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EDUCATION HOLE PRESENTS

MARKETING MANAGEMENT
UNIT IV

2013

WWW.EDHOLE.COM

Elements of Marketing Mix ..................................................................................................... 3


Product ............................................................................................................................................................ 3
Price ................................................................................................................................................................. 3
Place ................................................................................................................................................................ 3
Promotion ....................................................................................................................................................... 3
Advertising ...................................................................................................................................................... 3
Word of mouth ................................................................................................................................................ 4

Four Cs of Marketing Mix ................................................................................................................ 4


Commodity - (Replaces Products) ........................................................................................................................ 4
Communication - (Replaces Promotion) .............................................................................................................. 4

Consumer Cost Convenience Communication .................................................................................. 4


New product failure ......................................................................................................................... 4
Stages Process Steps of New Product Development ........................................................................................... 6
1. Idea generation ................................................................................................................................................ 6
2. Idea screening .................................................................................................................................................. 6
3. Concept testing ................................................................................................................................................ 7
4. Business analysis .............................................................................................................................................. 7
5. Product development ...................................................................................................................................... 8
6. Test marketing ................................................................................................................................................. 8
7. Commercialization ........................................................................................................................................... 8
8. Review of market performance ....................................................................................................................... 8

Product Life Cycle (PLC)............................................................................................................ 9


Stages of Product Life Cycle ............................................................................................................................ 9
Product Life Cycle (PLC)........................................................................................................................................ 9
Introduction stage ........................................................................................................................................... 9
Growth Stage ..................................................................................................................................................... 10
Maturity stage .................................................................................................................................................... 11
Marketing mix decisions include ........................................................................................................................ 11
Product .......................................................................................................................................................... 11
Decline stage ................................................................................................................................................. 11

Limitations of Product Life Cycle (PLC) ........................................................................................... 11

Elements of Marketing Mix


The elements of marketing mix are often called the four Ps of marketing.
Product
Goods manufactured by organizations for the end-users are called products.
Products can be of two types - Tangible Product and Intangible Product (Services)
An individual can see, touch and feel tangible products as compared to intangible products.
A product in a market place is something which a seller sells to the buyers in exchange of
money.
Price
The money which a buyer pays for a product is called as price of the product. The price of a
product is indirectly proportional to its availability in the market. Lesser its availability, more
would be its price and vice a versa.
Retail stores which stock unique products (not available at any other store) quote a higher price
from the buyers.
Place
Place refers to the location where the products are available and can be sold or purchased.
Buyers can purchase products either from physical markets or from virtual markets. In a physical
market, buyers and sellers can physically meet and interact with each other whereas in a virtual
market buyers and sellers meet through internet.
Promotion
Promotion refers to the various strategies and ideas implemented by the marketers to make the
end - users aware of their brand. Promotion includes various techniques employed to promote
and make a brand popular amongst the masses.
Promotion can be through any of the following ways:
Advertising
Print media, Television, radio are effective ways to entice customers and make them aware of the
brands existence.

Billboards, hoardings, banners installed intelligently at strategic locations like heavy traffic
areas, crossings, railway stations, bus stands attract the passing individuals towards a particular
brand.
Taglines also increase the recall value of the brand amongst the customers.
Word of mouth
One satisfied customer brings ten more customers along with him whereas one dis-satisfied
customer takes away ten more customers. Thats the importance of word of mouth. Positive word
of mouth goes a long way in promoting brands amongst the customers.
Lately three more Ps have been added to the marketing mix. They are as follows:
People - The individuals involved in the sale and purchase of products or services come under
people.
Process - Process includes the various mechanisms and procedures which help the product to
finally reach its target market
Physical Evidence - With the help of physical evidence, a marketer tries to communicate the
USPs and benefits of a product to the end users

Four Cs of Marketing Mix


Now a day, organizations treat their customers like kings. In the current scenario, the four Cs
has thus replaced the four Ps of marketing making it a more customer oriented model. Koichi
Shimizu in the year 1973 proposed a four Cs classification.

