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Case Method in Marketing Education - Service Marketing Mix/Extended Marketing Mix

Service Marketing Mix/Extended Marketing Mix

Having discussed the characteristics of a service, let us now look at the marketing mix of a service.

The service marketing mix comprises off the 7’p’s. These include:
Product
• Price
• Place
• Promotion

• People
• Process
• Physical evidence
.

 

The marketing mix principles (also known as the 4 p’s.) are used by business as tools to assist them in pursuing their objectives. The marketing mix principles are controllable variables, which have to be carefully managed and must meet the needs of the defined target group. The marketing mix is apart of the organisations planning process and consists of analysing the defined:

Level 1: Core Product. What is the core benefit your product offers?. Customers who purchase a camera are buying more then just a camera they are purchasing memories.

Level 2 Actual Product: All cameras capture memories. The aim is to ensure that your potential customers purchase your one. The strategy at this level involves organisations branding, adding features and benefits to ensure that their product offers a differential advantage from their competitors.

Level 3: Augmented product: What additional non-tangible benefits can you offer? Competition at this level is based around after sales service, warranties, delivery and so on. John Lewis a retail departmental store offers free five year guarantee on purchases of their Television sets, this gives their `customers the additional benefit of peace of mind over the five years should their purchase develop a fault.

Product Decisions

When placing a product within a market many factors and decisions have to be taken into consideration. These include:

Product design – Will the design be the selling point for the organisation as we have seen with the iMAC,  the new VW Beetle or the Dyson vacuum cleaner.

Product quality: Quality has to consistent with other elements of the marketing mix. A premium based pricing strategy has to reflect the quality a product offers.

 

               

                                                

Product features: What features will you add that may increase the benefit offered to your target market? Will the organisation use a discriminatory pricing policy for offering these additional benefits?

Branding: One of the most important decisions a marketing manager can make is about branding. The value of brands in today’s environment is phenomenal. Brands have the power of instant sales, they convey a message of confidence, quality and reliability to their target market.

Brands have to be managed well, as some brands can be cash cows for organisations. In many organisations they are represented by brand managers, who have hugh resources to ensure their success within the market.

A brand is a tool which is used by an organisation to differentiate itself from competitors. Ask yourself what is the value of a pair of Nike trainers without the brand or the logo? How does your perception change?

Increasingly brand managers are becoming annoyed by ‘copycat’ strategies being employed by supermarket food retail stores particular within the UK . Coca-Cola threatened legal action against UK retailer Sainsbury after introducing their Classic Cola, which displayed similar designs and fonts on their cans. 

Internet branding is now becoming an essential part of the branding strategy game. Generic names like Bank.com and Business.com have been sold for £m’s. ( Recently within the UK banking industry we have seen the introduction of Internet banks such as cahoot.com and marbles.com the task by brand managers is to make sure that consumers understand that these brands are banks

 

Pricing Strategies

Pricing is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organisation. The remaining 3p’s are the variable cost for the organisation. It costs to produce and design a product, it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean a loss of sales for the organisation. Pricing should take into account the following factors:

Fixed and variable costs.

Competition

Company objectives

Proposed positioning strategies.

Target group and willingness to pay.

Types of Pricing Strategies

An organisation can adopt a number of pricing strategies. The pricing strategies are based much on what objectives the company has set itself to achieve.

Penetration pricing: Where the organisation sets a low price to increase sales and market share.

Skimming pricing: The organisation sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer.

Competition pricing: Setting a price in comparison with competitors.

Product Line Pricing: Pricing different products within the same product range at different price points. An example would be a video manufacturer offering different video recorders with different features at different prices. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximising turnover and profits.

Bundle Pricing: The organisation bundles a group of products at a reduced price.

Psychological pricing: The seller here will consider the psychology of price and the positioning of price within the market place. The seller will therefore charge 99p instead £1 or $199 instead of $200

Premium pricing: The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Harrods, first class airline services, Porsche etc.

Optional pricing: The organisation sells optional extras along with the product to maximise its turnover. This strategy is used commonly within the car industry.

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pricing strategies

 

 

Place strategies

This refers to how an organisation will distribute the product or service they are offering to the end user. The organisation must distribute the product to the user at the right place at the right time. Efficient and effective distribution is important if the organisation is to meet its overall marketing objectives. If an organisation underestimatea demand and customers cannot purchase products because of it, profitability will be affected.

What channel of distribution will they use?

Two types of channel of distribution methods are available. Indirect distribution involves distributing your product by the use of an intermediary for example a manufacturer selling to a wholesaler and then on to the retailer.. Direct distribution involves distributing direct from a manufacturer to the consumer For example Dell Computers providing directly to its target custmers. The advantage of direct distribution is that it gives a manufacturer complete control over their product.

 

indirect distributiondirect distribution

Above indirect distribution (left) and direct distribution (right).

 

Distribution Strategies

Depending on the type of product being distributed there are three common distribution strategies available:

1. Intensive distribution: Used commonly to distribute low priced or impulse purchase products eg chocolates, soft drinks. 

2. Exclusive distribution: Involves limiting distribution to a single outlet. The product is usually highly priced, and requires the intermediary to place much detail in its sell. An example of would be the sale of vehicles through exclusive dealers.

3. Selective Distribution: A small number of retail outlets are chosen to distribute the product. Selective distribution is common with products such as computers, televisions household appliances, where consumers are willing to shop around and where manufacturers want a large geographical spread.

If a manufacturer decides to adopt an exclusive or selective strategy they should select a intermediary which has experience of handling similar products, credible and is known by the target audience

Promotion Strategies

promotional mix

 

Message & Media Strategy .

