The marketing mix is one of the most famous marketing terms. The marketing mix is the tactical or operational part of a marketing plan. The marketing mix is also called the 4Ps and the 7Ps. The 4Ps are Price, Place,Product and Promotion. The services marketing mix is also called the 7Ps and includes the addition of Process, People and Physical evidence.

 

“The marketing mix is . . . The set of controllable tactical marketing tools – product, price, place, and promotion – that the firm blends to produce the response it wants in the target market.” Kotler and Armstrong (2010).

 

The concept is simple. Think about another common mix - a cake mix. All cakes contain eggs, milk, flour, and sugar. However, you can alter the final cake by altering the amounts of mix elements contained in it. So for a sweet cake add more sugar!

 

It is the same with the marketing mix. The offer you make to your customer can be altered by varying the mix elements. So for a high profile brand, increase the focus on promotion and desensitize the weight given to price.

 

Another way to think about the marketing mix is to use the image of an artist's palette. The marketer mixes the prime colours (mix elements) in different quantities to deliver a particular final colour. Every hand painted picture is original in some way, as is every marketing mix. Let’s look at the elements of the marketing mix in more detail. Click on the links to go to the lesson on each element.

 

Brands and Branding

Branding is a strategy that is used by marketers. Pickton and Broderick (2001) describe branding as Strategy to differentiate products and companies, and to build economic value for both the consumer and the brand owner.

Brand occupies space in the perception of the consumer, and is what results from the totality of what the consumer takes into consideration before making a purchase decision (Pickton and Broderick 2001).

So brandingis a strategy, and brand is what has meaning to the consumer.

There are some other terms used in branding. Brand Equity is the addition of the brand's attributes including reputation, symbols, associations and names. Then the financial expression of the elements of brand equity is called Brand Value.

 

There are a number of interpretations of the term brand (De Chernatony 2003). They are summarized as follows:

• A brand is simply a logo e.g. McDonald's Golden Arches.
• A brand is a legal instrument, existing in a similar way to a patent or copyright.
• A brand is a company e.g. Coca-Cola.
• A brand is shorthand - not as straightforward. Here a brand that is perceived as having benefits in the mind of the consumer is recognised and acts as a shortcut to circumvent large chunks of information. So when searching for a product or service in less familiar surroundings you will conduct an information search. A recognised brand will help you reach a decision more conveniently.
• A brand is a risk reducer. The brand reassures you when in unfamiliar territory.
• A brand is positioning. It is situated in relation to other brands in the mind of the consumer as better, worse, quicker, slower, etc.
• A brand is a personality, beyond function e.g. Apple's iPod versus just any MP3 player.
• A brand is a cluster of values e.g. Google is reliable, ethical, invaluable, innovative and so on.
• A brand is a vision. Here managers aspire to see a brand with a cluster of values. In this context vision is similar to goal or mission.
• A brand is added value, where the consumer sees value in a brand over and above its competition e.g. Audi over Volkswagen, and Volkswagen over Skoda - despite similarities.
• A brand is an identity that includes all sorts of components; depending on the brand e.g. Body Shop International encapsulates ethics, environmentalism and political beliefs.
• A brand is an image where the consumer perceives a brand as representing a particular reality e.g. Stella Artois Reassuring Expensive.
• A brand is a relationship where the consumer reflects upon him or herself through the experience of consuming a product or service.

 

Marketing Mix

 

1. Price

“Price is the amount the consumer must exchange to receive the offering”. 

Solomon et al (2009).

 

The company’s goal in terms of price is really to reduce costs through improving manufacturing and efficiency, and most importantly the marketer needs to increase the perceived value of the benefits of its products and services to the buyer or consumer. There are many ways to price a product. Let's have a look at some of them and try to understand the best policy/strategy in various situations.

 

Premium Pricing:

Use a high price where there is a unique brand. This approach is used where a substantial competitive advantage exists and the marketer is safe in the knowledge that they can charge a relatively higher price. Such high prices are charged for luxuries such as Cunard Cruises, Savoy Hotel rooms, and first class air travel.

 

Penetration Pricing:

The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom and Sky TV. These companies need to land grab large numbers of consumers to make it worth their while, so they offer free telephones or satellite dishes at discounted rates in order to get people to sign up for their services. Once there is a large number of subscribers prices gradually creep up. Taking Sky TV for example, or any cable or satellite company, when there is a premium movie or sporting event prices are at their highest – so they move from a penetration approach to more of a skimming/premium pricing approach.

 

Economy Pricing:

This is a no frills low price. The costs of marketing and promoting a product are kept to a minimum. Supermarkets often have economy brands for soups, spaghetti, etc. Budget airlines are famous for keeping their overheads as low as possible and then giving the consumer a relatively lower price to fill an aircraft. The first few seats are sold at a very cheap price (almost a promotional price) and the middle majority are economy seats, with the highest price being paid for the last few seats on a flight (which would be a premium pricing strategy). During times of recession economy pricing sees more sales. However it is not the same as a value pricing approach which we come to shortly.

 

Price Skimming:

Price skimming sees a company charge a higher price because it has a substantial competitive advantage. However, the advantage tends not to be sustainable. The high price attracts new competitors into the market, and the price inevitably falls due to increased supply.

