The marketing mix
A key marketing activity is the management of the company's marketing mix. The marketing mix consists of four major elements: product, price, promotion and place. These '4-Ps' are four key decision areas and form a major aspect of marketing concept implementation. Part B of this book looks at each of the 4-Ps in considerable detail. At this point, however, it will be useful to examine each element briefly so that we can understand the essence of marketing mix decision-making.
Product
The choice of what products/services and benefits should be offered to a group of customers is known as the 'product decision' (see Exhibit 1.3). An important element is new product/service development. As technology and tastes change, products become out of date and inferior to those of the competition, so companies must replace them with features that customers value. For example, when Microsoft launched Windows XP in 2001, it offered home users new features such as Windows Movie Maker for editing and organizing home movies and a network set-up wizard so that all the computers in a home can share printers, files and an Internet connection. Product decisions also involve choices regarding brand names, guarantees, packaging and the services that should accompany the product offering. Guarantees can be an important component of the product offering. For example, the operators of the AVE, Spain's high-speed train, capable of travelling at 300 kmph, are so confident of its performance that they guarantee to give customers a full refund of their fare if they are more than five minutes late.
Price
Because price represents, on a unit basis, what the company receives for the product or service that is being marketed, it is a key element of the marketing mix. All of the other elements represent costs- for example, expenditure on product design (product), advertising and salespeople (promotion), and transportation and distribution (place). Marketers, therefore, need to be very clear about pricing objectives, methods and the factors that influence price setting; they must also take into account the necessity for discounting and offering allowances in some transactions.
Promotion
Decisions have to be taken with due attention to the promotional mix: advertising, personal selling, sales promotions, public relations, direct marketing, and Internet and online marketing. By these means, the target audience is made aware of the existence of a product or service, and the benefits (both economic and psychological) it confers to customers. Each element of the promotional mix has its own set of strengths and weakness, and these will be explored later. A growing form of promotion is the use of the Internet as a promotional tool. A key advantage of this is that small companies can expand the scope of their market at a relatively low cost (e-Marketing 1.2 illustrates how the use of the Internet can radically change the fortunes of a small business).
Exhibit 1.3 This advertisement for the Ford Mondeo emphasizes the product benefit of safety
Place
The aspect of place is to do with those decisions concerning the distribution channels that are to be used and their management (see Marketing in Action 1.2), the location of outlets, methods of transportation, and the inventory levels to be held. The objective is to ensure that products and services are available in the proper quantities, at the right time and in the right place. Distribution channels consist of organizations such as retailers or wholesalers through which goods pass on their way to customers. Producers need to manage their relationships with these organizations well because they may provide the only cost-effective access to the marketplace.
An effective marketing mix (see Fig.1.6) is composed of four main features. Initially, the mix must be designed to match the needs of a target customer group. Second, it must contribute to the creation of a competitive advantage, which is a clear performance differential over the competition on factors that are important to customers (see, for example, the Ford Mondeo ad in Exhibit 1.3). Third, the marketing mix must match the resources that are available to the firm. Certain media-for example, television advertising - require a minimum threshold investment before they are regarded as feasible. In the UK a rule of thumb is that at least £1 million per year is required to achieve impact in a national advertising campaign. Clearly, those brands that cannot afford such a promotional budget must use other less expensive media (for example, posters or sales promotion) to attract and hold customers. Finally, an effective marketing mix should be well blended to form a consistent theme. For example, the use of exclusive outlets for upmarket fashion and cosmetic brands - Armani, Christian Dior and Calvin Klein, for example - is consistent with their strategic position.
Thinking of the marketing mix simply in terms of the 4-Ps has been the subject of some criticism in recent years. For example, in service businesses like hair salons, the hairdresser is a key part of the service itself, while the decor of a restaurant or cafe is an important aspect of the enjoyment of that experience. Consequently, service marketers have argued for a 7-Ps' approach to incorporate (in addition to the original 4-Ps) the people, process and physical evidence aspects of services." Whatever framework is used, the important issue is not to neglect decision-making areas that are critical to effective marketing. The strength of the 4-Ps approach is that it represents a memorable and practical framework for marketing decision-making, and has proved useful in the classroom and in practice for many years.
e-Marketing