From the

Marketing Mix to
Dead Dogs
The Marketing Mix

Product
Physical
Environmen
t
The
Marketing Price
Mix
Process

Promotio
Place n
2
 The Marketing Mix
 a “grounding” concept that offers tools &
pointers when a business evaluates & defines its
marketing strategy, objectives & activities - what
it seeks from its target markets & how it does it
 7Ps – Price, Product, Promotion, Place, People,
Process, Physical Environment
 Traditional 4Ps + 3Ps to cover service industry
growth

3
The Marketing Mix

Physical Product
Environmen
t Design
Usefulness
Convenience
Proces Value
The
s Quality
Marketing Branding
Mix Associations
Place Accessories
Technology
ecoCredentials
Promotio
n
Packaging
Price/ Warranties
Pricing

4
 Product – see slide 28
 methods to improve/differentiate
the product to target & increase sales
more effectively
 to gain a competitive advantage e.g.
 USPs

 extension strategies

 specialised versions

 new editions

 improvements – real or otherwise!

 changed packaging

 use enhanced technology etc.

5
Pricing

6
 Penetration Pricing
 price set to ‘penetrate the market’
Penetration Pricing
 ‘Low’ price for high volumes
 "Dumping"?
Price
 typical in mass market products – Whole
chocolate bars, food stuffs, household market price
good, etc.
 suitable for products with long life
cycles
 useful for launching in new market
 problem to raise price
subsequently

Quantity

7
 Market Skimming
“Skim the cream (profit) off
the top first” pricing
Skimming Pricing high price for those willing to
pay then aim at more price-
Price Sell at high
price before sensitive consumers.
reducing to
Initial next price level
skimming and repeat
price  High price, low volumes
Second
 Suitable for products with short
price life cycles or soon facing
competition (e.g. after a patent
Final
price runs out)
 e.g. Harry Potter hard-back,
Playstation, digital technology,
Quantity
new DVDs, etc.

LCD and Plasma screens: Why are high prices falling?

8
 Value Pricing
 Price set according to
perceptions about the
value of the
product/service
 e.g. status
products/exclusive
products

9
Loss Leader

 Supermarkets, e.g. milk, £5 gin

at Christmas (people attracted
to the store & buy other things)
 Purchases of other items more
than covers ‘loss’ on item sold
 e.g. ‘Free’ mobile phone when
taking on contract package

10
Psychological Pricing

play on consumer perceptions

e.g. £9.99 not £10.20 !
Links with value pricing –
high value goods priced
according to what consumers
THINK should be the price

11
Going Rate (Price Leadership)
 Where there is a price leader, rivals can't
compete on price
 too high & lose market share
 too low & price leader matches price &
forces smaller rival out of market
 So follow pricing leads of rivals with
dominant market share
 Where competition is limited, ‘going rate’
pricing may apply – banks, petrol,
supermarkets, electrical goods – similar
prices all outlets

12
 Discount Pricing

Quantity Seasonal

Discount
Pricing

Sale Cash

Trade

13
Tender Pricing

14
 Tender Pricing
 Many government
contracts awarded via a
tender
 Firm (or firms) submit
their price for carrying
out “the work”
 Purchaser then chooses
which offers best value
A European consortium led by Airbus
recently won a contract to supply
 Mostly done in secret
refuelling services to the RAF – priced
at £13 billion!
Title: Air refuelling. Copyright: Getty Images, available
from Education Image Gallery

15
Price Discrimination

 Charging a different
price for the same
good/service in
different markets
 Requires each market
to be impenetrable
 Requires different price
elasticity of demand in
each market

16
Destroyer Pricing/Predatory Pricing

 Deliberate price cutting or

offer of ‘free
gifts/products’ to force
rivals (normally smaller &
weaker) out & prevent
new entrants
 Anti-competitive & illegal
if proved

17
 Absorption/Full Cost Pricing
 Full Cost Pricing – set price to
cover both fixed & variable costs
 Absorption Cost Pricing – Price
set to ‘absorb’ some fixed costs
of production
 Price of some products in a
portfolio therefore need not be
full cost

18
 Break-Even Point
Cost-volume-profit (at a price) analysis

19
 Contribution Pricing
Contribution = Selling Price – Variable (direct costs)
 From break even analysis
 Set price to cover variable costs+ a ‘contribution’ to
the fixed costs
 Similar to marginal cost pricing