 

Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented. New products were developed and the market for watches gained a reputation for innovation.

 

Psychological Pricing:

This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example Price Point Perspective (PPP) 0.99 Cents not 1 US Dollar. It's strange how consumers use price as an indicator of all sorts of factors, especially when they are in unfamiliar markets. Consumers might practice a decision avoidance approach when buying products in an unfamiliar setting, an example being when buying ice cream. What would you like, an ice cream at $0.75, $1.25 or $2.00? The choice is yours. Maybe you're entering an entirely new market. Let's say that you're buying a lawnmower for the first time and know nothing about garden equipment. Would you automatically by the cheapest? Would you buy the most expensive? Or, would you go for a lawnmower somewhere in the middle? Price therefore may be an indication of quality or benefits in unfamiliar markets.

 

Product Line Pricing:

Where there is a range of products or services the pricing reflects the benefits of parts of the range. For example car washes; a basic wash could be $2, a wash and wax $4 and the whole package for $6. Product line pricing seldom reflects the cost of making the product since it delivers a range of prices that a consumer perceives as being fair incrementally – over the range.

 

If you buy chocolate bars or potato chips (crisps) you expect to pay X for a single packet, although if you buy a family pack which is 5 times bigger, you expect to pay less than 5X the price. The cost of making and distributing large family packs of chocolate/chips could be far more expensive. It might benefit the manufacturer to sell them singly in terms of profit margin, although they price over the whole line. Profit is made on the range rather than single items.

 

Optional Product Pricing:

Companies will attempt to increase the amount customers spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other. Again budget airlines are prime users of this approach when they charge you extra for additional luggage or extra legroom.

 

Captive Product Pricing:

Where products have complements, companies will charge a premium price since the consumer has no choice. For example a razor manufacturer will charge a low price for the first plastic razor and recoup its margin (and more) from the sale of the blades that fit the razor. Another example is where printer manufacturers will sell you an inkjet printer at a low price. In this instance the inkjet company knows that once you run out of the consumable ink you need to buy more, and this tends to be relatively expensive. Again the cartridges are not interchangeable and you have no choice.

 

Product Bundle Pricing:

Here sellers combine several products in the same package. This also serves to move old stock. Blu-ray and videogames are often sold using the bundle approach once they reach the end of their product life cycle. You might also see product bundle pricing with the sale of items at auction, where an attractive item may be included in a lot with a box of less interesting things so that you must bid for the entire lot. It's a good way of moving slow selling products, and in a way is another form of promotional pricing.

 

Promotional Pricing:

Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free), money off vouchers and discounts. Promotional pricing is often the subject of controversy. Many countries have laws which govern the amount of time that a product should be sold at its original higher price before it can be discounted. Sales are extravaganzas of promotional pricing!

 

Geographical Pricing:

Geographical pricing sees variations in price in different parts of the world. For example rarity value, or where shipping costs increase price. In some countries there is more tax on certain types of product which makes them more or less expensive, or legislation which limits how many products might be imported again raising price. Some countries tax inelastic goods such as alcohol or petrol in order to increase revenue, and it is noticeable when you do travel overseas that sometimes goods are much cheaper, or expensive of course.

 

Value Pricing:

This approach is used where external factors such as recession or increased competition force companies to provide value products and services to retain sales e.g. value meals at McDonalds and other fast-food restaurants. Value price means that you get great value for money i.e. the price that you pay makes you feel that you are getting a lot of product. In many ways it is similar to economy pricing. One must not make the mistake to think that there is added value in terms of the product or service. Reducing price does not generally increase value.

 

Digital Pricing:

The digital marketing mix is simply an adaptation of the traditional marketing mix, and 'P' for price. However, the Internet has influenced how online businesses price in a number of ways:

• International pricing and competition give consumers access to the lowest price for any generic good. For example, British consumers benefit when buying products from the United States since there are almost two Dollars to the Pound. Conversely this makes British goods more expensive to the American consumer. So it's cheap to buy spectacles from a US website and then to import them into the UK (even including transport costs and import taxes).
• Online auctions are a popular and innovative way of pricing, for example eBay. Here you register with the online auction company as a seller and/or a buyer. You can place an item into auction where buyers bid against each other. The highest bidder wins. The auction website takes a commission. The commission is factored into the price you pay.
• Greater access to pricing information, more quickly and in a format that makes pricing comparable and transparent. There are a number of sites that will compare and contrast prices for the same or similar goods and services e.g. prices on car insurance.
• Pricing could also include the cost of an online advertising medium such as Google Adwords. Here an online supplier would buy a keyword located in a text or image based advert onto Google's own search engine or onto a website belonging to a Google publisher. For example you search for the term 'hair straighteners' on Google and you are directed to a site about hair dressing. On this site is plenty of information about hair straightening, placed next to some contextual adverts. You click on the advert and are taken to a site selling hair dressing supplies. You buy the hair straighteners, and your suppliers pay a small 'pay- per-click' fee which is split between Google and their publisher. This is factored into the price you pay.

 

2. Place

“Place includes company activities that make the product available to target consumers”. 

Kotler and Armstrong (2010).

