, and having promotional offers.
Packaging: The packaging of your product is very important to satisfy the customer. The purpose of packaging is to to make the product look more attractive, to give a satisfying feeling to the customer while unboxing, to enable easy stacking of the product, to keep it safe during transport etc. Packaging is a very important part of a product and is vital, so don't forget to package your product well.
Price
It is important that a product is priced appropriately. If the price is too high, then it will put customers off buying the product. If the price is too low, then the business may not cover the production costs. There are several pricing strategies you can use such as cost plus, competitive, promotional, price skimming, and price penetration.
Cost plus pricing- This pricing strategy involves working out how much each unit costs to produce and then adding a fixed percentage for profit. Advantages of this are, it is easy to calculate because the business decides on the mark-up and it can be applied to most products. Some disadvantages of this are, you can't get high profits with this pricing strategy, an overall profit can only be gotten if enough goods are sold and competitors can easily undercut your prices.
Competitive pricing- This pricing strategy involves undercutting your competitor's price for similar product. Advantages of this method include sales are likely to be good since you offer similar product for cheaper, you are cutting out the competitor and other businesses are forced to develop a unique selling point in order to draw customers. However there are also disadvantages to this. They include if the competitors already sell their products for cheap prices, then it is nearly impossible to undercut their prices significantly enough to attract customers while at the same time get a good profit and the profit will be low so it will be important to have a constant and loyal base of customers.
Promotional Pricing- This strategy involves selling the product for a limited time at a lower discounted price and then putting it for sale for a regular price. Advantages of this strategy is that it can help clear out unsold goods taking up space in the inventory and it can make a good more popular in it's final stages. However on the flip side the disadvantages of this method include it can't be on promotion for too long or else customers will stop believing in it's value and the good's will be sold at a lower price which will mean that you will receive less revenue.
Price skimming- This strategy involves setting a high price during product launch to give customer's an idea that the product is premium and then reducing it later. Benefits of this strategy include, giving an image of high quality to customers, getting a high profit, and a lot of the costs such as R&D are recovered. Some disadvantages includes, competitors can easily undercut your prices, unless the product has a unique selling point customers might not buy, the product will have to be premium, the price might send off a lot of the customers, and it only works during the introductory stages of the product.
Price Penetration- This consists of setting a deliberately low initial price to gain sales, build customer loyalty and win market share , and then raising it. Advantages of this include low prices can attract customers easily, easy t undercut competitors, can easily gain market share, Disadvantages of this strategy include, lower profit during introductory stages, lower price might give customers impression of low quality and this strategy only works during the product's introduction stage of it's life cycle.
My recommendation for price- In terms of choosing a pricing strategy it really depends on your product and your business, Does you product have a lot of competitors with high prices?, then undercut them by choosing a competitive pricing strategy. Does you product have a USP? if yes then follow the price skimming pricing strategy. Do you need to get rid of old stock and need quick sales? Then use promotional pricing. So on and so forth. If you are stuck and unable to chose the perfect pricing strategy for your product, my recommendation would be to go with cost plus pricing. It is a very balanced strategy, which gives enough profit to sustain your business. Once you become more experienced you can change your strategy depending on your liking.
It is important that a product is priced appropriately. If the price is too high, then it will put customers off buying the product. If the price is too low, then the business may not cover the production costs. There are several pricing strategies you can use such as cost plus, competitive, promotional, price skimming, and price penetration.
Cost plus pricing- This pricing strategy involves working out how much each unit costs to produce and then adding a fixed percentage for profit. Advantages of this are, it is easy to calculate because the business decides on the mark-up and it can be applied to most products. Some disadvantages of this are, you can't get high profits with this pricing strategy, an overall profit can only be gotten if enough goods are sold and competitors can easily undercut your prices.
Competitive pricing- This pricing strategy involves undercutting your competitor's price for similar product. Advantages of this method include sales are likely to be good since you offer similar product for cheaper, you are cutting out the competitor and other businesses are forced to develop a unique selling point in order to draw customers. However there are also disadvantages to this. They include if the competitors already sell their products for cheap prices, then it is nearly impossible to undercut their prices significantly enough to attract customers while at the same time get a good profit and the profit will be low so it will be important to have a constant and loyal base of customers.
Promotional Pricing- This strategy involves selling the product for a limited time at a lower discounted price and then putting it for sale for a regular price. Advantages of this strategy is that it can help clear out unsold goods taking up space in the inventory and it can make a good more popular in it's final stages. However on the flip side the disadvantages of this method include it can't be on promotion for too long or else customers will stop believing in it's value and the good's will be sold at a lower price which will mean that you will receive less revenue.
Price skimming- This strategy involves setting a high price during product launch to give customer's an idea that the product is premium and then reducing it later. Benefits of this strategy include, giving an image of high quality to customers, getting a high profit, and a lot of the costs such as R&D are recovered. Some disadvantages includes, competitors can easily undercut your prices, unless the product has a unique selling point customers might not buy, the product will have to be premium, the price might send off a lot of the customers, and it only works during the introductory stages of the product.
