Marketing mix theory, first coined by E. Jerome McCarthy in the 1960s, is one of the basics of marketing for anyone to run a successful business.
But before explaining the principles the parts of the theory, let us look at this example of Coca Cola
Coca Cola being one of the most valued brands in the world –
- Has a well-diversified portfolio of 3500+ products.
- Operates in around all countries of the world but two and distributes its products with the help of a franchise system.
- All of its products are priced keeping in mind the competitors (since the FMCG industry works mostly in perfect competition), and
- Has adopted various promotion strategies during till now (eg Christmas advertisements, I’d like to buy the world a coke ad, etc and also certain CSR activities)
This is the traditional marketing mix – developing the product the customer needs, distributing it in the most efficient manner, pricing it in a way to increase its demand, and promoting it to boost sales,
Marketing Mix Definition
Marketing mix is the set of tactics a business use to promote and sell its products in the market. These tactics range from developing the product, deciding its price and places where it will be sold, to deciding its communication and promotional strategies.
The tactics are further divided into four principles or four Ps – Product, Price, Place, and Promotion. However, nowadays, the marketing mix constitutes several other Ps like Process, People, and physical evidence as vital mix elements.
Product is an item produced or procured by the business to satisfy the needs of the customer. It is the actual item which is held for sale in the market. The product can be tangible or intangible (it can be a good or a service). It is not necessary that the business produces the product. It can also procure it from somewhere else.
Product mix refers to the mix of all the products present in the company for sale. (Just like the Coca-Cola example. All the 3500+ products constitute the product mix of the company.)
Every product has a definite life cycle. A life cycle of the product constitute different stages a product undergoes from the time it was first thought to the time it is finally removed from the market.
A business keeps all this in mind while creating a product mix of the marketing mix.
Price is the actual amount which the consumer pays for the product. It is a result of various factors which include profits of the company, segment targeted, subsidies, discounts, supply-demand, and the cost of other three P’s of the marketing mix.
This aspect determines the company’s survival in the market. Hence price has a great effect on the entire marketing mix.
Price mix influence the positioning of the product among competition as well as the customer’s perception of the product. Hence businesses usually use one of these three strategies for pricing –
- Penetration Pricing (low price kept to capture market share)
- Skimming Pricing (high price initially then lowering of price)
- Competition Pricing (pricing at par of competition)
The price decides where will product stand among the competition.
A product, until it is well placed / distributed to reach the customer, is of no use to the customer. Hence, Place Mix is important. Business should be clear about their target market and how to reach the same. Place mix constitute strategies of where and how the product will be available for the customers for the actual sale.
Distribution Strategies include
- Intensive Distribution (Cover as much market as you can. E.g. Surf Companies)
- Selective Distribution (For premium products. Open limited outlets. E.g. Zara)
- Exclusive Distribution (For more exclusive products. Very less outlets. E.g. Lamborghini)
- Franchise system (Small companies distribute on your behalf. E.g. Coca-Cola)
A business can also decide between direct and indirect distribution.
Direct Distribution – When the business sell directly to the customers without involving any intermediaries.
Indirect Distribution – When the business involves intermediaries in their distribution strategy.
Promotion leads and follows every other P’s of the mix. It’s through this aspect is how the business let know customers about their product. Promotion leads to brand recognition.
- Personal Selling
- Sales Promotion
- Public Relations
- Direct Marketing, and
- Social Media Outreach
These mediums helps the business to transfer the idea of the product from the company to the customer.
The Other 3 P’s
In addition to these 4 Marketing Mix P’s, modern marketers have added 3 more P’s to the marketing mix of services. These are
- Physical Environment
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A startup consultant, dreamer, traveller, and philomath. Aashish has worked with over a 50 startups and successfully helped them ideate, raise money, and succeed. When not working, he can be found hiking, camping, and stargazing.