 

Place is also known as channel, distribution, or intermediary. It is the mechanism through which goods and/or services are moved from the manufacturer/ service provider to the user or consumer.

 

As you will be aware from your experiences as a consumer, producers rarely sell their goods or services directly to the person that consumes them. Marketing channels, or place in terms of the marketing mix, are the means by which interdependent organizations move products or services from the producer to the person that purchases or consumes the product. This is the basic role of distribution.

 

Let us consider the nature of distribution by looking at a very simple example of how it works in relation to our everyday experiences.

 

A basic example would be a tin of vegetable soup. The entire chain would begin with the seeds that the farmer sews and then plants. The farmer would sell the vegetables to the soup manufacturer, who would create soup from a recipe and then package the soup in a tin, and then bulk pack tins into a box and then those same boxes onto a pallet. The pallets would be driven by lorry or some other vehicle to a wholesaler. Independent retailers whilst visiting the wholesaler would break down a pallet and take a box of tinned soup. The retailer would return to his or her store and open the boxes of soup and place individual items onto a shelf next to similar products. The purchaser or customer would enter the store and buy a series of products including tinned soup. Having paid for the products the customer returned home and cooked soup for his or her family. The family eats the soup and they are the final consumers, as opposed to customers. This is an example of a very basic marketing channel in operation.

 

The case is that a manufacturer will attempt to maximise the accessibility of his product to as many consumers as possible. A prime example of this is Coca-Cola and their attempt to put a bottle of Coke within the arms reach of every consumer. For Coca-Cola this means a number of channels of distribution including manufacturing, transportation, bottling, wholesaling, retailing, vending machines and any other form of distribution you can think of. Coca-Cola maximises its accessibility.

 

“(A marketing channel is) . . . a set of interdependent organisations that help make a product or service available for use or consumption by the consumer or business user”.

 

Kotler et al (2010)

 

“A channel of distribution comprises a set of institutions which perform all of the activities utilised to move a product and its title from production to consumption”.

 

Bucklin - Theory of Distribution Channel Structure (1966)

 

The Bucklin definition above albeit more than 50 years old still represents the basic concept of place in the marketing mix.

 

Place has a number of names. Place is also known as channel, distribution or intermediary. It is the mechanism through which goods and/or services are moved from the manufacturer/ service provider to the user or consumer. So let's take a look at some basic distribution or channel decisions, and how we decide on the best distribution channel for our product or service.

 

There are six basic 'channel' decisions:

• Do we use direct or indirect channels? (e.g. 'direct' to a consumer, 'indirect' via a wholesaler).
• Single or multiple channels.
• Cumulative length of the multiple channels.
• Types of intermediary (see later).
• Number of intermediaries at each level (e.g. How many retailers in southern Spain?).
• Which companies as intermediaries to avoid 'intrachannel conflict' (i.e. infighting between local distributors).

 

Selection Consideration - how do we decide upon a distributor?

• Market segment - the distributor must be familiar with your target consumer and segment.
• Changes during the Product Life Cycle - different channels can be exploited at different points in the PLC e.g. Foldaway scooters are now available everywhere. Once they were sold via a few specific stores.
• Producer/distributor fit - Is there a match between their polices, strategies, image, and yours? Look for 'synergy'.
• Qualification assessment - establish the experience and track record of your intermediary.
• How much training and support will your distributor require?

Different customers have different needs. Customers in different segments have different needs, for example a food distributor will sell flour in different ways when it sells to a hotel as opposed to when the sales to a wholesaler. A business customer will have different needs to a retail customer, for example a stationary distributor will sell printer paper in bulk directly to a large company but will sell a single ream (500 sheets) indirectly to the average householder via his local stationery store.

 

Types of Channel Intermediaries.

There are many types of intermediaries including wholesalers, agents, retailers, the Internet, licensing and franchising. The main modes of distribution will be looked at in more detail as follows:

 

Channel Intermediaries - Wholesalers

• They break down 'bulk' into smaller packages for resale by a retailer.
• They buy from producers and resell to retailers. They take ownership or 'title' to goods whereas agents do not (see below).
• They provide storage facilities. For example, cheese manufacturers seldom wait for their product to mature. They sell on to a wholesaler that will store it and eventually resell to a retailer.
• Wholesalers often reduce the physical contact cost between the producer and consumer e.g. customer service costs, or sales force costs.
• A wholesaler will often take on some of the marketing responsibilities. Many produce their own brochures and use their own telesales operations.

 

Channel Intermediaries - Agents

• Agents are mainly used in international markets.
• An agent will typically secure an order for a producer and will take a commission. They do not tend to take title to the goods. This means that capital is not tied up in goods. However, a 'stockist agent' will hold consignment stock (i.e. will store the stock, but the title will remain with the producer. This approach is used where goods need to get into a market soon after the order is placed e.g. foodstuffs).
• Agents can be very expensive to train. They are difficult to keep control of due to the physical distances involved. They are difficult to motivate.

 

Channel Intermediaries - Retailers

• Retailers will have a much stronger personal relationship with the consumer.
• The retailer will hold several other brands and products. A consumer will expect to be exposed to many products.
• Retailers will often offer credit to the customer e.g. electrical wholesalers, or travel agents.
• Products and services are promoted and merchandised by the retailer.
• The retailer will give the final selling price to the product.
• Retailers often have a strong 'brand' themselves e.g. Ross and Wall-Mart in the USA, and Alisuper, Modelo, and Jumbo in Portugal.

