MARKETING MIX

Marketing involves a number of activities. To begin with, an organisation may decide on its
target group of customers to be served. Once the target group is decided, the product is to be placed in
the market by providing the appropriate product, price, distribution and promotional efforts. These are
to be combined or mixed in an appropriate proportion so as to achieve the marketing goal. Such mix of
product, price, distribution and promotional efforts is known as ‘Marketing Mix’. According to Philip
Kotler “Marketing Mix is the set of controllable variables that the firm can use to influence the buyer’s
response”. The controllable variables in this context refer to the 4 ‘P’s [product, price, place
(distribution) and promotion]. Each firm strives to build up such a composition of 4‘P’s, which can
create highest level of consumer satisfaction and at the same time meet its organisational objectives.
Thus, this mix is assembled keeping in mind the needs of target customers, and it varies from one
organisation to another depending upon its available resources and marketing objectives. Let us now
have a brief idea about the four components of marketing mix.
I. Product : Product refers to the goods and services offered by the organisation. A pair of shoes, a
plate of dahi-vada, a lipstick, all are products. All these are purchased because they satisfy one or more
of our needs. We are paying not for the tangible product but for the benefit it will provide. So, in
simple words, product can be described as a bundle of benefits which a marketeer offers to the
consumer for a price. While buying a pair of shoes, we are actually buying comfort for our feet, while
buying a lipstick we are actually paying for beauty because lipstick is likely to make us look good.
Product can also take the form of a service like an air travel, telecommunication, etc. Thus, the term
product refers to goods and services offered by the organisation for sale.
Product Classification
1. Based on use, the product can be classified as:
A. Consumer Goods- Consumer goods: Goods meant for personal consumption by the
households or ultimate consumers are called consumer goods. This includes items like
toiletries, groceries, clothes etc. Based on consumers’ buying behaviour the consumer
goods can be further classified as :
a. Convenience Goods : Do you remember, the last time when did you buy a
packet of butter or a soft drink or a grocery item? Perhaps you don’t remember,
or you will say last week or yesterday. Reason is, these goods belong to the
categories of convenience goods which are bought frequently without much
planning or shopping effort and are also consumed quickly. Buying decision in
case of these goods does not involve much pre-planning. Such goods are usually
sold at convenient retail outlets.
b. Shopping Goods: These are goods which are purchased less frequently and
are used very slowly like clothes, shoes, household appliances. In case of these
goods, consumers make choice of a product considering its suitability, price,
style, quality and products of competitors and substitutes, if any. In other words,
the consumers usually spend a considerable amount of time and effort to finalise
their purchase decision as they lack complete information prior to their shopping
trip. It may be noted that shopping goods involve much more expenses than
convenience goods.
c. Speciality Goods : Because of some special characteristics of certain
categories of goods people generally put special efforts to buy them. They are
ready to buy these goods at prices at which they are offered and also put in extra
time to locate the seller to make the purchase. The nearest car dealer may be ten
kilometres away but the buyer will go there to inspect and purchase it. In fact,
prior to making a trip to buy the product he/she will collect complete
information about the various brands. Examples of speciality goods are cameras,
TV sets, new automobiles etc.
 B. Industrial Goods-Goods meant for consumption or use as inputs in production of
other products or provision of some service are termed as ‘industrial goods’. These are
meant for non-personal and commercial use and include
a. raw materials
b. machinery
c. components
d. operating supplies (such as lubricants, stationery etc). The buyers of industrial
goods are supposed to be knowledgeable, cost conscious and rational in their
purchase and therefore, the marketeers follow different pricing, distribution and
promotional strategies for their sale.
2. Based on Durability, the products can be classified as :
A. Durable Goods : Durable goods are products which are used for a long period i.e.,
for months or years together. Examples of such goods are refrigerator, car, washing
machine etc. Such goods generally require more of personal selling efforts and have
high profit margins. In case of these goods, seller’s reputation and presale and after-sale
service are important determinants of purchase decision.
B. Non-durable Goods: Non-durable goods are products that are normally consumed in
one go or last for a few uses. Examples of such products are soap, salt, pickles, sauce
etc. These items are consumed quickly and we purchase these goods more often. Such
items are generally made available by the producer through large number of convenient
retail outlets. Profit margins on such items are usually kept low and heavy advertising is
done to attract people towards their trial and use.
3. Based on tangibility, the products can be classified as:
A. Tangible Goods : Most goods, whether these are consumer goods or industrial goods
and whether these are durable or non-durable, fall in this category as they have a
physical form, that can be touched and seen. Thus, all items like groceries, cars, raw-
materials, machinery etc. fall in the category of tangible goods.
B. Intangible Goods : Intangible goods refer to services provided to the individual
consumers or to the organisational buyers (industrial, commercial, institutional,
government etc.). Services are essentially intangible activities which provide want or
need satisfaction. Medical treatment, postal, banking and insurance services etc., all fall
in this category
II. Price: Price is the amount charged for a product or service. It is the second most important element
in the marketing mix. Fixing the price of the product is a tricky job. Many factors like demand for a
product, cost involved, consumer’s ability to pay, prices charged by competitors for similar products,
government restrictions etc. have to be kept in mind while fixing the price. In fact, pricing is a very
crucial decision area as it has its effect on demand for the product and also on the profitability of the
firm.
As stated earlier price is the consideration in terms of money paid by consumers for the bundle
of benefits he/she derives by using the product/ service. In simple terms, it is the exchange value of
goods and services in terms of money. Pricing (determination of price to be charged) is another
important element of marketing mix and it plays a crucial role in the success of a product in the
market. If the price fixed is high, it is likely to have an adverse effect on the sales volume. If, on the
other hand, it is too low, it will adversely affect the profitability. Hence, it has to be fixed after taking
various aspects into consideration. The factors usually taken into account while determining the price
of a product can be broadly described as follows:
1. Cost: No business can survive unless it covers its cost of production and distribution. In large
number of products, the retail prices are determined by adding a reasonable profit margin to the
cost. Higher the cost, higher is likely to be the price, lower the cost lower the price.
 2. Demand: Demand also affects the price in a big way. When there is limited supply of a
product and the demand is high, people buy even if high prices are charged by the producer.
But how high the price would be is dependent upon prospective buyers’ capacity and
willingness to pay and their preference for the product. In this context, price elasticity, i.e.
responsiveness of demand to changes in price should also be kept in view.
3. Competition: The price charged by the competitor for similar product is an important
determinant of price. A marketeer would not like to charge a price higher than the competitor
for fear of losing customers. Also, he may avoid charging a price lower than the competitor.
Because it may result in price war which we have recently seen in the case of soft drinks,
washing powder, mobile phone etc.
4. Marketing Objectives: A firm may have different marketing objectives such as maximisation
of profit, maximisation of sales, bigger market share, survival in the market and so on. The
prices have to be determined accordingly. For example, if the objective is to maximise sales or
have a bigger market share, a low price will be fixed. Recently one brand of washing powder
slashed its prices to half, to grab a bigger share of the market.
5. Government Regulation: Prices of some essential products are regulated by the government
under the Essential Commodities Act. For example, prior to liberalisation of the economy,
cement and steel prices were decided by the government. Hence, it is essential that the existing
statutory limits, if any, are also kept in view while determining the prices of products by the
producers.