Price Penetration- This consists of setting a deliberately low initial price to gain sales, build customer loyalty and win market share , and then raising it. Advantages of this include low prices can attract customers easily, easy t undercut competitors, can easily gain market share, Disadvantages of this strategy include, lower profit during introductory stages, lower price might give customers impression of low quality and this strategy only works during the product's introduction stage of it's life cycle.
My recommendation for price- In terms of choosing a pricing strategy it really depends on your product and your business, Does you product have a lot of competitors with high prices?, then undercut them by choosing a competitive pricing strategy. Does you product have a USP? if yes then follow the price skimming pricing strategy. Do you need to get rid of old stock and need quick sales? Then use promotional pricing. So on and so forth. If you are stuck and unable to chose the perfect pricing strategy for your product, my recommendation would be to go with cost plus pricing. It is a very balanced strategy, which gives enough profit to sustain your business. Once you become more experienced you can change your strategy depending on your liking.
Place
Once a product has been developed and a price has been chosen, the product needs to be made available to the customer. To do this, a business needs to use channels of distribution. There are three basic channels of distribution that are used, those are, selling directly from the manufacturer, selling via a retailer and selling from both a retailer and a manufacturer. I will go through the Pros and Cons of each channel of distribution and which should you chose below.
Channel 1, selling directly to the customer:
Pros: Your cost and selling price are both lower since passing through wholesalers and retailers increase the price for travel, and selling directly to the customer improves customer, business relationship. This can help build a loyal customer base.
Cons- High costs are involved for you, since now you have to manage the shipping on your own, and it will be difficult to reach a customers as a new business whereas a retailer will have frequent customers.
Channel 2, selling via retailers:
Pros: It increases the range of customers your products are noticed by, and retailers can help to increase the marketing budget because they can undertake additional promotion to sell the product
Cons: Profit has to be shared with the retailer or they also have to be paid, and the retailer will also most definitely sell similar product from an other business, giving your products competition.
Channel 3, selling via both wholesalers and retailer:
Pros: The goods will reach out to a maximum amount of customers, the wholesaler will deal with transportation cost for the retailer.
Cons: You will get lesser profit, as you have to pay/share the profit with both the wholesaler and retailer, you might not have control over how your product is showed to customers(price, features etc.).
Example:
At first you might not understand about retailers and wholesalers, and might be confused. To help you understand, I will use the example of Apple. Apple is the manufacturer. Their channel of distribution is via retailers and they also sell through themselves. The official retailers who they sell to include Jumbo, EMAX, iStore, iStyle etc. These official retailers receive products for cheaper from Apple and have to follow instructions from Apple as to the price they have to set, ads, promotions etc. This is the reason the prices of Apple products are same in Apple and other official retailers. There are also a few other retailers who sell Apple Products but don't have a partnership with Apple, and can sell the products the way they want. Choosing your channel of distribution can be tricky with a lot of pros and cons to consider. Below is a checklist to make the job easier for you.
Who is the consumer? Is the product being sold to the final user? If so, wholesalers and retailers are recommended to be used.
Is the product expirable? If yes then it is recommended to directly sell to save time.
Is the product technical? If the product is technical, customers will require assistance by someone who can explain to them about the product, it's use and how to use it, so direct selling is the best option in that case.
What are the objectives of the business? Businesses with an objective of profit maximization may choose to use direct selling, so that they achieve maximum profit. On the other hand, businesses which want to achieve a high market share may want to use intermediaries such as wholesalers and retailers because they can reach more customers that way.
Where are the customers ? Businesses that are closer to their customers should stick to direct selling. Businesses that need to ship the goods long-distance are more likely to use retailers.
Once a product has been developed and a price has been chosen, the product needs to be made available to the customer. To do this, a business needs to use channels of distribution. There are three basic channels of distribution that are used, those are, selling directly from the manufacturer, selling via a retailer and selling from both a retailer and a manufacturer. I will go through the Pros and Cons of each channel of distribution and which should you chose below.
Channel 1, selling directly to the customer:
Pros: Your cost and selling price are both lower since passing through wholesalers and retailers increase the price for travel, and selling directly to the customer improves customer, business relationship. This can help build a loyal customer base.
Cons- High costs are involved for you, since now you have to manage the shipping on your own, and it will be difficult to reach a customers as a new business whereas a retailer will have frequent customers.
Channel 2, selling via retailers:
Pros: It increases the range of customers your products are noticed by, and retailers can help to increase the marketing budget because they can undertake additional promotion to sell the product
Cons: Profit has to be shared with the retailer or they also have to be paid, and the retailer will also most definitely sell similar product from an other business, giving your products competition.
Channel 3, selling via both wholesalers and retailer:
Pros: The goods will reach out to a maximum amount of customers, the wholesaler will deal with transportation cost for the retailer.
Cons: You will get lesser profit, as you have to pay/share the profit with both the wholesaler and retailer, you might not have control over how your product is showed to customers(price, features etc.).
