Showing posts with label distribution. Show all posts
Showing posts with label distribution. Show all posts

Thursday 31 December 2015

THE MARKETING MIX

The marketing mix is the family of variables used to perform marketing functions. The term marketing mix was first used by Neil Borden in 1953.
There have been many formulations of marketing mix over the years. Here, we take a look at some of the most prominent.

The Four Ps
First, we examine what is undoubtedly the best known marketing mix, consisting of 4Ps, and composed by E. Jerome McCarthy in 1960. The 4Ps are product, price, promotion and place (distribution).
Product
A product is anything offered to address a need or want that a customer has, in exchange for something else embodying value.
Products take many forms such as good, service, idea, experience, place, or combination. (Customers actually seek products for the benefits they provide. The benefits of consuming the services of a hairdresser include good looks).
Marketers attempt to augment or enhance the attributes of basic products to make them more appealing to potential buyers.
Some of the main areas in which marketers have to make decisions are:
-         Quality. A detergent, for example, must clean as well as, or better than, what is paid for or what the information carries suggests. Marketers must take the right steps to make that possible.

-         Design. The significance of design is that it affects such factors as ease of handling and attractiveness to the eye.

-         Product variety. One major reason variety is important is that buyers do not all have the same tastes. Another is that there is possibility of presence (or absence) of one product affecting the sales performance of another. For instance, a customer that is building a house would probably head for a shop dealing in a wide range of construction products including bricks, cement and sand (and get benefits like saving time and money) than visit a supplier that sells only one construction product. Even within classes like cement, for instance, marketers have to see if variations are a necessity.

-         Brand name. A good brand name is an asset that can contribute to better sales. Two considerations here need to be that the brand name:

o   Suggests something positive about the product.
o   Is easy to pronounce and remember.

-         Legal protection. By obtaining protection of the law for their product, marketers reduce the probability of opportunists from reaping where they did not sow, and optimizing sales. Without legal protection, some unauthorized companies could, for instance, manufacture the same product or use the same brand name.
Price
The price is the amount of value the marketer asks buyers to give in exchange for the product. In the modern economy, price is expressed in currency terms such as two dollars ($2), two kwacha (K2), two pounds (£2) and two rupees (Rs. 2).
Many products immediately think of price when they come upon or hear of a product on sale. This probably helps underline the importance of price as a marketing mix variable.
Price is the component of the 4Ps-marketing mix with the most immediate effect on sales figures and profit. In setting price, some key considerations are:
-         List price. This is the amount of money stated on the price tag, and which tells the buyer the quantity of value the marketer expects under normal circumstances.

-         Cost. The marketer needs to decide what amount of discount, if any, can be given and under what arrangements they are possible. The marketer may, for example, decide that for full payment at once and in advance, the suitable discount be 10%, and that for two equal instalments over a period of one month, the list price be reduced by 5%.

Discounts are connected to such factors as exposure to risk and encouraging customers to make full payments in as short a time as possible to enable the marketer make quick re-investment.
Other important factors to look at in deciding the price of a product include competition, cost of production and desired profit.
Promotion
Promotion refers to the different ways businesses use to disseminate product information to their target markets and encourage buying.
Without promotion, prospective clients may never know that a particular product were on offer. Other aims of promotion include:
-         Making the market aware of price, size, design, place of availability and other relevant factors.
-         Enabling the market to plan and, of course
-         Prompting the purchase decision (does the marketer not want to make money?).
The key elements of the promotional mix are:
-         Advertising. This is the sort of promotional effort that is normally paid for, non-personal, aimed at a wide audience, repetitive and often artistically stimulating to the recipient. The promoter of the product identifies themselves. Newspapers, radio and television are among the most popular advertising tools.

-         Sales promotion. Sales promotions are periodical, short-term marketing efforts usually carrying such objectives as reversing a drop in sales. They offer incentives like a third item for the purchase of two. Competitions in which ultimately a grand prize can be won are common forms of sales promotion.

-         Personal selling.  This is the face-to-face and sometimes telephone encounter between a sales person and a possible buyer or group of possible buyers.

-         Public relations. This promotional tool is anchored on building a good company image. However, there are often ethics to be followed, that include truthfulness and empathy toward consumers.

-         Direct marketing. Direct marketing is personalized promotion utilizing tools like letters, catalogs and email. The personal nature of direct marketing makes building customer data-bases extremely important.

