Strategic Marketing Mix: Product, Price, Distribution, and Communication
Item 19: Decisions in the Marketing Mix
19.1 Concept of Marketing Mix
To design marketing strategies, marketers have some basic tools available. These tools must be properly combined to achieve the objectives set. They can be summarized in four controllable variables of the trading system, the Four P’s: product, price, distribution, and promotion. These instruments are considered controllable variables that can be modified. However, these modifications are only possible within limits. The marketing mix is the business strategy that takes the company from some combination of the four trade variables.
- Product and distribution: These are strategic long-term instruments, as they cannot be changed immediately, and planning should be done thoroughly.
- Price and promotion: These are tactical tools. Within the constraints outlined above, they can be changed quickly and easily.
19.2. Decisions on the Product
What is a product? It is any good, service, or idea that is offered to the market. It is the means to meet the needs of the consumer. The product concept should focus on shared benefits and not the physical characteristics. The basic levels of a product are the core product, actual product, and augmented product.
Decisions on the product create the means to meet market needs. They are the first decisions to be taken in designing the marketing strategy since it is impossible to assess, distribute, or promote something that does not exist. They are long-term decisions that cannot be changed immediately:
a) Product Portfolio: The product suite offered by the company. Its composition determines the number and method of grouping products, the homogeneity or heterogeneity of the data, and the extent to which they are complementary.
b) Differentiation of the Product: This consists of determining the characteristics that distinguish the product and make it somewhat unique and different. Differentiation will be a competitive advantage for the company. The product can be differentiated by price, quality, design, image, ancillary services, etc.
The company must know how the market perceives the goods and what the attributes or determinants of preferences expressed are. This will allow the company to establish the current position of its products with respect to the competition and the ideal position to be reached.
c) Brand, Model, Packaging: These identify the goods and set them apart from competitors. They can be important tools for creating a positive image of the product and the company.
d) Development of Related Services: Product installation, advice on use, maintenance, warranty, technical assistance, and financing of the purchase.
e) Product Life Cycle: This involves the analysis of the stages through which the life of the product passes, from its launch to retirement. The market response to marketing stimuli varies at each stage of the life cycle. Therefore, one should know the stage where the product is to design the appropriate strategy.
f) Modification and Removal of Existing Products: Depending on the life of the product and technological, cultural, and social changes in the environment, we have to establish the potential of the product or its withdrawal.
g) Planning of New Products: The company should plan to maintain its competitive edge so it can ultimately ensure its livelihood. However, not all new products succeed. An overestimation of demand or a poorly designed marketing strategy can derail the product.
19.3. Decisions on Pricing
The price is not only the amount of money paid to obtain a product but also the time taken to acquire it, as well as the effort and inconvenience required to obtain it. The price has a strong impact on the product image. A high price can mean quality, and a low price the contrary. Also, the price has a significant influence on income and company profits.
The price is a short-term variable since it can change quickly. There are multiple conditioning factors in pricing, ranging from the type of market and aims to the product life cycle. Pricing includes the implementation of policies related to:
a) Costs, Margins, and Discounts: Analysis of marketing costs, profit margins, and discounts to apply for quantity or payment season.
b) Pricing a Single Product: The price of a product can be determined basically by the following criteria:
- Based on its costs.
- In accordance with the prices set by the competition.
- Depending on the sensitivity of demand for different market segments.
c) Pricing a Product Line: If what is wanted is to maximize the overall benefit of the line, consider the cross-elasticities of the various products that comprise it, i.e., the impact of a price change.
19.4 Distribution Decisions
Distribution links production to consumption. Its mission is to make the product available to the market in a way that facilitates or stimulates its purchase by the consumer. The distribution channel is the path followed by the product through intermediaries, from producer to consumer.
Distribution is a marketing variable that allows us to bring the product to final consumers in the appropriate quality, quantity, timing, and location:
- Selection of distribution channels.
- Location and size of the outlets.
- Management of internal relations.
- Logistics distribution.
Distribution decisions are long-term. There is no unique way to distribute each type of product, so it may take several forms. There are a number of factors that condition the potential distribution systems, including market characteristics, product distribution systems common in the industry, and available resources.
Forms of distribution are constantly evolving due to the impact of new technologies, costs, and consumer demands. Include the design and implementation of policies relating to:
a) Distribution Channels: The differentiation of the roles of intermediaries. The selection of channel type. Determining the number, location, size, and characteristics of sales points.
b) Merchandising: A set of activities undertaken to encourage the purchase of the product at the point of sale. This includes product presentation, the distribution of shelves, and the design and determination of the content of advertising material at the point of sale.
c) Direct Distribution: This involves the direct relationship between consumer and producer. It provides various alternatives, such as canvassing, selling through catalogs, and telemarketing. Although initially identified with direct marketing, current practice considers direct distribution more of a direct marketing promotion system that tries to find a measurable response to communications.
d) Hospitality or Physical Distribution: Includes all activities for the product to travel from the point of production to consumption and to facilitate its acquisition. This involves transport, storage, and collection of the product and determining the points of sale and service.
19.5 Decisions on Communication
The promotion of a product is the set of activities that seek to communicate the benefits of the product to persuade the target market to purchase it from whoever provides it. It is a matter of the following activities:
- Personal Selling: Refers to the communication that a company performs through its network of resellers or representatives.
- Sales Promotion: This involves incentives or gifts that a company carries out to promote its products in the short term.
- Direct Marketing: Involves the use of direct media that allows interaction between transmitter and receiver to contract directly with the target audience, requiring a direct and readily measurable response.
- Advertising: It is characterized as a form of paid communication, in an impersonal way, through which brands, institutions, products, etc., are promoted.
- Public Relations: It is aimed at a diverse audience through different media and aims to improve the image, brand, or product of a company, as a starting point to build close and stable relations with different groups.
The way the various promotional tools are combined depends on the characteristics of the product, market, competition, and strategy used by the firm.