 

Channel Intermediaries - Internet

• The Internet has a geographically dispersed market.
• The main benefit of the Internet is that niche products reach a wider audience e.g. Scottish salmon direct from an Inverness fishery.
• There are low barriers to entry as set up costs are relatively small.
• Use e-commerce technology (for payment, shopping software, etc)
• There is a paradigm shift in commerce and consumption which benefits distribution via the Internet

 

There is a huge growth in online retailing. People buy physical products from companies such as Amazon or eBay, as well as a whole plethora of other smaller retailers marketing in a wide variety of small niches, also known as the long thin tail of marketing. There are many transaction related products such as theatre tickets and software upgrades that can be bought solely online. One way of segmenting Internet users was identified by McKinsey in 2000 and is summarised here as follows:

Simplifiers- experienced Internet users who seek convenience and low prices.

Surfers– an innovative minority who enjoy buying niche items and experiences based upon their own initiative.

Bargainers–price sensitive surfers looking for the best price.

Connectors– those new to the Internet who want to connect with others via Facebook and Twitter, with little knowledge to go much further.

Routiners- who have a small number of favourite sites which they visit often, such as online banking for example

Sportsters- who spend most of their time looking at entertainment and sport.

Which of the above best represent you and your buyer behaviour when you are online?

 

Licensing and franchising

Some businesses are hothouses of ideas and innovation but they may lack expertise in terms of business and finance. In these situations licensing or franchising are an ideal option.

Licensing is essentially a contract which allows another business to manufacture or provide a service which conforms to your licence. Licensing is useful if the business wishes to quickly move into foreign countries, if manufacturing in a local market is too expensive then manufacturing could be undertaken overseas under licence, if shipping costs are too expensive or perhaps a market overseas would prefer a locally branded item. In return the licensee will get fees, will be able to penetrate a wide range of overseas markets, generally can control quality and production levels, and ultimately will be able to introduce new models as they arise.

 

Franchising is similar to licensing but tends to be used where there is a brand name or a particular format that a company owns. There are lots of familiar examples of franchising including KFC and many familiar high street and mall names - marketing everything from hamburgers to jewellery. Try to identify some franchises the next time that you go for a day out shopping.

 

Changing roles of logistics

Place also includes logistics. Logistics historically were largely about the physical distribution of goods from manufacturer to consumer by road and rail, sea and air. Logistics has undergone many changes since the 1970s. The cargo container was developed which reduced the amount of times the products needed loading on and off vehicles, and in and out of warehouses. More recently goods are loaded onto the container at the factory and products stay in the container until they are unloaded in at their final desination.

 

Supply chain management is now a focal discipline which takes logistics to the next level. Distribution is a central strategic management topic, and involves logistics professionals with highly technical information technology, resources and software.

 

The logistics manager integrates all elements of physical distribution and will optimise the flow of services and goods. There is a large amount of planning and organising in terms of the whole process, which includes selecting other agents and suppliers who are integrated into the process. Often logistics will integrate forwards with the supply chain of a large customer. An example of current thinking on logistics would include Just In Time Management (JIT) where components are delivered directly to manufacturing sites as the producers need them on the assembly line.

 

3. Product 

“Product means the goods-and-services combination the company offers to the target market”. 

Kotler and Armstrong (2010).

 

In order to actively explore the nature of a product further, let’s consider it as three different products -the CORE product, the ACTUAL product, and finally the AUGMENTED product. This is known as the Three Levels of a Product:

 

Consumers often think that a product is simply the physical item that he or she buys. In order to actively explore the nature of a product further, let’s consider it as three different products - the COREproduct, the ACTUALproduct, and finally the AUGMENTEDproduct. This concept is known as the Three Levels of a Product.

 

The CORE product is NOT the tangible physical product. You can't touch it. That's because the core product is the BENEFIT of the product that makes it valuable to you. So with the car example, the benefit is convenience i.e. the ease at which you can go where you like, when you want to. Another core benefit is speed since you can travel around relatively quickly.

 

The ACTUAL product is the tangible, physical product. You can get some use out of it. Again with the car, it is the vehicle that you test drive, buy and then collect. You can touch it. The actual product is what the average person would think of under the generic banner of product.

 

The AUGMENTED product is the non-physical part of the product. It usually consists of lots of added value, for which you may or may not pay a premium. So when you buy a car, part of the augmented product would be the warranty, the customer service support offered by the car's manufacturer and any after-sales service. The augmented product is an important way to tailor the core or actual product to the needs of an individual customer. The features of augmented products can be converted in to benefits for individuals.

 

Features and benefits of products.

Features and benefits of a product are also relevant to the three levels of the product. Products tend to have a whole series of features but only a small number of benefits to the actual consumer.

 

Let's look at this another way, if you buy a Nintendo console it has many features; for example you can play games alone or you can play against another opponent or two or three opponents. You can also have access to the Internet. Avatars are adaptable so you can create yourself and your friends. These are all examples of features to the consumer. However a consumer may buy it because he or she wants to stay fit and will use software and peripherals to become healthier. Becoming healthier is the benefit to the consumer.

