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IBBusinessDPBusiness ManagementSLRevision Notes4. Marketing 4.4 The Marketing Mix (7 P's)The Marketing Mix: Product

The Marketing Mix: Product (DP IB Business Management)

Revision Note

Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

DP Business Management: SLDP Business Management: HL

An Introduction to the Marketing Mix

  • The marketing mix refers to the seven elements that contribute to the successful marketing of a product

Diagram: The Seven P's of the Marketing Mix

ibdp-economics---the-7ps-of-the-marketing-mix

The extended marketing mix includes 7 P's

An Explanation of the Seven P's of the Extended Marketing Mix

Element

Explanation

Product

  • This involves identifying the features, design, quality, branding, and packaging of the product/service available for sale and ensuring that they meet the needs and expectations of customers

  • E.g. HSBC offers different current accounts to meet a variety of customer needs, with each account having different features

    • The Premier Account is a fee-free current account aimed at higher income individuals which includes free worldwide travel insurance, overdraft facilities and preferential interest rates on mortgages

Price

  • This involves identifying the best pricing strategies to use after having considered the amount of money customers are willing to pay, as well as factors such as production costs, competition, demand and perceived value

    • E.g. Netflix has recently changed its pricing structure to reflect the different needs of customers and achieve further growth

      • Customers choosing the Standard service which includes adverts pay the lowest subscription fee

      • Premium customers pay three times as much as Standard service customers but can enjoy advert-free, ultra-HD programming

Place

  • This refers to the distribution channels and physical location used to make the product/service available to customers

    • Place involves decisions related to the selection of sales outlets, logistics and supply chain management 

  • Intensive distribution involves targeting the mass market by selling products in as many popular outlets as possible

  • Exclusive distribution involves targeting high end customers by limiting the sales outlets

    • E.g. Porsche sports cars are sold through licensed retailers

Promotion

  • This relates to the activities used to communicate and promote the product/service to the target market including advertising, public relations, sales promotions, personal selling etc.

  • Promotional strategies are used by firms to make their existing and potential customers aware of their product, build their brand image and encourage loyalty

    • E.g. Southwestern Airlines makes extensive use of humorous advertising, as well as offering frequent discounts on tickets and engaging in public relations by sponsorship of several US baseball teams

People

  • This  refers to the human resources involved in customer interactions and product/service delivery so as to provide a positive customer experience

    • Employing, training and retaining the right set of employees is especially important for the success of service-focused businesses

Process

  • This refers to the operational processes and workflows that enable the smooth and efficient execution of marketing strategies

  • Process is an essential element as it ensures that the customer experience is consistent, streamlined, and meets or exceeds customer expectations

    • E.g travel companies such as Germany's Meier's Weltreisen sell a range of package holidays that provide flights, hotels and full transfer services while providing resort-based representatives that ensure a smooth vacation experience for customers

Physical Evidence

  • This refers to the tangible elements that customers can perceive when interacting with a product/service such as the physical environment, packaging, and branding

    • E.g. large fast food retailers such as McDonalds and Pizza Hut create almost identical outlets around the world, with highly recognisable logos and even matching furniture and decor in restaurants

The Product Life Cycle

  • The product life cycle describes the different stages a product goes through from its conception to its eventual decline in sales

  • There are typically five stages in the product life cycle: development, introduction, growth, maturity, and decline

Diagram: a typical product life cycle

The five stages a product goes through over its life span - from development to decline (and ultimately withdrawal from a market)
The five stages a product goes through over its life span - from development to decline (and ultimately withdrawal from a market)

  •  The implications for cash flow and marketing vary at each stage of the product life cycle

  • Companies should tailor their marketing strategies and manage their cash flow to ensure long-term profitability and success

The Product Life Cycle, Cash Flow and Marketing Strategy

Stage

Explanation

Implications & Strategies

Development

  • Generating and screening product ideas and then designing and developing the product

  • The business usually incurs high costs for research and development, market research, and product testing

  • Cash flow is usually negative during this stage, as the company is investing heavily in the product without generating any revenue

  • The marketing strategy during this stage is focused on creating awareness and generating interest in the product

Introduction

  • The stage begins when the product is launched

  • Characterised by slow sales growth as the product is still new and unknown to most consumers 