20
 Cost-Plus Pricing

Calculate the average cost (AC)

and add a “mark up”
21
Promotion
(separate lecture on marketing communications)

Strategies to make the

consumer aware of the
existence of a product
or service
22
 Place (marketing channels)

 How products & services get from producer to consumer; where

they are presented to & can be accessed by consumer
 The more places to buy the product & the easier it is to buy it
there, the better for business (& consumer?) 23
• first point of business contact
is usually a person
• people represent the
business
• what is the lasting image
they give the customer?
• people's role in developing
customer relations especially
in a knowledge driven
economy.
• significance of training &
knowledge of the
product/service
• mission statement & culture?
Do staff represent the
desired culture of the
business?

24
 Process

 process by which product is created/passed on to final user

 what processes do they go thru to acquire the services?
 how do they experience “the process”
 steps, stages, involvement, participation
 how do they consume “the service” & with others?
 feelings of being valued & status
 may incl. more use of ICT to speed up ordering, delivery etc.
 finding available service?
 contact & support – face2face, on-line, personal vs impersonal, sensitivity
 registration, subscription, form filling,
 degree of technology & user know-how
 returns & complaints
 follow-up & membership 25
Moorcroft

26
Physical Environment
 making the physical environment as
welcoming & as reflective of the
“product/service brand” as possible
 e.g. car showrooms - well lit, stylish
furniture & decor, seating, coffee
making, newspapers & play areas.
 ambience, mood, presentation
 smart/shabby?
 trendy/retro/modern/old fashioned?
 light/dark/bright/subdued?
 romantic/chic/loud?
 clean/dirty/unkempt/neat?
 music?
 smell?
 How to achieve this for WWW site?
27
 The Marketing Mix Recipe
The recipe/blend depends upon:
 marketing objectives

 type of product

 target market

 market structure

 rivals’ behaviour

 global issues – culture/religion, etc.

 marketing position

 product portfolio decisions

 product lifecycle
 Boston Matrix

28
 The company's Product Mix
(Product Portfolio)
 The assortment of Product Mix (Portfolio)
product lines &
Dimensions
individual offerings
available from a
Width: number of product lines
company.
Length: total number of items in
Product Line mix
 A series of related Depth: number of product
products. variants
Consistency: degree to which
Individual Offering
product lines are related
 Single product within a

product line.

29
 Maple Leaf Foods International
Mix/Portfolio
WIDTH OF ASSORTMENT

Meats Groceries Non-edible

Fresh and frozen meats Peanut butter By-products
Bacon Canned vegetables & fruit Hides
Sausages Vegetable oils
Wieners Lard
Luncheon meats Suet
Canned meat French fries
Poultry Maple syrup
Jams

30
 Product Strategy & PLC
• stages products go thru
from development to
withdrawal
• each product may have a
different life cycle
• stage determines revenue
capabilities
• relevant to strategic
marketing planning

product support, redesign, freshening, withdrawal, new product

development planning, forecasting etc
Product Portfolio
 the product range available or in development at any one time
 product portfolio management is vital for cash flow 31
Stages in Product Life Cycle – “Electricals"

32
 Product Development: Questions

 Market analysis – is it wanted?

 Can it be produced at a profit?
 Who is it to be aimed at?
 Product development and refinement
 Test marketing – local/regional ?
 Analysis of test results & amendment of
product/production process
 Preparations for launch – publicity,
marketing campaign
33
 Development (pre-introduction) stage
 Ideas – possibly many & from any of the following

 market research – identifies gaps in the market

 watching competitors
 technology change
 planned research & development (R&D)
 luck or intuition – stumble across ideas?
 creative thinking – inventions, hunches?
 futures thinking – what will people be
using/wanting/needing 5,10,20 years hence?
 government directive

34
 Stages of the New-Product Development
Process

Business
Strategy

Develop Generate Conduct business

new-product ideas/ Screen analysis
strategy concepts and evaluate

Develop Test Commercialise

Commercialized
Product

35
 Concept Testing
Concept screening
 marketing research project to

measure consumer attitudes &

perceptions relevant to a new-
product idea.

