LESSON 2: 5Ps OF MARKETING MIX

PRODUCT, PRICE, PROMOTION, PLACE & PEOPLE

1 PRODUCT:

In the modern world, the consumer-oriented manufacturer starts by ascertaining what consumers want (as opposed to what he chooses to produce) and what they are prepared to pay for. He would then arrange to produce a range of products to meet those specifications. This means it is the consumer who nowadays decides what the manufacturer has to produce and (decides) whether the organization will flourish or collapse through non-patronage of its products/service. Products must be constantly modified in the light of changing consumer needs and environmental development. These features and benefits determine price, promotion and distribution strategies.

2 PRICE:

The amount of money a customer pays in exchange for a product is known as the price. It is a key element of the marketing mix as it produces revenue to the firm. Pricing will always remain the art of marketing. The pricing of a service should be realistic – not too high and not too low below the mean otherwise the producer will respectively either price overboard or bankruptcy occasioned by low profit. The determinants of price are many but two are of the utmost important, namely (a) products are determined with the following in mind.

1. Survival of the firm
2. Return on investment (ROI)
3. Market share
4. Product quality

PRICING POLICIES

Pricing policies are the philosophies on which sellers or providers of financial services base their prices. In the goods market, there appear to be the following main pricing policies.

1. Skimming Pricing Policy: This type of policy is used when a new product is introduced into a market in which there are no competitors. Skimming policy means that the price is set high relative to the cost of the product, this result in a high gross profit. As competitors enter the market, the firm is forced to reduce its price.
   3. Stable Pricing Policy: This exists where prices, once established tent to remain constant for long periods of time, irrespective of the fluctuations in the cost of making and procuring the goods. This pricing policy is followed in many services institutions where prices are mostly regulated.
   4. Going Rate of Market Price: This involves fixing prices which match others in the market place. It is a defensive measure to protect existing business.
   5. Competitive Pricing Policy: An arbitrary price is set to match competitive pressure, but this price should be at a level which will cover cost and allow a margin of profit.Penetration Pricing Policy: A firm that uses penetration policy sets a price only slightly higher than the cost of the product. It is a price below prices of other competing brands in the market. It is usually used if the market is regarded as a price sensitive market. It is used to gain a large share of the market.
   3. 3. PROMOTION:

       Promotion encompasses all communication efforts aimed at generating sales or building a favorable attitude to a company’s product. This would include adverting, sales promotion, public relations, publicity, personal selling, direct marketing, packaging and labelling amongst others.

      1. Advertising: It is a non-personal presentation of goods, services or ideas that is paid for by

      an identified sponsor. It is any paid form of non-personal communication of ideas in the prime media i.e. television, the press, posters radio, cinema.

      2. Personal Selling: Oral communication with prospective purchasers with the intention of making a sale.
      3. Sales Promotion: Incentives or fit schemes to consumers that are designed to stimulate purchases.
      4. Publicity and public relations: It is a free space in the press which is achieved by packaging the message in a way that is newsworthy so that the media will pick it up.

      Advertising is the most widely used form of promotion in the marketing of services. One reason for this is that when a new service is being introduced, there is the need for advancement to introduce it to the general public. Secondly, advertising helps to acquaint the consumer with the value or benefits of a service and this can help widen the market for that particular service. Service firms like the banks also try to participate actively in community affairs as a means of getting their names across to the public. Finally, advertising helps to emphasize the courteous, friendly and efficient service rendered by a firm. Other forms of promotional strategy include personal selling, publicity, and sales promotion.

      Personal selling becomes very important when trying to develop a close relationship between the buyer and the seller. Free publicity of television progran1ffies by some banks also helps in service promotion.

      The following are classified as promotional tools:

      • Selling and Sales management.
      • Advertising
      • Sales promotion
      • Publicity and Public relations
      • Exhibitions and other event management
      • Packaging and branding
      • Sponsorships
      • Word of mouth4. PLACE (DISTRIBUTION):

        Production is not said to be complete until goods get to the final consumers. Products/services need to be available in adequate quantities, in convenient locations and at times when customers want to buy them. Place as a marketing mix tool refers to the activities an organization undertakes to ensure that its products/services are easily accessible to its target customers.

5. PEOPLE

This element of the marketing mix refers to the staff, salespersons and those who work for and with the business and /or brand. Decisions made under this element usually revolve around customer service and customer relationship management.

BASIC MARKETING PROCESS

Under the marketing concept, the firm must find a way to discover unfulfilled customer needs and bring to market products that satisfy those needs. The process of doing so can be modeled in a sequence of steps the situation is analyzed to identify opportunities, the strategy is formulated for a value proposition, tactical decisions are made, the plan is implemented, and the results are monitored.

The Marketing Process

1. Situation Analysis
2. MarketingStrategy
3. Marketing Mix
4. Decision Implementation and
5. Control

There are several frameworks that can be used to add structure to the situation analysis:

❖ 5C Analysis – Company, customers, competitors, collaborations, climate. The

(organization) company represents the internal situation; the other four cover aspects of the external situation.

❖ PEST Analysis – Macro-environmental, political, economic, social, and technological factors and SWOT analysis strengthen,weaknesses, opportunities, and threats.

The marketing strategy involves, segmentation, target market selection, product positing within the target market and value proposition to the target market. Also, Marketing Mix Decisions informs detailed tactical decisions that are made for the controllable parameters of the marketing mix.

The action items include:

❖ Product development – specifying designing, and producing the first units of the product.

❖ Pricing decisions

❖ Distribution contracts

❖ Promotional campaign development

❖ Person decisions