Commodity - (Replaces Products)


Cost - (Replaces Price) involves manufacturing cost, buying cost and selling cost
Channel - The various channels which help the product reach the target market.

Communication - (Replaces Promotion)


Robert F. Lauterborn gave a modernized version of the four Cs model in the year 1993.
According to him the four Cs of marketing are:

Consumer Cost Convenience Communication


New product failure

In this era of tight competition from domestic and global firms the firm who don't come out with
new products are putting themselves at great risk because their existing products are prone to
changing customer needs, shorter product life cycles, new technologies and increased
competition.Despite years of research and huge capital being pumped in to understanding the
consumer, making a launch successful is still a difficult task. The new product largely depends
on the product quality and the marketing tactics of the firm, there are many occasions were the
product failed miserably even after using the best technology and quality the reason is that the
new product is not worth for the customers. The prime factor for the new product success is customer value. Value is what the customer thinks is value. The major reasons for product failure
are
1. Faulty product idea The product often fail because faulty of product idea. A good idea
can revolutionize the market but a bad idea may prove bitter to the firm or it may backfire
Eg: Polar industries in 1991 launched "COOL CATS" fan - decorated with cartoon
characters meant primarily for children. The fan was priced at premium; the idea was that
children's were increasingly becoming influensors in purchase decisions and to attract the
kids with the cartoon creatures and to position the product exclusively for kids. The
product failed miserably inspite of its huge advertising budget because when the fan was
put on it didn't have any colour effect and the customer did not justify its premium price.
2. Distribution related problemsThe new product fails if the product is unable to meet the
channel requirements. While developing the product the channel requirements must be
given adequate consideration. Eg: when NESTLE launched its new chocolates the
product and promotion was ok but the product failed in the distribution side because the
company stipulated the product to be stored in refrigerators. The product faced two
problems in the distribution side because it meant excluding a number of retail outlets as
they didn't have this facility and secondly the chocolate was not picked by the customers
as it was not seen upfront in the retail shops. Finally Nestle had to reformulate the
product according to channel requirements.3. Poor timing of launchToo early or late
entry into the market is a common cause of failure. Kinetic Merlin was launched in pune
in 1991.It was a 3 in 1 set consisting of a colour television, a stereo with detachable
speakers and a home computer. The product was targeted at the Indian consumers who
are fond of sophisticated gadgets to immediately adopt such an innovative idea but in
reality the idea was too advanced for the customers to digest at that time because they
were not exposed to such type of products before.
3. Improper PositioningPositioning means putting the product into the predetermined orbit.
Improper positioning may affect the product success. Eg: Titan Tanishq introduced their
18 carat jewellery and the product was positioned at elite segment but there was a
contradiction as to why these elite segment should go in for a low carat gold because the
norms for gold in India at that time was 22 carat. The product failed miserably in
retrospect Titan had to introduce 22-carat jewellery.Some other reasons for product

failure are:* Lack of differential advantage * Poor planning * Technical problems in the
product* Competitors fighting back harder than expected* Poor market research

Stages Process Steps of New Product Development


The stages or process or steps involved in a new-product development are depicted in the image
given below. Click on it to get a zoomed preview.
Now let's discuss each stage in the process of a new-product development.

1. Idea generation
The first step in new-product development is idea generation.
New ideas can be generated by:
Conducting marketing research to find out the consumers' needs and wants.
Inviting suggestions from consumers.
Inviting suggestions from employees.
Brainstorming suggestions for new-product ideas.
Searching in different markets viz., national and international markets for new-product ideas.
Getting feedback from agents or dealers about services offered by competitors.
Studying the new products of the competitors.