Methods of price Fixation

1. Cost Based Pricing Under this method, price of the product is fixed by adding the amount
of desired profit margin to the cost of the product. If a particular soap costs the marketeer P
8 and he desires a profit of 25%, the price of the soap is fixed at 8 + (8x100/100) =16.
While calculating the price in this way, all costs (variable as well as fixed) incurred in
manufacturing the product are taken into consideration.
2. Competition Based Pricing In case of products where market is highly competitive and
there is negligible difference in quality of competing brands, price is usually fixed closer to
the price of the competing brands. It is called ‘young rate pricing’ and is a very convenient
method because the marketeers do not have to worry much about demand and cost and
effect the change as per the changes by the industry leaders.
3. Demand Based Pricing At times, prices are determined by the demand for the product.
Under this method, without paying much attention to cost and competitors prices, the
marketeers try to ascertain the demand for the product. If the demand is high they decide to
take advantage and fix a high price. If the demand is low, they fix low prices for their
product. At times they resort to differential prices and charge different prices from different
groups of customers depending upon their perceived values and capacity to pay. Take the
case of cinema halls where the rates of tickets differ for the different sets of rows in the hall.
4. Objective Based Pricing This method is applicable to introduction of new (innovative)
products. If, at the introductory stage of the products, the organisation wishes to penetrate
the market i.e., to capture large parts of the market and discourage the prospective
competitors to enter into the fray, it fixes a low price. Alternatively, the organisation may
decide to skim the market i.e., to earn high profit by taking advantage of a group of
customers who give more importance to their status or distinction and are willing to pay
even a higher price for it. In such a situation they fix quite high price at the introductory
stage of their product and market it to only those customers who can afford it.

