Mastering the Marketing Mix: Product, Price, and Distribution Strategies
The Marketing Mix
The marketing mix is the set of controllable variables a company uses to create a specific market position and influence its target market. These variables are: product, price, distribution, and communication.
Product Levels
Commodity: The core benefit or need the product satisfies.
Formal Product: Attributes that differentiate the product, including:
- Quality: Technical (functional performance) and economic (durability and value).
- Brand: Name, term, sign, symbol, design, or combination, identifying and differentiating the product. To build a strong brand:
- Create a memorable and pronounceable name.
- Associate the brand with the product’s world.
- Design a strong logo to differentiate from competitors.
- Emphasize a unique product feature in all communications.
- Avoid complex advertising that confuses consumers.
- Packaging: Important for consumer needs (comfort, utility), influencing purchase, storage, and use.
Augmented Product: Additional benefits associated with the purchase.
Product Life Cycle
The chronological process from product launch to demise, influenced by demand instability and market novelties. Phases include:
Introduction/Launch Phase
- Low sales volume and high investment.
- Strong technical, commercial, and communication efforts.
- Market introduction challenges.
- Low saturation and few competitors.
- Longer and more complex for novel products.
Growth Phase
- Rapid sales growth.
- Manufacturing process refinement.
- Increased production to meet demand.
- Rising number of competitors and manufacturing costs.
- High, but potentially decreasing, prices.
Maturity Phase
- Sales growth slows.
- Sophisticated manufacturing and technology standardization.
- Low manufacturing costs.
- Many competitors attracted by high profits.
- Price wars may occur.
- Emphasis on product differentiation.
Decline Phase
- Sales decline due to falling demand.
- Profits diminish.
- Price reductions.
- Company aims for elimination or replacement.
Pricing Strategies
Cost-Based Pricing
Simplest method: adding a margin to unit manufacturing costs.
- Fixed Costs: Constant regardless of production volume.
- Variable Costs: Vary depending on goods produced.
- Total Cost (TC) = Fixed Costs (FC) + Variable Costs (VC).
- Advantage: Price covers production costs. Disadvantage: Ignores competition.
Demand-Based Pricing
Price is set based on consumer willingness to pay.
Competition-Based Pricing
- Setting prices below competitors: Cost leaders can achieve positive benefits.
- Setting prices above competitors: Viable if consumers perceive higher quality or favorable market conditions.
Sales Boosting Strategies
- Discounts.
- Psychological pricing: Higher price conveys exclusivity.
- Captive pricing: Low product price, high accessory prices.
New Product Strategies
- Introduction Strategy: Low prices for market advantage during expected high growth.
- High Price Strategy: Premium pricing for innovative products targeting early adopters.
- Maintenance Strategy: Price stabilization at a normal market level.
Life Cycle Pricing Strategies
- Launch phase: Low price.
- Growth phase: Stable price.
- Maturity phase: Stable price.
- Decline phase: Price reduction.
Competition-Based Strategies
- Higher prices: Signal superior quality.
- Lower prices: Offset product disadvantages.
- Similar prices: Differentiation based on other qualities.
Distribution
Making the product available to consumers in the desired quantity, time, and location. Intermediaries act as liaisons between the company and the consumer.
Distribution Channels
- Direct Channel: Manufacturer sells directly to consumers.
- Short Channels: Manufacturer sells to retailers, who sell to consumers.
- Long Channels: Manufacturer sells to wholesalers, who sell to distributors or representatives, who then sell to other wholesalers or retailers.