Test marketing
 select areas typical of total

market & introduce new product

with a campaign to determine
consumer response before
national marketing
36
 Introduction/Launch

 high cost/low sales

 advertising & promotion campaigns
 expensive communications & promotions
 maximise publicity
 target campaign at specific audiences?
 guerrilla & viral marketing
 teething problems ?
 production capacity & shortages
 monitor initial sales

37
 Growth
 increased consumer awareness
 sales rise, revenues increase
 break-even point & cash flow
 see "rising Star" Boston Matrix
 more investment – production capacity
 fixed costs/variable costs
 cash flow, contribution
 more market penetration, new entry
 monitor market – competitors reaction?
 defend product – patents, copyrights
38
 Cost-Volume-Profit Analysis (Break-even
Point)
Dolly Toys - BreaK-even Chart

250000

200000
Revenue
£Revenue/Costs

150000 FCosts
VCosts
100000 TotalCosts

50000

0
Fixed costs £74,000
00

00

00

00

00

00

00
0

0
20

60

10

22
14

18

26

30

34
Volum e
Unit variable cost £44.24
Selling Price £68
Contribution £23.76
BE Volume 3114 units
BE Sales £211785
39
 PLC: Maturity - Saturation
 new entrants flood into market. Sales peak
 greater competition, copy-cats
 protect market share, promotion & support costs rise
 differentiation, branding & brand extensions
 penetrate new markets e.g. international? M&A
 Licensing, pricing e.g VW-Skoda + joint ventures
 pressure to develop new strategies
 lower production costs
 move to low labour cost market
 branding to differentiate
 improve standards & quality

40
 Extension Strategies

Sales Line extension

Develop individual offerings appealing
to different market segments but
closely related to existing product line.

Increase frequency of use by present

customers
Add new users
Find new uses
Change product quality or packaging.

Time
41
 PLC: Decline & Withdrawal

 "Dead dogs" – Boston matrix

 product outlives/outgrows its usefulness/value
 sales decline
 cost of support rises too far
 withdraw - decision depends on
 impact on customers and brand family
 availability of new products
 will fashions/trends will come around again ?
 divest (or MBO ?)

42
 Alternative Product Life Cycles
es,
J o n
i an a
, In d V W e -
l e s D , e , r
e a t i P O a n g
s , B e tt , O r ,
vi n r k es
El B e n
c k w o
r sa r i
n y l o v e e r
To le, C Anni s p a p
e e t g , e w
B e r i n " , n
a s t o n s
M l ect i
o l ft s
"c vd gi
c d / d
43
 Decay Curve of New-Product w t o
Ideas
. H o h
i st s u n c
a r t , la
u s ic h e m
- m r d t m
p o p e c o f ro
e w , r n e y
N h e m m o g ,
d t k e c in
fin , m a
“ ? D a n
h em b i e s m e
t n a , C o
w a n h e r
" ro t k e r
ig B n o o
B s, S
a r t
D
44
Boston Consulting Group Matrix

 a method for &and informing decision

making about marketing strategies
 Boston Consulting Group – a business &
marketing consultancy - 1968
 links growth rate, market share & cash flow
 classifies products into 4 categories:

45
 Boston (Box) Matrix
Rising stars Problem Children
High

Market
Growth Cash generator Dogs

Low
High Low
Market Share

46
 Stars
 products experiencing high growth rates
 potential for more high revenue growth
 Implications:
 huge potential

 possibly expensive to develop … recoup investment costs

 cost of market entry for new-comers

 go for long term revenue

 spend to promote & increase market penetration

 invest to defend product

 copying by followers

 corporations buy acorn stars

47
 Cash generators
Implications:
 cheap to promote ?
 branding &
differentiation
 high market share but low  at maturity stage of
growth – PLC maturity PLC?
 operating efficiencies  generate lots of cash –
use for M&A, + more
 low cost support R&D?
 high cash revenue – positive  monitor performance –
cash flows the long term?
 Defend, extend market share  threats ?
 refresh the product 48
 Problem Child – Question-mark
low market share in Problem children
–spend
growth market good money after
need investment to bad ?
develop, compete, enter
new segments/markets
etc
cannot afford to
buy/acquire market Implications:
share?  What chance for these products

Economy of scale securing a better market hold?

inefficiencies  How much investment to promote
negative cash flow to a stronger position?
 Risks

 what to do? Stay in – get out? Is it

worth it? 49
 Dead dogs
Product is starting to
 low growth market embarrass the company?
 low or declining
Implications:
market share (PLC)
Are they worth persevering
 negative cash flow, with?
large support costs How much are they costing?
 divest Could they be revived? How?
 management pets How much would it cost to
 buy out? continue
to support such products?
How much would it cost to get
out of the market?

50