4.5 The Marketing Mix (7 P's) (DP IB Business Management)

Repositioning is a product-related extension strategy where a product is marketed differently to appeal to a new market segment.

Examples of promotion-related extension strategies include:

• Changes to advertising

• Price promotions

• Sales promotions

The Boston Consulting Group (BCG) Matrix is a tool used by businesses to analyse their product portfolio and make strategic decisions about each product.

The four categories in the BCG Matrix are:

• Cash Cow

• Problem Child/Question Mark

• Star

• Dog

A cash cow is a product with a high market share in a mature market that generates significant positive cash flow but has low growth potential.

A star has a high market share in a high-growth market.

False.

Dog products have a low market share in a low-growth market.

A problem child is a product with a low market share in a high-growth market that has the potential to become a star if the company invests in its development.

The typical strategy for cash cows is to harvest them, minimising investment while maximising profits.

False.

Businesses often move away (divest) from dog products to focus on more profitable products.

A build strategy involves investing selectively in problem children with the highest potential to convert them into stars.

True.

A limitation of the BCG Matrix is its simplistic approach, which classifies products solely based on market growth rate and relative market share, ignoring other important factors.

False.

The BCG Matrix is based on current market conditions and historical data and does not consider changes in the competitive environment.

False.

Dogs may be harvested or maintained if they still generate some cash flow.

Branding involves creating a unique and identifiable name, design, symbol, or other feature that differentiates a product or company from its competitors.

The three types of branding are:

• Corporate branding

• Product branding

• Own branding

Corporate branding refers to the use of a company name or logo to promote all the products or services offered by the company.

Product branding refers to the use of a unique name, design, or symbol to promote a specific product.

False.

Own brand products are typically offered at a lower price than branded products.

A unique selling point (USP) is a feature that makes a product stand out from its competitors.

Emotional branding is where companies build strong emotional connections with their customers by appealing to their values, beliefs and emotions.

True.

Strong branding can lead to a reduced price elasticity of demand (more inelastic)

An own brand product is one that uses a retailer's name to promote a specific product or service. It is often used by supermarkets.

True.

Strong branding can add value to a product by creating a perception of quality, reliability, and reputation.

Brand loyalty is the tendency of consumers to continue buying the same brand of goods rather than competing brands.

False.

Branding can have significant effects on multiple elements of the marketing mix, including product, price, promotion, and sometimes place.

Cost-plus pricing is where the business calculates the cost of production and then adds a markup to determine the final price.

Penetration pricing is where a business sets a low price for a new product when it is first introduced to quickly capture market share.

A loss leader pricing strategy involves charging a price below the average cost for a product so as to attract customers to buy other profitable products.

False.

Predatory pricing is illegal in many countries as it is considered anti-competitive.

Premium pricing involves setting a high price for a product to give customers an impression of high quality and luxury.

Price skimming involves setting a high price for a short period at a product's launch, after which it is gradually lowered.

True.

A business may use more than one method of pricing across its product range.

False.

Penetration pricing is effective when a business wants to quickly capture market share, often at the expense of short-term profit margins.

Promotional pricing is where prices are temporarily reduced to stimulate sales or attract customers.

Formula.

Competitive pricing is where prices are set based on what rivals charge for similar products or services.

True.

Price is the only element of the marketing mix that directly relates to sales revenue.

Dynamic pricing involves charging different prices to match demand patterns.

Price elasticity of demand is a measure of the responsiveness of demand for a product to a change in its price.

Formula.

False.

A price elasticity of demand value greater than 1 indicates that demand is price elastic.

Price inelastic demand is when the quantity of a product demanded changes less than the change in price.

True.

Price skimming strategies are best employed for products that with price inelastic demand.

False.

Raising prices for products with elastic demand will decrease total revenue.

Dynamic pricing strategies may raise ethical concerns when prices are increased significantly during emergencies or crises. This is called price gouging and can harm a business's reputation.

Contribution pricing involves setting prices that cover direct costs associated with producing a product and also contribute to covering indirect costs.

The main goal of competitive pricing is to gain or maintain market share by offering prices that are in line with or slightly below those of rivals.

The three forms of promotion are:

• Above the line promotion

• Below the line promotion

• Through the line promotion.

Above the line promotion refers to advertising activities aimed at reaching a wide audience through traditional mass media channels.

Below the line promotion includes marketing communications over which a business has direct control and which do not make use of mass media.

True.

Through the line promotion combines both above the line and below the line techniques to create a comprehensive promotional campaign.

The three types of above the line promotion are

• Informative

• Persuasive

• Reassuring.