-         Publicity. Sometimes not included as part of the promotional mix, publicity is a form of advertising calculated to reach the target market in news form. As a result, it often is headlined by what is said or done by an invited celebrity or other public figure (say, to the opening ceremony of a restaurant), who is given centre stage by the marketer. Even though publicity is often seen as unpaid, it is usually paid in the form of food and beverages for guests, hiring of public address systems and other costs of this nature.

Marketers have to decide what combination of promotional instruments is the most appropriate at a given time and in a given situation.
Place
Place or distribution is the marketing mix component dealing with providing the most optimal point-of-sale for the consumer.
Marketers have to decide how their products are to reach their target customers. They may decide to use middlemen, distribute the products themselves or use both channels.
Why are place decisions important? One reason is that distribution requires resources such as transport and storage capacity, adequate amounts of which the manufacturer may or may not have.
Another is that each type of distribution method is likely to affect the final price in a different way. Wholesalers, for instance, need to make profit on distribution activities, and therefore have to add their costs to the price at which they bought the product.
Another key consideration is that the distribution channel selected can be a source of competitive advantage. Some wholesalers, for instance, have established wide networks of key retailers and other fellow intermediaries who can contribute to better sales and profit levels.
Factors often looked at in ‘place decisions’ today include the nature of the product, the target market and available technology (books, movies, music, for example, can be moved from one point to another via the internet in soft copy form).
The three main distribution policies are:
-         Intensive, in which the aim is to reach as wide an audience as possible, and therefore includes use of many middlemen. It favours goods bought all the time and without any real prior planning (convenience goods).

-         Selective, in which a wide but not all-inclusive approach to use of intermediaries is used.  Producers can select a number of distributors they consider competent enough to do the type of job that satisfies them.

-         Exclusive, in which a much more restrictive approach is employed. A very limited number of distributers is appointed in this type of distribution. Normally, this arrangement does not allow the intermediary to stock competing products.

The 7 Ps of ‘services-marketing’
In the marketing of services, it is increasingly appreciated that the traditional 4Ps just examined, and an additional three, are a more complete set of marketing mix variables.
The additional three Ps are people, process and physical evidence.
People
Companies do their business using people. In other words, people who work for an enterprise are the personification of the company. It means issues like how helpful the people are; how well they know the product/s;  how enthusiastic they are to give the service; and how much interest they take in understanding the unique situation of each customer can mean greater, less, or no customer loyalty, sales and profits.
Process
It matters how the service is given. If the product is passenger transport, questions are likely to include:
-         Are the customers kept fairly entertained before departure and during travel?
-         Are the travellers informed of any changes, say, in the departure time or route?
-         Does the seating arrangement give enough comfort?
Physical Evidence   
Physical evidence deals with factors that can be seen or touched, and that are likely to increase the desire of the market to consume the service. Here are two examples:
-         A visitor to a hotel or restaurant will likely be encouraged to make the purchase decision when the environment is clean, fresh and relaxing.

-         It is probable a prospective client of a hairdresser will be more positive about consuming the service when they are able to see customers of the business who have good haircuts or hair-do’s.  

Robert Lauterborn’s 4Cs-Marketing-Mix
When, in the 1990’s, Robert F. Lauterborn constituted a marketing mix of 4Cs, he had been in search of a combination of tools he would see as more customer-focussed than the traditional 4Ps.
Lauterborn converted the 4Ps to 4Cs.

Explaining the four Cs
(Product) Consumer – What the customer wants or needs should be the focus of product creation.
(Price) Cost The marketer needs to focus on all the costs to the customer, such as those involved in maintaining the product.
(Place/Distribution) Convenience – The marketer has to take the product where the customer can buy it with minimal problems.
(Promotion) Communication – rather than send messages urging the target market to buy, the marketer must attempt to establish a situation in which there is exchange of information.

Conclusion
As stated at the beginning, what we have just seen is not the full list of marketing mix proposals that are there today.
It is also likely that there will be more efforts to improve, update or indeed replace the marketing mixes currently in use, due to elements like the dynamism of the field of marketing; changes in technology; ever-higher customer expectations; competition among businesses; and desire to formulate the ‘perfect’ marketing mix. How far present and future marketers can go in any such direction cannot be easy to tell.
Rupert Chimfwembe, 16th November, 2015.