Example:
At first you might not understand about retailers and wholesalers, and might be confused. To help you understand, I will use the example of Apple. Apple is the manufacturer. Their channel of distribution is via retailers and they also sell through themselves. The official retailers who they sell to include Jumbo, EMAX, iStore, iStyle etc. These official retailers receive products for cheaper from Apple and have to follow instructions from Apple as to the price they have to set, ads, promotions etc. This is the reason the prices of Apple products are same in Apple and other official retailers. There are also a few other retailers who sell Apple Products but don't have a partnership with Apple, and can sell the products the way they want. Choosing your channel of distribution can be tricky with a lot of pros and cons to consider. Below is a checklist to make the job easier for you.
Who is the consumer? Is the product being sold to the final user? If so, wholesalers and retailers are recommended to be used.
Is the product expirable? If yes then it is recommended to directly sell to save time.
Is the product technical? If the product is technical, customers will require assistance by someone who can explain to them about the product, it's use and how to use it, so direct selling is the best option in that case.
What are the objectives of the business? Businesses with an objective of profit maximization may choose to use direct selling, so that they achieve maximum profit. On the other hand, businesses which want to achieve a high market share may want to use intermediaries such as wholesalers and retailers because they can reach more customers that way.
Where are the customers ? Businesses that are closer to their customers should stick to direct selling. Businesses that need to ship the goods long-distance are more likely to use retailers.
Promotion
In Business Promotion is the process of making customers aware of your product and feeding them information about your products. It is done to persuade and push customers to buy the product. A business will have many various and different objectives for promotion. Some of these objectives include:
Advertisement: Paid-for communication that uses different types of media to present the product to potential consumers. Advertisement platforms include billboards, TV, social media,
Benefits- It can be used for reaching a large audience, it can be done no matter your business or product( it is very versatile)
Disadvantages- It can be ignored easily by viewers, it is expensive
In Business Promotion is the process of making customers aware of your product and feeding them information about your products. It is done to persuade and push customers to buy the product. A business will have many various and different objectives for promotion. Some of these objectives include:
- To provide information about the product and its features, so it is relevant to the customer's specific wants or needs
- To persuade customers to purchase your product in general or to purchase your product over a competitor's
- To raise awareness of your product
Advertisement: Paid-for communication that uses different types of media to present the product to potential consumers. Advertisement platforms include billboards, TV, social media,
Benefits- It can be used for reaching a large audience, it can be done no matter your business or product( it is very versatile)
Disadvantages- It can be ignored easily by viewers, it is expensive
Sales Promotion- This is used when business put their products on special deals and offers such as Buy One Get One Free, cheaper discounted prices, etc.
Benefits- It can be used to get rid of excess inventory, it can attract a lot of customers at once, and it is cheaper than advertisement since no 3rd party agency is involved.
Disadvantages- Some costs are still there such as lost profit, this method is only short term.
Benefits- It can be used to get rid of excess inventory, it can attract a lot of customers at once, and it is cheaper than advertisement since no 3rd party agency is involved.
Disadvantages- Some costs are still there such as lost profit, this method is only short term.
Merchandising- This method involves promoting the product at the retail stage, mostly by setting up an attractive display counter that is able to catch the customer’s interest.
Advantages- If the business has a shop, and enough space it can be very easy to organize, customers can see and handle the goods themselves.
Disadvantages- It can be difficult to arrange the business is not into retail, customers can easily go past it without noticing the products being merchandised. |
An example of Merchandising
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Direct Mail- This is a written form of communication that is sent via email to the customer
Advantages- It is easy to a large audience if it is done online, it can be personalized for each customer making the promotion more relevant for each customer.
Disadvantages- It can be ignored as sometimes email service providers send the email to junk, spam or promotional folders or the customer's on purpose ignore them, it has a very low response rate making creating inefficiency.
Advantages- It is easy to a large audience if it is done online, it can be personalized for each customer making the promotion more relevant for each customer.
Disadvantages- It can be ignored as sometimes email service providers send the email to junk, spam or promotional folders or the customer's on purpose ignore them, it has a very low response rate making creating inefficiency.
Now since you know about the marketing mix in theory, it is important how you combine your strategy and the 4ps together in order to maintain a successful business. Designing your product well, doing the branding, choosing the right strategies, choosing how you will sell your product and how you will market it to the customers are all very important for the success of your business. So use what you have learnt in theory and choose your strategies well and you will have done the first steps to make your business successful.
Sources
https://app.kognity.com/study/app/grade-9-business-block-8-2021-2023/sid-181-cid-142294/book/product-id-28421/
https://app.kognity.com/study/app/grade-9-business-block-8-2021-2023/sid-181-cid-142294/book/price-id-28422/
https://app.kognity.com/study/app/grade-10-business-block-8-2021-2023/sid-181-cid-142294/book/place-id-28423/
https://app.kognity.com/study/app/grade-10-business-block-8-2021-2023/sid-181-cid-142294/book/promotion-id-28424/
https://www.getdor.com/blog/content/images/2020/03/grocery-store-cross-sell.jpg