  • Cash flow is usually negative as the business usually incurs high costs for promotion, advertising and distribution

  • Promotional efforts are focused on creating awareness and generating interest in the product

  • Pricing strategies will depend upon the nature of the product and the market

    • Price skimming may be used for innovative or high technology products where little competition exists

    • Penetration pricing may be more suited to products being introduced to competitive markets

Growth

  • The product enters this stage when sales begin to increase rapidly

  • The business focus shifts to building market share and increasing production to meet the growing demand 

  • Cash flow usually turns positive during this stage as sales revenue increases and costs are spread out over a larger volume of production

  • Marketing strategies focus on differentiating the product from its competitors and building brand loyalty

    • Price skimming tactics may be dropped in favour of longer-term premium pricing for high-end products

    • Promotional activity including advertising is likely to increase as customers are encouraged to purchase repeatedly

    • Further distribution channels will be sought to meet increasing demand

Maturity

  • Characterised by slowing sales growth as the product reaches its peak in terms of market penetration

  • Cash flow is usually positive during this stage as sales revenue continues to come in and costs are reduced through economies of scale and efficient production processes

  • The marketing strategy aims to maintain market share and increase profitability by cutting costs and finding new markets

    • Promotional pricing tactics may be used

    • Advertising will focus on reminding customers of product benefits

    • Further new distribution channels will be sought

    • Product features may be upgraded

Decline

  • Starts when sales begin to decline as the product becomes obsolete or is replaced by newer products

  • The business focus shifts to managing the product's decline and reducing costs

  • Cash flow usually turns negative as sales revenue declines and costs associated with the product's decline increase

  • The marketing strategy may involve discontinuing the product, reducing its price to clear inventory, or finding new uses for the product

Examiner Tips and Tricks

You should be aware that product life cycles rarely follow this model precisely

  • In some cases the product life cycle is very short, lasting just a few months weeks

    • Memorabilia produced and sold for King Charles' coronation in 2023 enjoyed short product life cycles in general, available for sale for just a few months prior to and after the event

  • In other cases product life cycles are incredibly long, lasting many decades

    • The Milka brand of chocolate was introduced in 1901 - more than a century later it remains one of the most popular global brands in its market segment with net sales of almost £2 billion in 2018

Extension Strategies

  • Extension strategies refer to the techniques used by businesses to extend the life of a product beyond its natural life cycle

  • These strategies are designed to boost sales and maintain profitability for a product that has reached the decline stage of its life cycle

  • There are two types of extension strategies:

    • Product-related extension strategies

    • Promotion-related extension strategies

  • These extension strategies involve changing or modifying the product to make it more appealing to customers and extend its life cycle and can be achieved in one of three ways:

    • Product improvements e.g. Samsung releases new versions of its Galaxy Smartphone every year with upgraded features and improvements to the previous model

    • Line extensions e.g. Coca-Cola introduced Diet Coke and Coke Zero as line extensions of its original Coca-Cola

    • Repositioning e.g. when IBM's personal computer division started losing market share to other brands, it repositioned its products as high-end business machines and focused on the enterprise market

  • These extension strategies involve changing the promotional aspects to extend a product's life cycle and could include one or more of the following changes:

    • Changes to advertising e.g Kellogg's continues to recreate advertisements for its Corn Flakes cereal, which has been around since 1906

    • Price promotions e.g. Cyber Monday occur on the first Monday after Thanksgiving in the USA and electronic firms discount prices significantly to boost sales of their products

    • Sales promotions e.g. many coffee shops offer a loyalty program where customers can earn a free drink for every six drinks consumed

Examiner Tips and Tricks

Businesses sometimes make the choice to remove a product from the market when it reaches the decline stage of the product life cycle, rather than continue to invest in expensive and time-consuming extension strategies. 

If you are asked to weigh up options to extend the life cycle of a product, a useful evaluative point could be the possibility of adopting none of the options - and considering the benefits of removing the product from sale.

These benefits may include reduced promotional and R&D spending as well as providing the opportunity for a business to focus on remaining products in its portfolio.

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    Author
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    Lisa Eades

    Author: Lisa Eades

    Expertise: Business Content Creator

    Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

    Steve Vorster

    Author: Steve Vorster

    Expertise: Economics & Business Subject Lead

    Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.