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What’s it: The marketing mix is a set of elements for satisfying consumers profitably. In the conventional model, it consists of product, price, promotion, and place.
Then, the experts added three other elements: people, process, and physical evidence. The addition is to accommodate the intangible product (or service), which has a different key to success from the tangible product.
Companies consider these elements in making decisions and designing unique selling propositions. They are supposed to sell the right product at the right price in the right way at the right location and time. Because they face competition, they must also do better than competitors.
The importance of the marketing mix
The marketing mix is the main factor influencing whether a business can sell it profitably. The company considers it to suit the needs and preferences of consumers in the target market. It is essential because it helps companies to:
- Understand where they should focus their marketing efforts
- Determine what products they can offer to customers, at what price, where, and how to attract customers
- Develop and execute an effective marketing strategy
- Allocate resources effectively and efficiently, avoiding unnecessary costs
- Leverage company strengths and minimize threats to internal weaknesses
Marketing mix elements
The marketing mix consists of seven interrelated decisions. They are:
- Product
- Price
- Promotion
- Place
- Person
- Process
- Physical evidence
Those seven elements are what we call the extended marketing mix or the 7Ps marketing mix. The last three are specifically related to service marketing.
Product
A product is something offered by a company to satisfy customer needs and wants. It may be an existing product, an improvement of an existing product, or a newly developed one.
Products fall into two categories: goods and services. Goods represent tangible products, while services represent intangible products.
Consumers need the right product. So, companies have to think about features and quality, which make their offering worthwhile. They design a unique selling proposition to meet customer needs and differentiate their products from competitors’ products.
Possible products are:
- Mass product
- Differentiated product
Mass products offer standard features and quality. They are relatively similar to competing products on the market. Thus, in attracting customers to buy, the company offers them at a lower price. The company usually adopts mass production, promotion, and distribution to achieve higher economies of scale, lower production costs, and achieve profitability.
Differentiated products accentuate high quality. They offer uniqueness to entice people to buy and be willing to pay a higher price. Such products have a higher profit per unit margin than mass products.
Price
Price is the monetary value of the product offered by the company. Consumers perceive it as a cost to get the product and fulfill their needs.
Pricing decisions are essential. If it is too low, the producer’s profit is less. Consumers may also lose confidence in the quality of the product. However, if it is too high, fewer consumers will be interested in buying.
Price is often associated with perceived value by customers. The price of the product should be in proportion to the value. If consumers perceive the price as higher than the value of the product, they are dissatisfied. Conversely, if it is lower, they are satisfied.
Pricing also depends on the company’s marketing strategy, especially under:
- Mass marketing
- Differentiated marketing
In mass marketing, companies charge low prices and offer a standard product quality. The profit margin per unit is low. So, to achieve their targeted total revenue, they have to sell at a high volume.
Under differentiated marketing, companies charge high prices and offer unique products. The uniqueness of the product makes consumers willing to pay more. Because it has a high profit per unit margin, it may achieve its revenue target with low sales volume.
How low or how high the company sets the selling price requires in-depth research. Whether for mass products or differentiated products, too-high prices will cause customers to switch to competing products. Conversely, too-low prices will result in less revenue.
Various factors are considered in setting a price, including:
- Production costs, including fixed and variable costs
- Characteristics of target consumers, whether they are quality conscious or price-conscious consumers
- Product type, whether mas product or differentiated product
- Target market, whether it is a new market or an existing market
- Competition in the market, including the number of competitors and their strategies
- The price elasticity of demand, about how sensitive consumers are if the company changes the selling price
Promotion
Effective promotion must convince consumers that the company’s products are the most appropriate to choose. Companies take advantage of promotional and communication channels to inform them of product availability, create interest and convince them to buy. It involves advertising, sales promotion, public relations, and direct marketing (we call them promotion mix).
Promotion decisions are not only about advertising the product but also about packaging. Companies use packaging to strengthen product image and attract customers.
Specifically, the promotion aims to:
- Attract potential customers to buy products
- Communicate and encourage target consumers to try new products
- Increase customer base by targeting consumers in new markets
- Inform consumers about product quality improvements
- Influence consumer perceptions to prefer the company’s products over competitors’ products
Place
This decision is about where to sell and how the product is made available to consumers when needed. Thinking of a sales location close to consumers is one way.
In addition, companies must think about how to distribute goods at an effective and low cost. That includes making a decision whether or not they are dependent on external distributors and retailers.
Find strategic locations for several businesses such as retail and restaurants. They usually choose busy city centers, where many potential customers are available. Meanwhile, customers also feel comfortable because it is close to where they live or work.
Physical evidence
Physical evidence represents both tangible elements and the environment in which companies deliver services and interact with customers. It may be the physical space and its appearance and decoration. It can also refer to the appearance of employees and the way they dress and act.
Physical evidence can help differentiate a company from its competitors. Lighting, layout, and interior design are one way to provide comfort for consumers. They influence consumers’ emotions when the interaction takes place.
For example, a messy retail store interior design makes consumers uncomfortable. The shop atmosphere becomes unpleasant to consumers, even giving them a bad experience. Hence, they are reluctant to visit the same shop at a later date.
This marketing mix element can also be used to support premium pricing for a service. Luxury hotels are a good example, where visitors are pampered with superior amenities.
Physical evidence also influences the customer’s assessment of the business. Customers who walk into the restaurant expect a clean and welcoming environment. However, suppose the restaurant is smelly and dirty. In that case, it makes customers leave immediately, even though the quality of the food served is the same as other, cleaner restaurants.
Person
This marketing mix refers to employees and business managers. It involves choosing and developing the right staff to deal with customers.
How staff interact and communicate with customers affects marketing success, especially services. Customers rate the company’s services based on the people who represent the organization.
Customer relationships and trust are created when staff provides service. If they are proficient, it creates a positive impression, a willingness to use services, and perhaps, recommends others. Conversely, if not, it can lead to bad customer reactions and disloyal customers.
Salespeople need to know what they are selling and how to sell it. It is determined not only by their education and skills but also by their attitude, appearance, body language, facial expressions, and speech.
Process
Processes are systems, procedures, and policies in providing services. It is essential to provide a consistent standard of service to all customers, which creates loyalty and trust in the company. It also helps increase efficiency, thus saving time and money.
Companies need clearly defined and efficient processes to support the services they offer. Everyone in the company knows what to do and how to do it. It may also be supported by computerization and automation, such as accounting systems in customer savings accounts.