An effective communication campaign should comprise of a well thought out message strategy. What message are you trying to put accross to your target audience?. How will you deliver that message? Will it be through the appropiate use of branding? logos or slogan design?. The message should reinforce the benefit of the product and should also help the company in developing the positioning strategy of the product. Companies with effective message strategies include:

Nike: Just do it.

Toyota: The car in front is a Toyota.

Media strategy refers to how the organisation is going to deliver their message. What aspects of the promotional mix will the company use to deliver their message strategy. Where will they promote? Clearly the company must take into account the readership and general behaviour of their target audience before they select their media strategy. What newspapers do their target market read? What TV programmes do they watch? Effective targeting of their media campaign could save the company on valuable financial resources.

Push & Pull Strategies -

Above a pull strategy (left) push strategy (right).

Communication by the manufacturer is not only directed towards consumers to create demand. A push strategy is where the manufacturer concentrates some of their marketing effort on promoting their product to retailers to convince them to stock the product. A combination of promotional mix strategies are used at this stage aimed at the retailer including personal selling, and direct mail. The product is pushed onto the retailer, hence the name. A pull strategy is based around the manufacturer promoting their product amongst the target market to create demand. Consumers pull the product through the distribution channel forcing the wholesaler and retailer to stock it, hence the name pull strategy. Organisations tend to use both push and pull strategies to create demand from retailers and consumers.

 

Communication Model - AIDA

AIDA is a communication model which can be used by firms to aid them in selling their product or services. AIDA is an Acronym for Attention, Interest, Desire, Action.. When a product is launched the first goal is to grab attention. Think, how can an organisation use it skills to do this? Use well-known personalities to sell products? Once you grab attention how can you hold Interest, through promoting features, clearly stating the benefit the product has to offer? The third stage is desire, how can you make the product desirable to the consumer? By demonstrating it? The final stage is the purchase action, if the company has been successful with its strategy then the target customer should purchase the product.

 

Promotion through the Product life cycle. -

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As products move through the four stages of the product lifecycle different promotional strategies should be employed at these stages to ensure the healthy success and life of the product .

Stages and promotion strategies employed.

Introduction

When a product is new the organisations objective will be to inform the target audience of its entry. Television, radio, magazine, coupons etc may be used to push the product through the introduction stage of the lifecycle. Push and Pull Strategies will be used at this crucial stage.

Growth

As the product becomes accepted by the target market the organisation at this stage of the lifecycle the organisation works on the strategy of further increasing brand awareness to encourage loyalty.

Maturity

At this stage with increased competition the organisation take persuasive tactics to encourage the consumers to purchase their product over their rivals. Any differential advantage will be clearly communicated to the target audience to inform of their benefit over their competitors.

Decline

As the product reaches the decline stage the organisation will use the strategy of reminding people of the product to slow the inevitable

 

 

Internet Promotion

The development of the world wide web has changed the business environment forever. Dot com fever has taken the industry and stock markets by storm. The e-commerce revolution promises to deliver a more efficient way of conducting business. Shoppers can now purchase from the comfort of their home 24 hours a day 7 days a week.

Owning a website is a now a crucial ingredient to the marketing mix strategy of an organisation. Consumers can now obtain instant information on products or services to aid them in their crucial purchase decision.  Sony Japan took pre-orders of their popular Playstaion 2 console over the net, which topped a 1 million after a few days,  European football stars are now issuing press releases over the web with the sites registered under their own names. Hit rates are phenomenal. 

Advertisers have now moved their money over to the internet as customers are on average spending more time online then watching TV. Popular ways to advertise seem to be with banners and pop ups.

Introducing the marketing mix

Marketing Mix : 4p's


Lets now look at the remaining 3 p’s:

People

An essential ingredient to any service provision is the use of appropriate staff and people. Recruiting the right staff and training them appropriately in the delivery of their service is essential if the organisation wants to obtain a form of competitive advantage. Consumers make judgments and deliver perceptions of the service based on the employees they interact with. Staff should have the appropriate interpersonal skills, aptititude, and service knowledge to provide the service that consumers are paying for. Many British organisations aim to apply for the Investors In People accreditation, which tells consumers that staff are taken care off by the company and they are trained to certain standards.

Process

Refers to the systems used to assist the organisation in delivering the service. Imagine you walk into Burger King and you order a Whopper Meal and you get it delivered within 2 minutes. What was the process that allowed you to obtain an efficient service delivery? Banks that send out Credit Cards automatically when their customers old one has expired again require an efficient process to identify expiry dates and renewal. An efficient service that replaces old credit cards will foster consumer loyalty and confidence in the company.

Physical Evidence

Where is the service being delivered? Physical Evidence is the element of the service mix which allows the consumer again to make judgments on the organisation. If you walk into a restaurant your expectations are of a clean, friendly environment. On an aircraft if you travel first class you expect enough room to be able to lay down!
Physical evidence is an essential ingredient of the service mix, consumers will make perceptions based on their sight of the service provision which will have an impact on the organisations perceptual plan of the service.

 

Service/extended marketing mix


To summarise service marketing looks at:

The Characteristics of a service that are:
(1) Lack of ownership
(2) Intangibility
(3) Inseparability
(4) Perishability
(5) Heterogeneity.

The Service marketing mix involves analysing the 7’p of marketing involving, Product, Price, Place, Promotion, Physical Evidence, Process and People.

To certain extent managing services are more complicated then managing products, products can be standardised, to standardise a service is far more difficult as there are more input factors i.e. people, physical evidence, process to manage then with a product.


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