Social media marketing targets promotional activity at users of online communities such as Facebook, Twitter, and YouTube.

False.

Below the line promotion is generally less expensive than above the line promotion.

Direct marketing involves communicating directly with customers through email, text message, social media, or post.

Sales promotion refers to techniques that encourage the purchase of a product or service by offering temporary incentives or discounts.

Personal selling is where a salesperson interacts with customers one-on-one, either in person or through digital communication channels.

False.

Public relations often involves building relationships with the public and managing reputations through non-paid methods.

True.

Promotional strategies should be tailored to the target market to be most effective.

Distribution channels are the chain of intermediaries through which products move from the manufacturer to the end customer.

True.

A four-stage distribution channel consists of producer, wholesaler, retailer, and consumer.

A three-stage distribution channel eliminates the wholesaler stage, with the producer selling directly to the retailer.

A two-stage distribution channel eliminates both the wholesaler and retailer stages, with the manufacturer selling directly to the end consumer.

False.

A disadvantage of a three-stage distribution channel is that the retailer's mark-up reduces the profit of the producer or make the product more expensive for consumers.

E-commerce is online distribution that has become increasingly popular due to the convenience and accessibility it offers to consumers.

Drop-shipping is a distribution method where businesses sell products without holding stock. Once sold, products are shipped directly from the producer to the customer.

Breaking bulk is where a wholesaler takes on responsibility for breaking a large quantity of products into smaller batches for retailers to purchase

Exclusive distribution involves targeting high-end customers by limiting the number of sales outlets in which products are sold.

False.

In a three-stage distribution channel, customer service and some promotional activities are carried out by the retailer.

The people element refers to the human resources involved in customer interactions and product delivery so as to provide a positive customer experience.

True.

A satisfied workforce is more likely to provide excellent customer service, work hard to close sales and act as brand ambassadors.

True.

People play a crucial role in the marketing mix, as they are responsible for designing and carrying out marketing activities.

The five key areas in which people contribute to the marketing mix are:

• Customer interactions

• Brand ambassadors

• Customer service

• Innovation and feedback

• Sales and persuasion

False.

Innovation and feedback from employees are crucial for refining marketing strategies, developing new products and enhancing the overall customer experience.

Brand ambassadors are employees whose knowledge, enthusiasm and passion for the brand can have a significant impact on how customers perceive and connect with the brand.

True.

Customer interactions can influence customer perceptions, build relationships and shape the overall customer experience

Customer service involves skilled employees addressing customer inquiries, resolving issues and providing personalised support, contributing to customer satisfaction and positive word-of-mouth recommendations.

Processes refer to the activities, procedures and systems a company employs to deliver a product or service to its customers.

True.

Processes directly impact the overall customer experience, as they involve everything from how customers discover a product to how they make a purchase and receive support.

False.

Marketing processes need to be flexible and adaptable to changing customer preferences.

True.

Well-designed processes provide a seamless and positive customer journey, enhancing customer satisfaction and loyalty.

Customer experience refers to how processes impact the overall customer journey, from discovering a product to making a purchase and receiving support.

False.

Processes help to maintain consistency in delivering messages, branding and experiences whenever an interaction with customers occurs.

Efficiency refers to how effective processes improve operations and reduce costs, leading to increased profitability.

True.

Consistency of processes builds customer trust. reinforces the brand identity and helps to develop long-term relationships with customers.

True.

Processes help different departments work together effectively to meet objectives.

Physical evidence is the tangible and visible signs of a product that customers interact with and perceive during their buying experience.

False.

Physical evidence is particularly important for services, as it helps to shape customer perceptions and build trust in a process where the intangible product cannot be viewed.

Common forms of physical evidence include:

• Store/office ambiance

• Packaging

• Signage and displays

• Digital presence

• Staff appearance and behaviour

• Equipment and facilities

• Marketing materials

False.

The design, quality and functionality of product packaging contribute to the overall impression customers have of a brand.

Ambiance refers to the physical environment in which a business operates, including factors such as store layout, interior design, lighting, colours and music.

False.

The appearance, professionalism and behaviour of employees contribute to the physical evidence and impact customer perceptions.

Digital presence refers to well-designed and user-friendly websites, social media profiles, online reviews and customer testimonials that act as virtual physical evidence.

True.

Physical evidence can support and embed a business's unique selling point as it reinforces values and provides visual cues with which customers may align.

Product samples are physical evidence that customers can touch and take away to try out a product before they commit to buying it.

True.

Eye-catching in-store displays can draw attention to specific products or offers, influencing purchase decisions