 

The consistent marketer will aim to discover the consumer’s preference for benefits and will match individual features to the preference. That is why professional salespeople for example, often ask many questions whereas a novice salesperson will just tell you the features of the product.

 

New Product Development (NPD)

New Product Development (NPD) will take in to account the consumer’s preference for benefits over features by considering research into their needs. NPD aims to satisfy and anticipate needs. NPD delivers products which offer benefits at the core, actual and augmented levels.

 

NPD might offer a replacement product for a current line, it could add products to the current line, it could discover new product lines and sometimes it delivers very innovative products which the world might not have seen before.

 

New products are launched for all sorts of reasons. As we know from our previous lesson on the business environment, legislation i.e. changes in the law can mean that companies have to design and develop new products. An example of this was when we moved from videotape recorders to digital and DVD recorders. So products need to be modified for changing target markets.

 

Sometimes the company will need to increase the volume that a production plant delivers, since maybe it is not running at full capacity. An example of this would be a food manufacturer of tinned soup that has a factory which can operate 24/7, designing different derivatives of the soup in order to lower the unit cost of production. So product lines are extended, in this case the reason being is to ease operational efficiency.

 

Intense competitive rivalry in the market will also lead to the need for NPD. Just think about your smart phone and how quickly such products go through their product life cycles, throughout your customer life-cycle.

 

Change in any element of the marketing mix would influence NPD, for example there is a movement to shop online and some products need to be distributed via online retailers, and the product is adapted to make it compact and simple to deliver. NPD can be driven by many influences from changing consumer tastes to the need to adapt products and services for local or international market.

 

The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).

 

PLC is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).

 

In theory it's the same for a product. After a period of development it is introduced or launched into the market; it gains more and more customers as it grows; eventually the market stabilises and the product becomes mature; then after a period of time the product is overtaken by development and the introduction of superior competitors, it goes into decline and is eventually withdrawn.

 

However, most products fail in the introduction phase. Others have very cyclical maturity phases where declines see the product promoted to regain customers.

Strategies for the differing stages of the Product Life Cycle.

The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution.

 

Growth, Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilise.

 

Maturity, Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilise. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media.

 

Decline, At this point there is a downturn in the market. For example more innovative products are introduced or consumer tastes have changed. There is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing marketing spend and cost cutting.

 

Problems with Product Life Cycle.

In reality very few products follow such a prescriptive cycle. The length of each stage varies enormously. The decisions of marketers can change the stage, for example from maturity to decline by price-cutting. Not all products go through each stage. Some go from introduction to decline. It is not easy to tell which stage the product is in. Remember that PLC is like all other tools. Use it to inform your gut feeling.

 

Customer Life Cycle (CLC) has obvious similarities with the Product Life Cycle (PLC). However, CLC focuses upon the creation and delivery of lifetime value to the customer i.e. looks at the products or services that customers NEED throughout their lives.

It is marketing orientated rather than product orientated, and embodies the marketing concept. Essentially, CLC is a summary of the key stages in a customer's relationship with an organisation. The problem here is that every organisation's product offering is different, which makes it impossible to draw out a single Life Cycle that is the same for every organisation.

 

Let's consider an example from the Banking sector. HSBC has a number of products that it aims at its customers throughout their lifetime relationship with the company. Here we apply a CLC. You can start young when you want to save money. 11-15 year olds are targeted with the Livecash Account, and 16-17 year olds with the Right Track Account. Then when (or if) you begin College or University there are Student Loans, and when you qualify there are Recent Graduate Accounts.

When you begin work there are many types of current and savings account, and you may wish to buy property, and so take out a mortgage. You could take out a car loan, to buy a vehicle to get you to work. It would also be advisable to take out a pension. As you progress through your career you begin your own family, and save for your own children's education. You embark upon a number of savings plans and schemes, and ultimately HSBC offer you pension planning (you may want to insure yourself for funeral expenses - although HSBC may not offer this!).

This is how an organization such as HSBC, which is marketing orientated, can recruit and retain customers, and then extend additional products and services to them - throughout the individual's life. This is an example of a Customer Life Cycle (CLC).

 

Another important point is that a lifetime CLC is made up many shorter CLC's. So, for example, Volkswagen Cars retains a customer for many years and one can predict the products that meet a customers needs throughout his or her family lifetime. However the purchase of each car, will in itself be a CLC with many Customer Touch Points. The consumer may need a bigger vehicle as his or her family expands - so they visit VW's website and register.

 

4. Promotion 

“Promotion includes all of the activities marketers undertake to inform consumers about their products and to encourage potential customers to buy these products”. 

Solomon et al (2009).

 

Promotion includes all of the tools available to the marketer for marketing communication. As with Neil H. Borden's marketing mix, marketing communications has its own promotions mix. Whilst there is no absolute agreement on the specific content of a marketing communications mix, there are many promotions elements that are often included such as sales, advertising, sales promotion, public relations, direct marketing, online communications and personal selling.

 

Think of it like a cake mix, the basic ingredients are always the same. However if you vary the amounts of one of the ingredients, the final outcome is different. It is the same with promotions. You can integrate different aspects of the promotions mix to deliver a unique campaign. Now let's look at the different elements of the promotions mix.

