Marketing mix

core product - the benefit enjoyed by the customer

actual product - brand, packaging, colour etc.

Augmented product - how the firm adds value to the product and makes more money from it.

this refers to the amount of money a firm requires in return for its goods or services.

the pricing policy a firm adopts will depend on:

• the nature of the product being sold
• the level of competition the firm faces.
• the price consumers are willing to pay.
• the cost of producing the product.

there are four pricing strategies

1). skimming

• this is a product people only buy once.
• it needs a lot of R&D, the manufacturere needs to get his money back.
• try to get the max price from customers so charge high to the keen customers then lower the price to other customers.
• e.g. iphones 

2). penetration pricing

• used when a new product is being produced onto a relatively competitive market.
• low inital price to attract customers then increase price once customer loyalty is built up.
• only useful for products that are bought repetitively.

3). cost-plus pricing

• when the firm calculates the average cost of prodiucing a product then add on a percentage profit to find a selling price.
• however, there is no way of knowing customers will pay this price.

4). valued based pricing

• this is done by the business finding out how its customers value the product and charging their customers this price.
• i.e the customers decides a price.

advertising

• takes place outside the shop.
• includes billboards, television etc.
• increases customer awareness and can persuade customers their product is superrior to others.

speacial offers

• promotional incentives that take place inside the shop.
• include discounts, entry to competitions.

joint ventures

• two companies join together to promote each other e.g. natwest six nations.
• this gains more publicity for both companies.
• however bad publicity for one company will earn bad publicity for the other as well.

insert diagram here

• how happy is the customer with the people he encounters.
• does the business train their staff for customer service?

this refers to how simple/enjoyable the buying process is for consumers.

• does the firm have a returen policy on bought items?
• can customers use different payment methods?
• is the organisation user friends?
• does queing take place?
• how quickly can a customer arrange a meeting with the business?

this refers to the location/ environment the business is in

is the customer impressed by the?

• decor
• access
• noise/ music
• child friendly
• layout

PED =                                       

PED looks at how the quantity of products demanded change when the price of a product changes.

if the PED is >1 the product is price elastic. here an increase in S.P leads to a decrease in total revenue.

if the PED is <1 the product is price inelastic. in this case an increase in S.P leads to a increase in total revenue

if the PED is 1 an increase of decrease in S.P will not lead to a change in total revenue.

it is useful because:

• if the firm knows the PED it will know the affects on total revenue if the S.P changes. however, we cannot ignore the costs if we want profit to incease as well.
• various functions of the business can be ready for a price decrease.

it is limited in its usefulness because:

• usually based on calculations that use historice information.
• depends on the quality of advice the PED knowledge can give. external factors can change.

this looks at how the quantity demanded of a rpoduct changes when the income of the population changes.

if IED is negative then the product is an inferrior good. when income goes up less of the product is demanded.

if IED is between 0&1 then the product is a normal good. the increase in income is greater than the increase in demand.

if IED is greater than 1 the product is normal. the increase in income is leass than the huge increase in demand.

      IED=

usefulness of product life cycles:

• it will help make decisions on when to withdraw a product from the market or even when to close an entire business.
• useful for businesses which sale a range of products.
• lets businesses know when they expect cash flow to be healthy or poor.
• can help you make better decisions about when to intorduce new products into the market.
• you can plan when you will need staff, raw materials etc.

Difficulties of product life cycles:

• practical problems in assessing exactly what stage a product is at at a particular time.
• it is very difficult to be precise when dealing with product life cycle diagrams.
• it does not indicate market potential, merely historiacl sales achieved so far.