2. Idea screening
Most companies have a "Idea Committee." This committee studies all the ideas very carefully.
They select the good ideas and reject the bad ideas.
Before selecting or rejecting an idea, the following questions are considered or asked:
Is it necessary to introduce a new product?
Can the existing plant and machinery produce the new product?
Can the existing marketing network sell the new product?

When can the new product break even?


If the answers to these questions are positive, then the idea of a new-product development is
selected else it is rejected. This step is necessary to avoid product failure.

3. Concept testing
Concept testing is done after idea screening. It is different from test marketing.
In this stage of concept testing, the company finds out:
Whether the consumers understand the product idea or not?
Whether the consumers need the new product or not?
Whether the consumers will accept the product or not?
Here, a small group of consumers is selected. They are given full information about the new
product. Then they are asked what they feel about the new product. They are asked whether they
like the new product or not. So, concept testing is done to find out the consumers' reactions
towards the new product. If most of the consumers like the product, then business analysis is
done.

4. Business analysis
Business analysis is a very important step in new-product development. Here, a detailed business
analysis is done. The company finds out whether the new product is commercially profitable or
not.
Under business analysis, the company finds out...
Whether the new product is commercially profitable or not?
What will be the cost of the new product?
Is there any demand for the new product?
Whether this demand is regular or seasonal?
Are there any competitors of the new product?
How the total sales of the new product be?
What will be the expenses on advertising, sales promotion, etc.?
How much profit the new product will earn?

So, the company studies the new product from the business point of view. If the new product is
profitable, it will be accepted else it will be rejected.

5. Product development
At this stage, the company has decided to introduce the new product in the market. It will take all
necessary steps to produce and distribute the new product. The production department will make
plans to produce the product. The marketing department will make plans to distribute the
product. The finance department will provide the finance for introducing the new product. The
advertising department will plan the advertisements for the new product. However, all this is
done as a small scale for Test Marketing.

6. Test marketing
Test marketing means to introduce the new product on a very small scale in a very small market.
If the new product is successful in this market, then it is introduced on a large scale. However, if
the product fails in the test market, then the company finds out the reasons for its failure. It
makes necessary changes in the new product and introduces it again in a small market. If the new
product fails again the company will reject it.
Test marketing reduces the risk of large-scale marketing. It is a safety device. It is very timeconsuming. It must be done especially for costly products.

7. Commercialization
If the test marketing is successful, then the company introduces the new product on a large scale,
say all over the country. The company makes a large investment in the new product. It produces
and distributes the new product on a huge scale. It advertises the new product on the mass media
like TV, Radio, Newspapers and Magazines, etc.

8. Review of market performance


The company must review the marketing performance of the new product.
It must answer the following questions:
Is the new product accepted by the consumers?
Are the demand, sales and profits high?
Are the consumers satisfied with the after-sales-service?

Are the middlemen happy with their commission?


Are the marketing staffs happy with their income from the new product?
Is the Marketing manager changing the marketing mix according to the changes in the
environment?
Are the competitors introducing a similar new product in the market?
The company must continuously monitor the performance of the new product. They must make
necessary changes in their marketing plans and strategies else the product will fail.

Product Life Cycle (PLC)


A new product passes through set of stages known as product life cycle. Product life
cycle applies to both brand and category of products. Its time period vary from product to
product. Modern product life cycles are becoming shorter and shorter as products in mature
stages are being renewed by market segmentation and product differentiation.
Companies always attempt to maximize the profit and revenues over the entire life cycle of a
product. In order to achieving the desired level of profit, the introduction of the new product at
the proper time is crucial. If new product is appealing to consumer and no stiff competition is out
there, company can charge high prices and earn high profits.
Stages of Product Life Cycle
Product life cycle comprises four stages:

Introduction stage
Growth stage
Maturity stage
Decline stage

Product Life Cycle (PLC)


