What is the marketing mix

What is the marketing mix What is the Marketing Mix The marketing mix of Product, Price, Promotion, and Place was introduced to marketing education by McCarthy (Yudelson 1999). First formulated as a pedagogical tool, the concept of the 4Ps represents a comprehensive way to describe the main tasks of marketing managers. (Goldsmith 1999). It is utilised to implement corporate planning after having researched and audited the marketing environment, identified and understood the customer, established a strategy and decided which market(s) or market segments to serve, or want to serve (Anonymous 2006). The Marketing Mix has its origins in the 60s: Neil Borden (1964) identified twelve controllable marketing elements that would result to a profitable business operation. Jerome McCarthy (1064) reduced Bordens factors to a simple four-element framework: Product, Price, Promotion and Place. Practitioners and academics embraced the Mix paradigm that soon became the established and essential element of marketing theory and operational marketing management. (Constantinides 2006) The 4Ps were a suitable framework for the 1960s environment which was characterised by profit making consumer manufacturing companies who were concerned with reaching their customers in an age of emerging mass media and national mass markets. (Anonymous 2006) Eventually the 4Ps of the marketing mix became an unquestionable paradigm in academic research, the validity of which was taken for granted. (Grà ¶nroos 1994). There are voices though from academics and researchers which shout that the Marketing Mix in the fo rm of the 4Ps is not able to face the latest marketing challenges. The components of the Mix Product Since its the consumers perception that should be the centre of product policy, the product should not be defined as just the set of its own physical properties. The perceptions are influenced by different parameters, such as any associated services, the image, the brand name, even the social and cultural connections, or the perception of its own differentiation from competition. A product is a mixture of tangible and intangible attributes, including functional, social and psychological utilities or benefits (Anonymous 2006). Price Price is the only revenue generating element of the marketing mix; the other elements consume resources. There are three basic pricing strategies that all organisations can pursue for existing products: pricing above the market (higher than similar competitve products), pricing below the market (lower than competition) and pricing at the market (almost at the price of competition) (Anonymous 2006). Promotion One long-term purpose of promotion is to influence and encourage buyers to accept or adopt goods, services and ideas. Potential buyers go through a psychological or behavioural process before purchasing a product. AIDA, which is an acronym for Attention, Interest, Desire and Action incorporates psychological processes: attention is a cognitive process, interest and desire are affective processes and action is a manifest behaviour process (Anonymous 2006). Place Place, or distribution strategy concerns the routes by which marketers of products and services can ensure that these reach their intended market. We normally refer to these routes as marketing channels, which include those intermediaries that products and services pass through from the point of production to the point of final use (Anonymous 2006). Criticism TQM and Relationships Management: Adaptation, not Revolution Yudelson (1999) identified six major marketing developments that challenged the 4Ps since the introduction of the Marketing Mix. Focus on the customer via the Marketing Concept (1960s); Broadening of marketing to include not-for-profits, services, causes, and even politics (1970s); Identification of the exchange transaction as the core of marketing (1970s); Introduction of Total Quality Management with its emphasis on customer satisfaction (1980s); Extension from transaction marketing to relationship marketing (1990s); Identification of the firm as a member of a complete value chain (1990s). Since the 80s, the definition of Product as anything offered is challenged due to the new perspective that organisations face: The success depends on the ability to transform satisfaction to delight. Customer satisfaction is identified as the new driving force, and that is one of the foundational ideas of TQM. Place is expanded to include the entire distribution system, which creates time and place utility and may incorporate specific systems such as just-in-time delivery as part of channel management. During the 1990s, another significant shift occurred. The role of relationships in the marketing activities of the organisation replaced the transaction perspective of earlier times. Price is no longer the amount of money paid to acquire a single Product but the lifetime costs associated with the acquisition, use, and ultimately disposal of the benefits attained during a period of time. Place is no longer just the point of exchange since that fails to communicate the interactions that occur as the product changes ownership and utility from conceptualisation to final disposal. Yudelson suggests that after nearly 40 years, the 4Ps need to let go because, as shown, the terminology has not managed to handle the challenges of developments in marketing thought and practice. However, no commonly agreed or satisfactory replacement has appeared and anyone who grew up on the concept of marketing mix (customers, marketing professionals and academics) would face significant dissonance if the key paradigm were dismissed. So, he suggests that the best strategy is Adaptation and