Bussines Management
Lilyb660
4.pptxBlock 1
Session 6: Formulating an offering- the marketing mix- product and place
Block 1- Reading 6
The marketing mix- Place (correction “product”)
The marketing mix- 4Ps
Historically the marketing mix is known as the ‘4Ps.
Product
Place
Promotion [distribution]
Price
Reading 6: Formulating an offering- the marketing mix- Product
The marketing mix- 7Ps
However, as ‘people’ element is now recognized as important for all offerings, not just services
5Ps are commonly considered for product offerings as well as the 7Ps for services.
Reading 6: Formulating an offering- the marketing mix- Product
The marketing mix
The elements of the marketing mix constitute the offer made to customers
All of the elements play a role in meeting consumer needs
While marketers use & vary elements of the marketing mix to tailor the offer to customers
In practice, elements cannot be frequently & rapidly changed because it takes time &/or be expensive.
So careful research, analysis & planning are important for an optimal mix
Close monitoring of an organization's environment is also required to ensure necessary changes can be anticipated.
Reading 6: Formulating an offering- the marketing mix- Product
Product
The term ‘product’ describes services, ideas & physical goods.
Many offerings include a combination of goods & services.
In the marketing mix, product includes:
Specifying a product’s development requirements.
Packaging design
Branding
After-care service and support
Reading 6: Formulating an offering- the marketing mix- Product
Three levels of product benefits
Reading 6: Formulating an offering- the marketing mix- Product
Types of products
There are four main types of product:
Convenience: frequently purchased, low investment and involvement (milk, tissues)
Shopping: less frequently purchased, selected on price, quality and style (furniture, computers)
Specialty: special purchase, expensive, strong brand preferences (luxury items)
Unsought: little knowledge (e.g. new invention) or little interest (Insurance)
Reading 6: Formulating an offering- the marketing mix- Product
Product
Innovations in products is expensive & risky as it is incremental in nature
Mainly at ‘actual product’ level rather than at the core product level.
Ex. new packaging, new features, new styling & new quality
Freezers & washing machines, which were invariably white, are now available in different colors, such as black and stainless steel
Reading 6: Formulating an offering- the marketing mix- Product
New product development Five-step basic new products process(Crawford & Di Benedetto, 2014)
Phase 1: Opportunity identification and selection
Phase 2: Concept generation
Phase 3: Concept/project evaluation
Phase 4: Development (includes both technical & marketing tasks)
Phase 5: Launch
Reading 6: Formulating an offering- the marketing mix- Product
New product development New product development model by Crawford (1991)
Extended list of steps for developing new products
New product planning – reviewing current product performance & identifying threats & new product opportunities.
Idea generation – generating product ideas in line with organizational objectives.
Idea screening – assessing how well product ideas match organizational objectives & resources.
Concept testing – testing the new product concept on a small sample of potential buyers to assess their reactions to it.
Market/business analysis – evaluating the new product’s potential sales, costs & profits for the organization.
Reading 6: Formulating an offering- the marketing mix- Product
New product development New product development model by Crawford (1991)
Product development – determining if the new product can be produced both technically and cost-effectively.
Test marketing – introducing the new product in limited geographic areas or a representative marketing channel to determine the reactions of potential buyers (sample launching of the entire marketing mix).
Commercialisation – refining & settling plans for full- scale production & marketing.
Not all companies go through all of these stages or go through them in a systematic process
Reading 6: Formulating an offering- the marketing mix- Product
Block 1- Reading 7
The marketing mix- Place
The marketing mix- Place (Distribution channels)
Marketers need to collaborate effectively with the operations management function to ensure that sufficient quantities, appropriate outlets and acceptable delivery costs are provided.
Reading 7: Formulating an offering- the marketing mix- Place
Distribution channels
Some channel members may also perform other functions including:
Information – channel members can be a vital source of information about other stakeholders & forces in the marketing environment, which can help an organization with its strategic planning .
Promotion – communicating promotions for a product .
Contact – some channel members will be in contact with potential buyers or consumers & can influence their purchase decisions .
Matching – some channel members may influence aspects of the product to enable it to match customers needs more closely
Negotiation – agreeing price or terms to facilitate exchanges .
Financing – providing funding for channel distribution .
Risk taking – taking on some of the risks involved in channel distribution
Reading 7: Formulating an offering- the marketing mix- Place
Distribution channels
The length of the chain and the type of actors in it vary.
Some chains are getting shorter, with providers dealing directly with buyers, such as in the travel industry.
Other chains are getting longer and more complicated, such as in clothing manufacturing.
Service distribution is more likely to be direct
Reading 7: Formulating an offering- the marketing mix- Place
Traditional Distribution Channel
Under the traditional model, each channel member was independent & pursued their individual goals & could conflict as well as cooperate with other channel members.
Channel conflict if not resolved could potentially damage channel relationships & compromise the effectiveness of the whole distribution channel.
Traditional model (Figure1)
Reading 7: Formulating an offering- the marketing mix- Place
Manufacturer
Wholesaler
Consumer
Retailer
Vertical marketing system (VMS)
Channel members act as a unified system under the leadership of one channel member on the basis of one of the following:
owning the other channel members – corporate VMS .
having contractual arrangements with them – contractual VMS .
exerting control over them through superior size or power – administered VMS
Reading 7: Formulating an offering- the marketing mix- Place
Manufacturer
Wholesaler
Consumer
Retailer
Vertical marketing system (VMS) Example: Apple
It manufactures chips and sensors for its products
Has a laboratory in Taiwan for developing screen technologies
Has bought a manufacturing facility in North San Jose, providing the company with flexibility and control over manufacturing.
Apple sells its products through physical & online stores, as well as selected retailers, controlling distribution & sales to end consumers.
Apple provides its own iOS operating system and iTunes software.
Reading 7: Formulating an offering- the marketing mix- Place
Vertical marketing system(VMS)- Examples
Franchises are a common example of contractual VMS including:
Restaurants (McDonald's, Burger King)
Hotels (Best Western)
Car rentals (Avis and Hertz)
Car dealerships (Ford and Honda).
Ex. of administered VMS include major supermarkets, who exert considerable power over smaller suppliers, and large retailers and large retailers such as Walmart.
Reading 7: Formulating an offering- the marketing mix- Place