Introduction stage
Product is introduced in the market with intention to build a clear identity and heavy promotion
is done for maximum awareness. Before actual offering of the product to customers, product
passes through product development, involves prototype and market tests. Companies incur more
costs in this phase and also bear additional cost for distribution. On the other hand, there are a

few customers at this stage, means low sales volume. So, during introductory stage companys
profits shows a negative figure because of huge cost but low sales volume.
At introduction stage, the company core focus is on establishing a market and arising demand for
the product. So, the impact on marketing mix is as follows:
ProductBranding, Quality level and intellectual property and protections are obtained to
stimulate consumers for the entire product category. Product is under more consideration, as first
impression is the last impression.
PriceHigh(skim) pricing is used for making high profits with intention to cover initial cost in a
short period and low pricing is used to penetrate and gain the market share. company choice of
pricing strategy depends on their goals.
PlaceDistribution at this stage is usually selective and scattered.
PromotionAt introductory stage , promotion is done with intention to build brand awareness.
Samples/trials are provided that is fruitful in attracting early adopters and potential customers.
Promotional programs are more essential in this phase. It is as much important as to produce the
product because it positions the product.

Growth Stage
In this stage, companys sales and profits starts increasing and competition also begin to
increase. The product becomes well recognized at this stage and some of the buyers repeat the
purchase patterns. During this stage, firms focus on brand preference and gaining market share.
It is market acceptance stage. But due to competition, company invest more in advertisement to
convince customers so profits may decline near the end of growth stage.
Effect on 4 Ps of marketing is as under:
ProductAlong with maintaining the existing quality, new features and improvements in product
quality may be done. All this is done to compete and maintain the market share.
PricePrice is maintained or may increase as company gets high demand at low competition or it
may be reduced to grasp more customers.
DistributionDistribution becomes more significant with the increase demand and acceptability of
product. More channels are added for intensive distribution in order to meet increasing demand.
On the other hand resellers start getting interested in the product, so trade discounts are also
minimal.
PromotionAt growth stage, promotion is increased. When acceptability of product increases,
more efforts are made for brand preference and loyalty.

Maturity stage
At maturity stage, brand awareness is strong so sale continues to grow but at a declining rate as
compared to past. At this stage, there are more competitors with the same products. So,
companies defend the market share and extending product life cycle, rather than making the
profits, By offering sales promotions to encourage retailer to give more shelf space to the product
than that of competitors. At this stage usually loyal customers make purchases.

Marketing mix decisions include


Product
At maturity stage, companies add features and modify the product in order to compete in market
and differentiate the product from competition. At this stage, it is best way to get dominance over
competitors and increase market share.
PriceBecause of intense competition, at maturity stage, price is reduced in order to compete. It
attracts the price conscious segment and retain the customers.
DistributionNew channels are added to face intense competition and incentives are offered to
retailers to get shelf preference over competitors.
PromotionPromotion is done in order to create product differentiation and loyalty. Incentives
are also offered to attract more customers.
Decline stage
Decline in sales, change in trends and unfavourable economic conditions explain decline stage.
At this stage market becomes saturated so sales declines. It may also be due technical
obsolescence or customer taste has been changed.
At decline stage company has three options:
Maintain the product, Reduce cost and finding new uses of product.
Harvest the product by reducing marketing cost and continue offering the product to loyal niche
until zero profit.
Discontinue the product when theres no profit or a successor is available. Selling out to
competitors who want to keep the product.
At declining stage, marketing mix decisions depends on companys strategy. For example, if
company want to harvest, the product will remain same and price will be reduced. In case of
liquidation, supply will be reduced dramatically.

Limitations of Product Life Cycle (PLC)

Product life cycle is criticized that it has no empirical support and it is not fruitful in special
cases. Different products have different properties so their life cycle also vary. It shows
that product life cycle is not best tool to predict the sales. Sometimes managerial decisions affect
the life of products in this case Product Life Cycle is not playing any role. product life cycle is
very fruitful for larger firms and corporations but it is not hundred percent accurate tool to
predict the life cycle and sales of products in all the situations.