not Revolution. His proposed adaptation focuses on the essential aspects of marketing as exchange driven behaviour, maintains the simplicity and familiarity of the 4Ps, recognises the concerns of past critics, and is capable of applying to both single instance transactions and long-term strategic relationships. Product should be redefined as all the benefits (present or anticipated) that the buyer or acquirer obtains from the exchange. It is recommended that Product be renamed as Performance to communicate the sense of benefit to the customer. Price should be redefined as everything that the acquirer gives up to obtain the benefits. It is suggested that we refer to the second P as Penalty to signify those things that the customer would have to give up or seek to minimize while obtaining the benefit or Performance associated with the exchange. Promotion should be redefined to include all of the information that is communicated between the parties to the transaction in keeping with the current thought on Integrated Marketing Communications. The purpose of the communication or information is to influence or encourage each party to enter into the transaction/ relationship. This is accomplished by providing information regarding the costs and benefits of the transaction-or better-the Perception of the Performance and Penalty. Place can be now defined as all that is done and required to facilitate or bring about the exchange and therefore, Yudelson proposes its redefinition as Process. Relationships Marketing A paradigm shift Grà ¶nroos (1994) believes that a paradigm shift is taking place in marketing. One of the main reasons lies beneath the nature of marketing mix. The marketing mix is a list of categories of marketing variables. A list never includes all relevant elements, it does not fit every situation, and it becomes obsolete. Moreover, the 4Ps represent an oversimplification of Bordens original concept, which was a list of 12 elements not intended to be a definition at all. This list would most probably have to be reconsidered in any given situation. Grà ¶nroos believes that McCarthy either misunderstood the meaning of Bordens marketing mix or his followers misunderstood McCarthys intentions. Probably Bordens original idea of a list of a large number of marketing mix ingredients that have to be reconsidered in every given situation was shortened for pedagogical reasons and a more limited number of marketing variables seemed to fit typical situations observed in the late 1950s and in the 1960s. T he 4Ps were never applicable to all markets and to all types of marketing situations. The development of alternative marketing theories (interaction/network approach to industrial marketing and the marketing of services, customer relationship economics) demonstrates that even from a management perspective, the marketing mix and its 4Ps became a problem. Gronroos concludes that in industrial marketing, services marketing, managing distribution channels and even consumer packaged goods marketing itself, a shift is clearly taking place from marketing to anonymous masses of customer to developing and managing relationships with more or less well-known or at least somehow identified customers. Other Reviews and Criticism Constantinides (2006) undertook a literature review on the status of Marketing Mix at the 21st century. He discovered that many researchers express serious doubts as to the role of the Mix as marketing management tool in its original form, proposing alternative approaches: adding new parameters to the original Mix (e.g. 7Ps for services) or replacing it with alternative frameworks altogether. Some of the weaknesses of the 4Ps identified in the study are domain specific: ignoring the human factor, lack of strategic dimensions, offensive posture and lack of interactivity. Two limitations however seem to be common in all reviewed categories: The models internal orientation: The lack of explicit market input in the framework which sources from the fact that the Mix was originally developed as a concept suitable for marketing of consumer products in the mass-oriented US manufacturing sector of the 60s The lack of personalisation: Significant shifts of consumer behaviour such as individualisation, diminishing brand preference, value orientation, increasing sophistication etc. have undermined the effectiveness of the impersonal one-way communication and the mass marketing approaches. Hyman (2004) undertook a similar study on the criticism of the Mix. According to that, some marketers contend that the scope of the 4Ps is insufficient from a pedagogical or applied perspective. To address this limitation, they updated the schema by refining the current Ps, adding new Ps, broadening its perspective, or adapting it to specific industries. Moreover, he summarised previously published criticism of the 4Ps: Inadequate theoretical grounding Not formally integrated into the exchange paradigm Fails three of the five requirements for a sound classification schema Overly focused on consumer goods, yet is production rather than marketing-concept oriented Cannot account for the full range of marketing management activities Ignores strategic marketing Focuses only on the acquisition stage of consumption Contains an increasingly catch-all (i.e. atheoretically focused) promotion category Fails to account for interactions between Ps or boundary-spanning topics Is incompatible with the relationship-marketing paradigm van Waterschoot and Van den Bulte (1992) in their own research identified five key limitations of the 4Ps model: It focuses on what marketers do to customers rather than for them. It is externally directed and ignores the internal market. It says nothing about interactions between the mix variables. It takes a mechanistic view about markets. It assumes a transactional exchange rather than a relationship. The Xbox 360 Marketing Mix The Xbox 360 is the second video game console produced by Microsoft, and was developed in cooperation with IBM, ATI, and SiS. The Xbox 360 is the successor to the Xbox, and competes with Sonys PlayStation 3 and Nintendos Wii as part of the seventh generation of gaming systems (usually called next-gen) (Wikipedia 2007). Product Name and Concept The term 360 represents a circle and is inline with the concept of the product. The customer is placed at The centre of the experience. Its a videogame and an entertainment system that integrates music, picture, games and movies. Everything revolves around the customer.