Markets and Products

A firms marketing strategy depends on a number of things:

• Its resources
• Their strengths and weaknesses
• Competition
• Marketing Strategy and Objectives
• Skills and assets of the business
• Market opportunities and threats
• Marketing objectives

Marketing Mix

The marketing mix or the 4P's are the key elements of a businesses marketing plan

The marketing mix refers to:

• Product
• Price
• Place
• Promotion

Product

Product refers to what the business sells

• This could be a good – tangible or a service – intangible
• Products are composed of different features which help consumers identify them e.g. their size, their colour
• Products need to be developed to meet customer needs and wants

Price

Price refers to how much consumers are charged for a product

• There are different strategies for different types of products:
• Price skimming (new products): Price is initially high due to type of product (usually electrical, luxury, innovative)
• Price penetration (new products) Price starts at a lower price to gain market share

Pricing strategies for existing products

• Price leader – dominant firms in the market are able to set the price for the rest of the market
• Price taker – these firms accept the price that the price leaders set
• Predator – predatory pricing is where businesses undercut competitors to drive them out of the market and gain market share

Methods

• Cost based – businesses work out how much products will cost to make, they then add a profit margin on to this to calculate price
• Contribution – Prices are calculated by looking at how much they contribute to variable costs
• Discriminatory – Where businesses can charge different prices to different consumers for the same product e.g. peak and off peak travel

Tactics

• Loss leader – Businesses have products priced at a low level where they will make a profit, this encourages customers into the business where they will buy additional products
• Psychological – Where businesses use prices such as £9.99 as they seem to be cheaper

Place

Place refers to physical location and channels of distribution

Channels of distribution

How a product gets from the producer to the consumer

There are four main channels of distribution:

• 1. Producer – consumer – this is generally used for small businesses e.g. farm shop
• 2. Producer – Wholesaler – Consumer – Here the wholesaler acts as an intermediary for the producer and is able to carry a number of different producers products e.g. furniture
• 3. Producer – Wholesaler – Retailer – Consumer- This is common for clothes
• 4. Producer – Retailer – Consumer – this is often used for electrical products

Each link in the chain of distribution adds costs onto the final product and makes it more expensive for the end consumer. Wholesalers and retailers can provide important functions for producers especially as they grow larger. By using wholesalers and retailers businesses can loose control over the promotion of their products

Location

Businesses need to consider a number of factors when considering their location including:

• Historical factors
• Cost of premises
• Space and land
• Transport links
• Proximity to suppliers / customers

Promotion

Promotion is the way of communicating what the product is to the consumers

It aims to persuade customers to buy the product

• Above the line promotion – Advertising that uses independent media
• Below the line promotion – Sponsorship, Public Relations, Direct Mail, Special offers

Advertising

Advertising can be done using a variety of media including:

• TV – local, national, sky, digital
• Radio – local, national
• Press – newspapers, magazines, local, national, specialist press

Marketing Objectives

Marketing objectives are targets that the marketing department wants to achieve. These objectives help businesses achieve their overall objectives. Marketing objectives allow businesses to achieve their marketing strategies.

Examples of objectives:

• To increase market share by 5%
• To increase distribution by 4%

Niche Marketing

Niche marketing is where a business concentrates on a small segment of the market

• This is often used by small companies as it is a way of avoiding competition who may not be interested in such a small segment
• E.g. Gardening magazines, Science fiction books

Mass Marketing

Mass marketing strategies aim the strategy at the whole market

• This is generally used by larger companies whose products appeal to everyone
• E.g. Ariel washing powder, TV magazines, Bestsellers.