 

The elements of the promotions mix are:

• Personal Selling.
• Sales Promotion.
• Public Relations.
• Direct Mail.
• Trade Fairs and Exhibitions.
• Advertising.
• Sponsorship.
• Online promotions

The elements of the promotions mix are integrated to form a coherent campaign. As with all forms of communication, the message from the marketer follows the 'communications process' as illustrated above. For example, a radio advert is made for a car manufacturer. The car manufacturer (sender) pays for a specific advert with contains a message specific to a target audience (encoding). It is transmitted during a set of commercials from a radio station (message/medium).

 

The message is decoded by a car radio (decoding) and the target consumer interprets the message (receiver). He or she might visit a dealership or seek further information from a web site (Response). The consumer might buy a car or express an interest or dislike (feedback). This information will inform future elements of an integrated promotional campaign. Perhaps a direct mail campaign would push the consumer to the point of purchase. Noise represents the thousands of marketing communications that a consumer is exposed to everyday, all competing for attention.

 

The Promotions Mix.

Let us look at the individual components of the promotions mix in more detail. Remember all of the elements are 'integrated' to form a specific communications campaign. 

 

1. Personal Selling.

Personal Selling is an effective way to manage personal customer relationships. The sales person acts on behalf of the organization. They tend to be well trained in the approaches and techniques of personal selling. However sales people are very expensive and should only be used where there is a genuine return on investment. For example salesmen are often used to sell cars or home improvements where the margin is high.

 

2. Sales Promotion.

Sales promotions tend to be thought of as being all promotions apart from advertising, personal selling, and public relations. For example the BOGOF promotion, or Buy One Get One Free. Others include couponing, money-off promotions, competitions, free accessories (such as free blades with a new razor), introductory offers (such as buy digital TV and get free installation), and so on. Each sales promotion should be carefully costed and compared with the next best alternative.

 

3. Public Relations (PR).

Public Relations is defined as 'the deliberate, planned and sustained effort to establish and maintain mutual understanding between an organization and its publics' (Institute of Public Relations). PR can be relatively cheap, but it is certainly not free. Successful strategies tend to be long-term and plan for all eventualities. All airlines exploit PR; just watch what happens when there is an incident. The pre-planned PR machine clicks in very quickly with a very effective rehearsed plan.

 

4. Direct Marketing.

Direct marketing is any marketing undertaken without a distributor or intermediary. In terms of promotion it means that the marketing company has direct communication with the customer. For example Nintendo distributes via retailers, although you can register directly with them for information which is often delivered by e-mail or mail.

Direct mail is very highly focussed upon targeting consumers based upon a database. As with all marketing, the potential consumer is targeted based upon a series of attributes and similarities. Creative agencies work with marketers to design a highly focussed communication in the form of a mailing. The mail is sent out to the potential consumers and responses are carefully monitored. For example, if you are marketing medical text books, you would use a database of doctors' surgeries as the basis of your mail shot.

Similarly e-mail is a form of online direct marketing. You register, or opt in, to join a mailing list for your favorite website. You confirm that you have opted in, and then you will receive newsletters and e-mails based upon your favorite topics. You need to be able to unsubscribe at any time, or opt out. Mailing lists which generate sales are like gold dust to the online marketer. Make sure that you use a mailing list with integrity just as you would expect when you sign up. The mailing list needs to be kept up-to-date, and often forms the basis of online Customer Relationship Management (CRM).

 

5. Trade Fairs and Exhibitions.

Such approaches are very good for making new contacts and renewing old ones. Companies will seldom sell much at such events. The purpose is to increase awareness and to encourage trial. They offer the opportunity for companies to meet with both the trade and the consumer.

 

6. Advertising.

Advertising is a 'paid for' communication. It is used to develop attitudes, create awareness, and transmit information in order to gain a response from the target market. There are many advertising 'media' such as newspapers (local, national, free, trade), magazines and journals, television (local, national, terrestrial, satellite) cinema, outdoor advertising (such as posters, bus sides). There is much more about digital, online and Internet advertising further down this pages, as well as throughout Marketing Teacher and the Marketing Teacher Blog.

 

7. Sponsorship.

Sponsorship is where an organization pays to be associated with a particular event, cause or image. Companies will sponsor sports events such as the Olympics or Formula One. The attributes of the event are then associated with the sponsoring organization.

 

The elements of the promotional mix are then integrated to form a unique, but coherent campaign.

 

8. Online Promotions

Online promotions will include many of the promotions mix elements which we considered above. For example advertising exists online with pay per click advertising which is marketed by Google. You can sponsor are website for example. Online businesses regularly send out newsletters which are targeted using e-mail and mailing lists, which is a form of direct marketing. Indeed websites are premium vehicle in the public relations industry to communicate particular points of view to relevant publics.

 

The online promotions field is indeed emerging. The field will soon spread into Geo targeting of adverts to people in specific locations via smart phones. Another example would be how social media targets adverts to you whilst you socialising online. Take a look at Marketing Teacher's Blog for more up-to-date examples of the emerging online promotions space.

 

5. Physical Evidence 

“(Physical evidence is) . . . The environment in which the service is delivered, and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service”. 