(Porcaro 2005) Classification Xbox 360 belongs to the shopping consumer products category, which includes products purchased after the consumer shops around to find the best deal based on comparisons of price, quality, style, durability and other product attributes that are felt to be important. Although due to shortage at its launch many consumers were making effort to find one and others were forced to buy from eBay at inflated prices, 3 months after the launch the console could be purchased with smaller effort. Therefore, a classification of Speciality is not justified. Product Mix The total set of products a company sells is called its product mix, which consists of its component product lines. The product mix of Microsoft regarding console gaming consists of the following product lines: Xbox 360 consoles, the Xbox Live Services (Marketplace, Video and Arcade), console accessories and Microsoft Games. Xbox 360 Product Line During launch only two configurations were available; the Core and the Premium versions. Over time, the product line length rose to 3, in an Up-Market Stretch move from Microsoft, by introducing a high end version (Elite). Product Positioning Microsoft targets both casual and hard-core gamers. The Core and Arcade versions seem attractive to the former, while Premium and Elite are more appropriate to the latter. Product Levels The five levels of customer value hierarchy are as follows (Kotler and Keller 2006): Core benefit: The benefit that the customer is really buying. The buyer of the Xox 360 is buying video gaming. Basic Product: The Xbox 360 includes a video games console and a controller. Expected product: A set of attributes and conditions the buyers normally expect. Gamers expect from the seventh generation of gaming systems good graphics and sound performance, a wireless controller, digital connection with the HD TV and the amplifier, online gaming with friends through the internet and the ability to listen to music and watch videos. Augmented product: The level in which the product exceeds customer expectations. The Xbox 360 through its Xbox LIVE service lets the customers download purchased or promotional material. This includes game demos, movie and game trailers, Arcade games as well as add-on game content (items, costumes, levels, maps etc). Potential product: All the possible augmentations and transformations the product might undergo in the future. Even before the launch of Xbox 360, Microsoft was researching ways to create a video store accessible through the console, as well as a TV service which would add IPTV functionality. One year after the launch of the console, the Xbox Video Marketplace was introduced in the United States, and the Microsoft TV service under development. Pricing The following table summarises competition pricing during their respective launch. Note that Playstation and Wii launched at November 2006, almost a year later than Xbox. The Xbox 360 was the first next-gen console to enter the market. Generally, if the product is an innovation, then the initial price is usually set quite high (Anonymous 2006), but this is not the policy that Microsoft followed. Microsoft used the strategy of Price penetration, in an effort to take as much market share as possible. In fact, it was reported that Microsoft was losing $126 per unit sold (Joystiq 2005). Robbie Bach, president of Entertainment and Devices Division, said that the Xbox 360 business will become profitable in 2008 and that the profit to make is not on the hardware itself, but rather on Live service subscriptions, accessories and games (Gamedaily 2007). In August 2007, Microsoft dropped the prices by à ¢Ã¢â‚¬Å¡Ã‚ ¬ 20 à ¢Ã¢â‚¬Å¡Ã‚ ¬ 50. In October 2007, they introduced the Arcade version and priced it exactly the same as the Wii, that is At the market. Odd-even pricing assumes product sales benefit from prices such as  £99.99 rather than  £100.00, because customers will think the product is a good deal (Anonymous 2006). As we saw, Microsoft followed this policy, as all next-gen competitors did. Promotion Microsoft utilized the following Marketing Communications Mix for the launch of the console system. Advertising The advertising campaign took place via television, magazines and internet sites. The tag line was Jump In, which was in complete accordance with the name and the concept of the product (the center of the experience). The ads were introducing the idea that its more fun to play when youre part of a community, that games have always been more fun when you play with friends (Porcaro 2005). Sales Promotion The sales promotion took place through online contests and websites. OurColony.net offered challenges to its community, rewarding solutions with cropped pictures of the console and game screenshots. OrigenXbox360.com was offering visitors an opportunity to enter in various contests for a chance to attend promotional pre-launch events. Hex168.com hosted a