The Marketing Mix
Firms modify each element in the marketing mix to establish an overall brand image and unique selling point that makes their products stand out from the competition.
Consumer Protection Acts
The consumer has basic legal rights if the product is:
Sale and Supply of Goods Act 1994
This Act says that all products have to be of a 'satisfactory quality'. This means that they have to:
Trade Descriptions Act
According to the Trade Descriptions Act, false or misleading information must not be given about products. For example, accurate information must be given about who made the product.
Fake designer goods that are marketed as genuine are a clear breach of the Trade Descriptions Act.
Consumer Credit Act 1974
This Act protects you when you borrow or buy on credit. The Consumer Credit Act states that:
- given a misleading description
- of an unsatisfactory quality
- not fit for its intended purpose
Sale and Supply of Goods Act 1994
This Act says that all products have to be of a 'satisfactory quality'. This means that they have to:
- be safe
- last for a reasonable amount of time
- be fit for their intended purpose
- have nothing wrong with them (unless the defect was noted at the time of sale)
Trade Descriptions Act
According to the Trade Descriptions Act, false or misleading information must not be given about products. For example, accurate information must be given about who made the product.
Fake designer goods that are marketed as genuine are a clear breach of the Trade Descriptions Act.
Consumer Credit Act 1974
This Act protects you when you borrow or buy on credit. The Consumer Credit Act states that:
- Businesses must have licences to give credit.
- No one under 18 is to be invited to borrow or buy on credit.
- Businesses have to state an Annual Percentage Rate (APR). If you sign a credit agreement at home you have several days in which you can tear up the agreement. This is called a 'cooling off period'.
Product
A product is goods or a service that is sold to customers or other businesses. Customers buy a product to meet a need. This means the firm must concentrate on making products that best meet customer requirements. A business needs to choose the function, appearance and cost most likely to make a product appeal to the target market and stand out from the competition. This is called product differentiation.
Product Life Cycle
These are:
Getting a product known beyond the launch stage usually requires costly promotion activity.
At some point, sales begin to decline and the business has to decide whether to withdraw the item or use an extension strategy to bolster sales. Extension strategies include updating packaging, adding extra features or lowering price.
A product portfolio is the range of items sold by a business. It can be analysed using the Boston Matrix.
- launch
- growth
- maturity
- decline
Getting a product known beyond the launch stage usually requires costly promotion activity.
At some point, sales begin to decline and the business has to decide whether to withdraw the item or use an extension strategy to bolster sales. Extension strategies include updating packaging, adding extra features or lowering price.
A product portfolio is the range of items sold by a business. It can be analysed using the Boston Matrix.
Star products have a high market share in a fast growing market.
Cash cows have a high market share in a slow growing market.
Question marks or Problem children products have a low market share in fast growing markets.
Dogs are products with a low market share in slow growing markets.
Cash cows have a high market share in a slow growing market.
Question marks or Problem children products have a low market share in fast growing markets.
Dogs are products with a low market share in slow growing markets.
Price
Factors affecting pricing.
- Customers. Price affects sales. Lowering the price of a product increases customer demand. However, too low a price may lead customers to think you are selling a low quality ‘budget product’.
- Competitors. A business takes into account the price charged by rival organisations, particularly in competitive markets. Competitive pricing occurs when a firm decides its own price based on that charged by rivals. Setting a price above that charged by the market leadercan only work if your product has better features and appearance.
- Costs. A business can make a profit only if the price charged eventually covers the costs of making an item. One way to try to ensure a profit is to use cost plus pricing. For example, adding a 50% mark up to a sandwich that costs £2 to make means setting the price at £3. The drawback of cost plus pricing is that it may not be competitive.
Penetration pricing means setting a relatively low price to boost sales. It is often used when a new product is launched, or if the firm’s main objective is growth.
Price skimming means setting a relatively high price to boost profits. It is often used by well-known businesses launching new, high quality, premium products.
Price skimming means setting a relatively high price to boost profits. It is often used by well-known businesses launching new, high quality, premium products.
Place
Place is the point where products are made available to customers. A business has to decide on the most cost-effective way to make their products easily available to customers.
This involves selecting the best channel of distribution. Potential methods include using:
This involves selecting the best channel of distribution. Potential methods include using:
- Retailers. Persuading shops to stock products means customers can buy items locally. However, using a middle man means lower profit margins for the producer.
- Producers can opt to distribute using a wholesaler who buys in bulk and resells smaller quantities to retailers or consumers. This again means lower profit margins for the manufacturer.
- Telesales and mail order. Direct communication allows a business to get products to customers without using a high street retailer. This is an example of direct selling.
- Internet selling or e-commerce. Online selling is an increasingly popular method of distribution and allows small firms a low cost method of marketing their products overseas. A business website can be both a method of distribution and promotion.
Promotion
Promotion refers to the methods used by a business to make customers aware of its product. Advertising is just one of the means a business can use to create publicity. Businesses create an overall promotional mix by putting together a combination of the following strategies:
- Advertising, where a business pays for messages about itself in mass media such as television or newspapers. Advertising is non-personal and is also called above-the-line promotion.
- Sales promotions, which encourage customers to buy now rather than later. For example, point of sale displays, 2-for-1 offers, free gifts, samples, coupons or competitions.
- Personal selling using face-to-face communication, eg employing a sales person or agent to make direct contact with customers.
- Direct marketing takes place when firms make contact with individual consumers using tactics such as ‘junk’ mail shots and weekly ‘special offer’ emails.