Zeithaml et al (2008)

 

Physical Evidence is the material part of a service. Strictly speaking there are no physical attributes to a service, so a consumer tends to rely on material cues. There are many examples of physical evidence, including some of the following buildings, equipment, signs and logos, annual accounts and business reports, brochures, your website, and even your business cards.

 

Physical evidence as part of the marketing mix

Services as we know are largely intangible when marketing. However customers tend to rely on physical cues to help them evaluate the product before they buy it. Therefore marketers develop what we call physical evidence to replace these physical cues in a service. The role of the marketer is to design and implement such tangible evidence. Physical evidence is the material part of a service.

 

There are many examples of physical evidence, including some of the following:

• The building itself (such as prestigious offices or scenic headquarters). This includes the design of the building itself, signage around the building, and parking at the building, how the building is landscaped and the environment that surrounds the building. This is part of what is known as the servicescape.
• The interior of any service environment is important. This includes the interior design of the facility, how well it is equipped, internal signage, how well the internal environment is laid out, and aspects such as temperature and air conditioning. This is also part of the servicescape.
• Packaging.
• Internet/web pages.
• Paperwork (such as invoices, tickets and dispatch notes).
• Brochures.
• Furnishings.
• Signage (such as those on aircraft and vehicles).
• Uniforms and employee dress.
• Business cards.
• Mailboxes.
• Many others . . .

A sporting event is packed full of physical evidence. Your tickets have your team's logos printed on them, and players are wearing uniforms (i.e. the team colors/colours and clothing). The stadium itself could be impressive and have an electrifying atmosphere. You travelled there and parked quickly nearby, and your seats are comfortable and close to restrooms and store. All you need now is for your team to win!

Some organizations depend heavily upon physical evidence as a means of marketing communications, for example tourism attractions and resorts (e.g. Disney World), parcel and mail services (e.g. UPS Courier Services), and large banks and insurance companies (e.g. Lloyds of London). This is important to their corporate image. Of course there are other examples with a slightly more tangible offering such as Rolls-Royce motor cars and P&O cruises.

 

Physical Environment

The physical environment is the space by which you are surrounded when you consume the service. So for a meal this is the restaurant and for a journey it is the aircraft that you travel inside. The physical environment is made up from its ambient conditions; spatial layout and functionality; and signs, symbols, and artefacts (Zeithaml 2000).

 

Ambience

The ambient conditions include temperature, colour, smell and sound, music and noise. The ambience is a package of these elements which consciously or subconsciously help you to experience the service. Ambience can be diverse. The ambience of a health spa is relaxing and calm, and the music and smells underpin this experience. The ambience of a nightclub will be loud noise and bright lights which enhance this customer experience, obviously in a different way. The marketer needs to match the ambience to the service that is being delivered.

 

Spatial Layout

The spatial layout and functionality are the way in which furniture is set up or machinery spaced out. Think about the spatial layout of your local cinema, or a church or temple that you have visited and how this affects your experience of the service. Functionality is more about how well suited the environment is to actually accomplish your needs. For example is the seat in the cinema comfortable, or can you reach your life jacket when on an aircraft?

Corporate branding (signs, symbols and artefacts).

 

Finally corporate image and identity are supported by signs, symbols and artefacts of the business itself. Examples of this would be the signage in Starbucks which reassures the consumer through branding. When you visit an airport there are signs which guide you around the facility smoothly, as well as statues and logos displayed throughout the complex. This is all important to the physical evidence as a fundamental element of the services marketing mix.

 

6. People 

“(People are) . . . All human actors who play a part in service delivery and thus influence the buyers' perceptions; namely, the firm's personnel, the customer, and other customers in the service environment”.

Zeithaml et al (2008).

 

People are the most important element of any service or experience. Services tend to be produced and consumed at the same moment, and aspects of the customer experience are altered to meet the individual needs of the person consuming it. Most of us can think of a situation where the personal service offered by individuals has made or tainted a tour, vacation or restaurant meal. Remember, people buy from people that they like, so the attitude, skills and appearance of all staff need to be first class. People have an important role in service delivery, they are relied upon to deliver and maintain transactional marketing and people play an important part in the customer relationship.

 

People deliver services in all sorts of settings. It is an important element of the services marketing mix. If you go to an organized event such as the Olympics then everything about the experience is underpinned by people. Behind-the-scenes there are project managers and chefs, maitre d' and accountants. The people deliver the service and this is the same for restaurants, hairdressers and auto mechanics.

 

People are the transactional interface between the company and its customers so people deliver the service and they collect money i.e. get paid on behalf the company for the service. So if you go to a restaurant the waiter will greet you, take your order and serve your food and finally he or she will take the money which completes the contractual transaction.

 

People underpin the customer relationship between the company and the consumer. Remember that people buy from people (as we always remind you on Marketing Teacher) and that the relationship between the person you are dealing with and yourself add much value to the transaction.

 

If you know you're going to eat at your favorite restaurant, it a good idea to learn the waiter’s name and build a rapport. Think of other times such as when you were selling a property and an agent was a particularly reliable and polite person, or perhaps you bought a car because you trusted the salesperson and this advantage clinched the deal. Marketing today is based on Customer Relationship Management (CRM) and the relationship with people that you're dealing with at the company can recruit you as a customer, retaining you as a customer and encourage you to remain a customer in the future. This is where people underpin the long-term customer relationship.