number of images that appeared to perpetuate obscure conspiracy theories, but sometimes contained oblique references to Xbox 360. The campaign was later revealed to be a U.S. contest that offered participants a chance to win one of three hundred and sixty Xbox 360 console bundles six days before the official launch (Wikipedia 2007). Marketing Public Relations In order to assist the launch and to increase awareness, Microsoft made use of Marketing Public Relations. The official unveiling of the Xbox 360 occurred on May 2005 on MTV in a program called MTV Presents: The Next Generation Xbox Revealed (Wikipedia 2007). Elijah Wood hosted the show which featured a musical performance by the band The Killers. Ten days later the Xbox 360 was featured on the cover of TIME Magazine along with an associated article. Obviously, the viewers of MTV belong to the target market, while the cover of TIME magazine was a huge boost to the hype. Events Microsoft is one of the major exhibitors in the annual E3 Media and Business Summit which is considered as the biggest annual event in the video game industry. The announcements regarding future development are taking place at the Microsoft keynote event, which is highly anticipated by the worldwide video game media and community. Microsoft is also a frequent sponsor to gaming events. In association with adidas and EA Sports, they sponsored the Xbox World Cup, which received a lot of publicity by the gaming community. Gamers who qualified through national preliminary rounds were given an all-expenses paid trip to Berlin to take part in the competition representing their nations in matches that took place in an 8,500 seat stadium. Microsoft managed to identify with the target market as well as increase awareness and express commitment to the community. Place (Distribution) As mentioned earlier, the product suffered from shortages during its launch, due to huge demand and slow production. However, three months later the problems had been bypassed and it is worth noted that in its first year on the market, the system launched in 36 countries, more countries than any console has launched in a single year. Microsoft chose to distribute the products through the Producer >> Wholesaler >> Retailer >> Consumer channel. For the countries where Microsoft has physical presence, the Wholesaler intermediary part was played by the regional division. The Xbox 360 is distributed intensively, which means that all available outlets are used for distributing it. Conclusion The marketing mix of Product, Price, Promotion, and Place was introduced to marketing education during the 1960s. Practitioners and academics embraced the paradigm that soon became the established element of marketing theory and operational marketing management. Eventually the 4Ps of the marketing mix became an unquestionable paradigm in academic research, the validity of which was taken for granted. However, many researchers and academics object. Yudelson believes that the Mix requires adaptation to the challenges of the era (TQM and the role of relationships) and proposes redefinition of the components. Grà ¶nroos argues the 4Ps was never intended to become a paradigm and started as a simple list which was an oversimplification of a larger list. He states that the 4Ps were never applicable to all markets and to all types of marketing situations, and that we have started to experience a paradigm shift towards relationships marketing. Other studies also conclude that the marketing m ix of the 4Ps is getting old and cannot address complex environment issues, such as management of personalisation. The application of the marketing mix model to the Xbox 360 gaming console system revealed that model managed to incorporate some of the major marketing planning activities of Microsoft under its 4Ps components. However, Yudelsons model seems to apply better. Xbox 360 is not just about the actual console product, but through its integration with other products and services its about the Performance of the entertainment experience. Its Promotion is inline with the current thought on Integrated Marketing Communications. And finally, its Place (distribution) is more about the Process of distribution, from which Microsoft actually suffered during the launch. Also, the marketing mix model failed to incorporate the personalisation component of the product. That is, through the LIVE services each user is uniquely identified. Microsoft has access to personal information, such as favourite games, music and movies and is able to propose similar content to the customers upon request. Unfortunate ly, the 4Ps did not manage to capture this aspect of Xbox 360 marketing. We conclude that the marketing mix is a tool which has performed well in the past and may still do in many cases. However, the increasingly complex environment demands adaptation and expansion. Personalisation for example is a very important component and should be incorporated under the umbrella of the new XPs, whatever number the academia decides that X should be. References Anonymous (2006). Strategic Marketing Module Book Edition 10, Management Centre, University of Leicester. Borden, N.H. (1964), The concept of the Marketing Mix, Journal of Advertising Research, June, pp 2-7 Constantinides, E. (2006), The Marketing Mix Revisited: Towards the 21st Century Marketing, Journal of Marketing Management 2006, 22, pp 407-438 Gamedaily, http://www.gamedaily.com/articles/features/bach-xbox-business-profitable-next-year/70371/?biz=1, [15 December 2007] Goldsmith, R. E. (1999), The personalised marketplace: beyond the 4Ps, Marketing Intelligence Planning 17/4, pp 178-185 Grà ¶nroos, C. 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