2.4 The marketing mix

The marketing mix includes 4 factors that businesses need to consider when making marketing decisions.

Product

Products can be tangible (physical) or non-tangible (service-based).

• Invention is creating and designing a product
• Innovation is turning an invention into reality

Product design

• Function - how the product works and its purpose
• Aesthetics - the look and feel of the product
• Economics - the cost of the materials or ingredients used

The product life cycle

Introduction	The product is new, which means the business needs to spend lots of money on promotion
Growth	There are a lot more sales of the product so any discounts or oers could lose money for the business
Maturity	The business has reached peak sales
Decline	Sales are starting to decline
Extension	A new product/variation is introduced which will need to be promoted heavily

Advantages	Disadvantages
Indicates to business when product extension is required	It is only an expected cycle so it may not be entirely accurate
Indicates when to spend more money on advertising	External factors are not taken into account

Price

Factors that can influence pricing

• Product demand
• Competitor's pricing
• Quality of the product/service
• Brand reputation
• Cost of materials/ingredients

Pricing methods

Price skimming

Price skimming is where a business charges a large price for a product as it is better quality or more well-known than competitors.

Advantages	Disadvantages
Makes customers feel good and likely to purchase again if they are satisfied	May be too expensive which could upset existing customers if price decreases later on

Cost-plus pricing

Cost-plus pricing involves calculating the cost of manufacturing then adding profit on top to find the final price.

Advantages	Disadvantages
Guaranteed to make a profit	Product may be too expensive compared to competitors

Penetration pricing

Penetration pricing is where a business makes a product very cheap so that new customers will be willing to try it.

Advantages	Disadvantages
Customers try the product and may switch from a competitor	May lose customers when price is eventually increased

Competitor pricing

Competitor pricing is where a business sets their pricing based on their competitors, usually with the aim of convincing customers to switch brands.

Advantages	Disadvantages
Increases market share as customers switch to your brand instead	Could result in a price war where businesses make a loss to be cheaper than competitors

Promotional pricing

Promotional pricing is where a business sells a product at a lower price to sell old stock, such as a sale.

Advantages	Disadvantages
Boosts sales and sells off old stock	Less profit and it could upset existing customers if price decreased since when they purchased it before

Point of sale

Point of sale promotions are marketing promotions that are at a business's physical location. ● Price reductions

● Loss leaders - sell main product at a loss and charge more for accessories e.g. Printers and ink

● Competitions ● Free samples

Advertising

Advertising is where businesses try to inform customers and persuade them to purchase a product.

Social media

On social media, businesses can post about their offerings, run competitions and promotions and interact with customers.

Advantages	Disadvantages
Easily measure interactions and statistics	Could be difficult to create effective posts
Free to start	Could be difficult to select correct platform

Websites

If a business has their own website, they can use it to share details about the business such as opening hours, locations or contact details. They can also measure customer's engagement with cookies and use them to show them relevant adverts in the future.

Advantages	Disadvantages
Customers can leave reviews to influence others to buy or visit	Customers may not visit the website or even know that it exists (waste of money)
No advertisements from competitors	May be difficult to appear on search engines so less customers would visit (wastes money)

Newspapers

Businesses can advertise in local or national newspapers to target larger or smaller audiences. They can also use newspapers for different niches to target specific customers, such as a newspaper for teenagers or one for older generations.

Advantages	Disadvantages
Enough space to provide an image and crucial information	Newspapers are becoming outdated and read less often
Works well for local businesses	Very expensive

Leaflets

Leaflets are typically a cheaper way of advertising for local businesses.

Advantages	Disadvantages
Cheaper than most other methods	Often thrown away (wastes money)
Visual and memorable if designed well	Could be ignored as passive advertising

Television and radio

Advertising on TV and on the radio is usually much more expensive as businesses have to pay for the production of the advert as well as the broadcasting costs, so it is usually used by large businesses.

Advantages	Disadvantages
Effective for large businesses	Very expensive
Seen by a large audience	Not suitable for small businesses

Place

Physical distribution

Physical distribution is where a business delivers its product or services to the customer via warehouses, factories etc. beforehand.

Indirect method

Manufacturer → Wholesaler → Retailer → Customer

Advantages	Disadvantages
Wholesaler ensures that the shop is not given too much stock	Retailers and manufacturers could make more profit by cutting out the wholesaler
Manufacturers can pay less delivery fees	Takes longer to reach final customer

Sometimes, supermarkets do not use a wholesaler in order to make more profit:

Manufacturer → Retailer → Customer

Direct method

This method does not use retailers or wholesalers and is used when the manufacturer also sells their products themselves:

Manufacturer → Customer

Advantages	Disadvantages
Customers pay less	Customers may not be able to visit in person so need to pay for delivery
Manufacturers make more profit	Some cheaper products are not worth paying for delivery, so customers may buy elsewhere

Digital distribution

Digital distribution is delivering products or services digitally, such as music streaming, online games, eBooks or online courses.

Advantages	Disadvantages
Customers can access instantly	Could be easily copied
Cheaper for customers and businesses as they don't need to pay rent or delivery	Risks of customer details being hacked which could ruin business reputation
Customers can purchase from anywhere in the world	Assumes that customers can access the internet

How the marketing mix works together

• Price: The price may be reduced
• Product: Older products may need to be less expensive than newer ones
• Place: Incorporating more channels of distribution could lead to more sales
• Promotion: More products can be sold if more people know about them from promotion