The marketing mix
The marketing mix of product, price, place and promotion must be planned together to suit the target market. Strategy includes pricing methods, the product life cycle and entering foreign markets.
📌 Key points
- The marketing mix is the 4Ps: product, price, place and promotion; they must work together for the target market.
- Product: design, quality, brand image and packaging. A strong brand builds loyalty and lets a business charge higher prices.
- The product life cycle stages are development, introduction, growth, maturity and decline; extension strategies (new markets, new features, new packaging, more promotion) can delay decline.
- Pricing methods: cost-plus (unit cost plus a mark-up), competitive (similar to rivals), penetration (low price to gain market share), skimming (high price for a new, unique product) and promotional (a low price for a short time).
- If demand is price elastic, a price rise causes a larger percentage fall in sales and revenue falls; if it is price inelastic, revenue rises when price rises.
- Place: distribution channels include manufacturer → consumer, manufacturer → retailer → consumer, and manufacturer → wholesaler → retailer → consumer.
- Promotion: advertising (TV, radio, newspapers, posters, internet), sales promotion (discounts, buy one get one free, free samples, competitions), sponsorship and social media.
- E-commerce and social media let businesses reach customers worldwide 24 hours a day, but face strong price competition and the cost of delivery and website security.
- A marketing strategy chooses the right mix for the target market. Entering foreign markets brings problems (culture, language, laws, local competitors), so firms may use joint ventures, franchises, licensing or local agents.
📖 Key terms
- Marketing mix
- The four key decisions that must be taken to market a product: product, price, place and promotion.
- Product life cycle
- The stages a product passes through from its introduction to its withdrawal from the market.
- Extension strategy
- A way of keeping a product in the maturity stage for longer.
- Cost-plus pricing
- Adding a fixed percentage mark-up to the cost of making a product.
- Price skimming
- Setting a high price for a new product when it is first launched.
- Penetration pricing
- Setting a low price when a new product is launched, to gain sales and market share.
- Wholesaler
- A business that buys products in bulk from manufacturers and sells them in smaller quantities to retailers.
- Sales promotion
- Incentives such as special offers or competitions to encourage sales in the short term.
✏️ Worked example
A business makes candles at a cost of $8 each. It uses cost-plus pricing with a 25% mark-up. Calculate the selling price and give one drawback of this pricing method.
- Mark-up = 25% × $8 = $2.
- Selling price = cost + mark-up = $8 + $2 = $10.
- Drawback: it ignores competitors’ prices, so $10 may be higher than rivals’ prices.
- Answer: $10 per candle.
Match the pricing method to the situation: skimming for a new, unique or high-tech product; penetration for entering a market with many competitors.
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