 

Here are some ways in which people add value to an experience as part of the marketing mix. Let’s consider training, personal selling and customer service.

 

Training

All customer facing personnel need to be trained and developed to maintain a high quality of personal service. Training should begin as soon as the individual starts working for an organization during an induction. The induction will involve the person in the organization's culture for the first time, as well as briefing him or her on day-to-day policies and procedures. At this very early stage the training needs of the individual are identified. A training and development plan is constructed for the individual which sets out personal goals that can be linked into future appraisals. In practice most training is either 'on-the-job' or 'off-the-job.' On-the-job training involves training whilst the job is being performed e.g. training of bar staff. Off-the-job training sees learning taking place at a college, training center or conference facility. Attention needs to be paid to Continuing Professional Development (CPD) where employees see their professional learning as a lifelong process of training and development.

 

Personal Selling

There are different kinds of salesperson. There is the product delivery salesperson. His or her main task is to deliver the product, and selling is of less importance e.g. fast food, or mail. The second type is the order taker, and these may be either 'internal' or 'external.' The internal sales person would take an order by telephone, e-mail or over a counter. The external sales person would be working in the field. In both cases little selling is done.

The next sort of sales person is the missionary. Here, as with those missionaries that promote faith, the salesperson builds goodwill with customers with the longer-term aim of generating orders. Again, actually closing the sale is not of great importance at this early stage. The forth type is the technical salesperson, e.g. a technical sales engineer. Their in-depth knowledge supports them as they advise customers on the best purchase for their needs. Finally, there are creative sellers. Creative sellers work to persuade buyers to give them an order. This is tough selling, and tends to offer the biggest incentives. The skill is identifying the needs of a customer and persuading them that they need to satisfy their previously unidentified need by giving an order.

 

Customer Service

Many products, services and experiences are supported by customer services teams. Customer services provide expertise (e.g. on the selection of financial services), technical support (e.g. offering advice on IT and software) and coordinate the customer interface (e.g. controlling service engineers, or communicating with a salesman). The disposition and attitude of such people is vitally important to a company. The way in which a complaint is handled can mean the difference between retaining or losing a customer, or improving or ruining a company's reputation. Today, customer service can be face-to-face, over the telephone or using the Internet. People tend to buy from people that they like, and so effective customer service is vital. Customer services can add value by offering customers technical support, expertise and advice.

 

7. Process 

“Process is . . . The actual procedures, mechanisms, and flow of activities by which the service is delivered – this service delivery and operating systems”. 

Zeithaml et al (2008).

 

There are a number of perceptions of the concept of process within the business and marketing literature. Some see processes as a means to achieve an outcome, for example - to achieve a 30% market share a company implements a marketing planning process. However in reality it is more about the customer interface between the business and consumer and how they deal with each other in a series of steps in stages, i.e. throughout the process.

 

Process is another element of the services marketing mix or 7Ps.There is a number of perceptions of the concept of process within the business and marketing literature. Some see processes as a means to achieve an outcome, for example - to achieve a 30% market share, a company implements a marketing planning process.

 

Another view is that marketing has a number of processes that integrate together to create an overall marketing process, for example - telemarketing and Internet marketing can be integrated. A further view is that marketing processes are used to control the marketing mix, i.e. processes that measure the achievement of marketing objectives. All views are understandable, but not particularly customer focused.

 

For the purposes of the marketing mix, process is an element of service that sees the customer experiencing an organization’s offering. It's best viewed as something that your customer participates in at different points in time. Here are some examples to help you build a picture of a marketing process, from the customer's point of view.

 

Going on a cruise - from the moment that you arrive at the dockside, you are greeted; your baggage is taken to your room. You have two weeks of services from restaurants and evening entertainment, to casinos and shopping. Finally, you arrive at your destination, and your baggage is delivered to you. This is a highly focused marketing process, and is an example of the importance of process in enabling delivery of the customer proposition. Another way of looking at this example is that there is end to end service support, which has enabled transactions between the company and its customers. There are other ways in which the process supports the customer experience as we will see from the next section.

 

At each stage of the process, marketers:

• Deliver value through all elements of the marketing mix. Process, physical evidence and people enhance services.
• Feedback can be taken and the mix can be altered.
• Customers are retained, and other services or products are extended and marked to them.
• The process itself can be tailored to the needs of different individuals, experiencing a similar service at the same time.

Processes essentially have inputs, throughputs and outputs (or outcomes). Marketing adds value to each of the stages.

There are a number of types of processes. Technological processes include the process of manufacturing goods and adapting them for the needs of clients. For example Rolls-Royce motor cars will build a Phantom which is adapted to the requirements of each individual client. There are also electronic processes which include things like Electronic Point-Of-Sale (EPOS), barcodes on products which are scanned on phones or by checkout people and other means such as loyalty cards.

Processes include direct activities and indirect activities. Direct activities add value at the customer interface as the consumer experiences the service. Many processes are supported by indirect activities, often known as back office activities, which support the service before, during and after it has been consumed.

 

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