III. Place: Goods are produced to be sold to the consumers. They must be made available to the
consumers at a place where they can conveniently make purchase. Woollens are manufactured on a
large scale in Ludhiana and you purchase them at a store from the nearby market in your town. So, it is
necessary that the product is available at shops in your town. This involves a chain of individuals and
institutions like distributors, wholesalers and retailers who constitute firm’s distribution network (also
called a channel of distribution). The organisation has to decide whether to sell directly to the retailer
or through the distributors/wholesaler etc. It can even plan to sell it directly to consumers. The choice
is guided by a host of factors about which you will learn later in this chapter.
Chanels of Distribution
1. It helps in establishing a regular contact with the customers and provides them the necessary
information relating to the goods.
2. It provides the facility for inspection of goods by the consumers at convenient points to make
their choice.
3. It facilitates the transfer of ownership as well as the delivery of goods.
4. It helps in financing by giving credit facility.
5. It assists the provision of after sales services, if necessary.
6. It assumes all risks connected with the carrying out the distribution function.

Types of Channels of Distribution

1. Zero stage channel of distribution- Zero stage distribution channel exists where there is
direct sale of goods by the producer to the consumer. This direct contact with the consumer
can be made through door-todoor salesmen, own retail outlets or even through direct mail.
Also in case of perishable products and certain technical household products, door-to-door
sale is an easier way of convincing consumer to make a purchase. Eureka Forbes, for
example, sells its water purifiers directly through their own sales staff.

2. One stage channel of distribution - In this case, there is one middleman i.e., the retailer. The
manufacturers sell their goods to retailers who in turn sell it to the consumers. This type of
distribution channel is preferred by manufacturers of consumer durables like refrigerator,
air conditioner, washing machine, etc. where individual purchase involves large amount. It
is also used for distribution through large scale retailers such as departmental stores (Big
Bazaar, Spensors) and super markets.

3. Two stage channel of distribution- This is the most commonly used channel of distribution
for the sale of consumer goods. In this case, there are two middlemen used, namely,
wholesaler and retailer. This is applicable to products where markets are spread over a large
area, value of individual purchase is small and the frequency of purchase is high.
 4. Three stage channel of distribution- When the number of wholesalers used is large and they
are scattered throughout the country, the manufacturers often use the services of mercantile
agents who act as a link between the producer and the wholesaler. They are also known as
distributors.

IV. Promotion: If the product is manufactured keeping the consumer needs in mind, is rightly priced
and made available at outlets convenient to them but the consumer is not made aware about its price,
features, availability etc, its marketing effort may not be successful. Therefore promotion is an
important ingredient of marketing mix as it refers to a process of informing, persuading and
influencing a consumer to make choice of the product to be bought. Promotion is done through means
of personal selling, advertising, publicity and sales promotion. It is done mainly with a view to provide
information to prospective consumers about the availability, characteristics and uses of a product. It
arouses potential consumer’s interest in the product, compare it with competitors’ product and make
his choice. The proliferation of print and electronic media has immensely helped the process of
promotion.
Four Elements of a Promotion Mix
1. Advertising: Advertising is the most commonly used tool for informing the present and
prospective consumers about the product, its quality, features, availability, etc. It is a paid form
of non-personal communication through different media about a product, idea, a service or an
organisation by an identified sponsor. It can be done through print media like newspaper,
magazines, billboards, electronic media like radio, television, etc. It is a very flexible and
comparatively low cost tool of promotion.
2. Publicity: This is a non-paid process of generating wide range of communication to
contribute a favourable attitude towards the product and the organisation. You may have seen
articles in newspapers about an organisation, its products and policies. The other tools of
publicity are press conference, publication and news in the electronic media etc. It is published
or broadcasted without charging any money from the firm. Marketeers often spend a lot of time
and effort in getting news items placed in the media for creation of a favourable image of the
company and its products.
3. Personal selling: You must have come across representatives of different companies
knocking at your door and persuading you to buy their product. It is a direct presentation of the
product to the consumers or prospective buyers. It refers to the use of salespersons to persuade
the buyers to act favourably and buy the product. It is most effective promotional tool in case of
industrial goods.
4. Sales promotion: This refers to short-term and temporary incentives to purchase or induce
trials of new goods. The tool include contests, games, gifts, trade shows, discounts, etc. Sales
promotional activities are often carried out at retail levels.