The Marketing Mix: Product (SL IB Business Management)

Product

• This involves identifying the features, design, quality, branding, and packaging of the product/service available for sale and ensuring that they meet the needs and expectations of customers
  
  
• E.g. HSBC offers different current accounts to meet a variety of customer needs, with each account having different features
  • The Premier Account is a fee-free current account aimed at higher income individuals which includes free worldwide travel insurance, overdraft facilities and preferential interest rates on mortgages

Price

• This involves identifying the best pricing strategies to use after having considered the amount of money customers are willing to pay, as well as factors such as production costs, competition, demand and perceived value
  
  • E.g. Netflix has recently changed its pricing structure to reflect the different needs of customers and achieve further growth

    • Customers choosing the Standard service which includes adverts pay the lowest subscription fee

    • Premium customers pay three times as much as Standard service customers but can enjoy advert-free, ultra-HD programming

Place

• This refers to the distribution channels and physical location used to make the product/service available to customers
  • Place involves decisions related to the selection of sales outlets, logistics and supply chain management
     

• Intensive distribution involves targeting the mass market by selling products in as many popular outlets as possible

• Exclusive distribution involves targeting high end customers by limiting the sales outlets

  • E.g. Porsche sports cars are sold through licensed retailers

Promotion

• This relates to the activities used to communicate and promote the product/service to the target market including advertising, public relations, sales promotions, personal selling etc.
   
• Promotional strategies are used by firms to make their existing and potential customers aware of their product, build their brand image and encourage loyalty
  • E.g. Southwestern Airlines makes extensive use of humorous advertising, as well as offering frequent discounts on tickets and engaging in public relations by sponsorship of several US baseball teams

People

• This  refers to the human resources involved in customer interactions and product/service delivery so as to provide a positive customer experience
  
  • Employing, training and retaining the right set of employees is especially important for the success of service-focused businesses
    

Process

• This refers to the operational processes and workflows that enable the smooth and efficient execution of marketing strategies
   
• Process is an essential element as it ensures that the customer experience is consistent, streamlined, and meets or exceeds customer expectations
  
  • E.g travel companies such as Germany's Meier's Weltreisen sell a range of package holidays that provide flights, hotels and full transfer services while providing resort-based representatives that ensure a smooth vacation experience for customers

Physical Evidence

• This refers to the tangible elements that customers can perceive when interacting with a product/service such as the physical environment, packaging, and branding
  
  • E.g. large fast food retailers such as McDonalds and Pizza Hut create almost identical outlets around the world, with highly recognisable logos and even matching furniture and decor in restaurants

Development

• Generating and screening product ideas and then designing and developing the product
   
• The business usually incurs high costs for research and development, market research, and product testing

• Cash flow is usually negative during this stage, as the company is investing heavily in the product without generating any revenue
  
  
• The marketing strategy during this stage is focused on creating awareness and generating interest in the product

Introduction

• The stage begins when the product is launched
  
  
• Characterised by slow sales growth as the product is still new and unknown to most consumers 

• Cash flow is usually negative as the business usually incurs high costs for promotion, advertising and distribution
   
• Promotional efforts are focused on creating awareness and generating interest in the product
   
• Pricing strategies will depend upon the nature of the product and the market
  • Price skimming may be used for innovative or high technology products where little competition exists
  • Penetration pricing may be more suited to products being introduced to competitive markets

Growth

• The product enters this stage when sales begin to increase rapidly
   
• The business focus shifts to building market share and increasing production to meet the growing demand 

• Cash flow usually turns positive during this stage as sales revenue increases and costs are spread out over a larger volume of production
   
• Marketing strategies focus on differentiating the product from its competitors and building brand loyalty
  • Price skimming tactics may be dropped in favour of longer-term premium pricing for high-end products
  • Promotional activity including advertising is likely to increase as customers are encouraged to purchase repeatedly
  • Further distribution channels will be sought to meet increasing demand

Maturity

• Characterised by slowing sales growth as the product reaches its peak in terms of market penetration

• Cash flow is usually positive during this stage as sales revenue continues to come in and costs are reduced through economies of scale and efficient production processes
   
• The marketing strategy aims to maintain market share and increase profitability by cutting costs and finding new markets
  • Promotional pricing tactics may be used
  • Advertising will focus on reminding customers of product benefits
  • Further new distribution channels will be sought
  • Product features may be upgraded

Decline

• Starts when sales begin to decline as the product becomes obsolete or is replaced by newer products
   
• The business focus shifts to managing the product's decline and reducing costs

• Cash flow usually turns negative as sales revenue declines and costs associated with the product's decline increase
   
• The marketing strategy may involve discontinuing the product, reducing its price to clear inventory, or finding new uses for the product