Tuesday, 26 May 2015

Commercial Aspects - Blog 3

A product is defined as ‘anything that can be offered for use and consumption, in exchange for money or some other form of value’, (Baines, et al., 2013, p. 204)Product is considered to be one of the four main elements of the marketing mix – also called the 4P’s; product, place, price and, promotion.  To analyse the different elements of a product, it can be split into three major categories; core product, embodied (or actual) product and, augmented product (Kotler, et al., 1999).  The aim of this anatomy of a product break-down is to allow the marketer to fully understand the purpose of the product, and to provide consumers with a reason to buy and to keep buying the product.  

Classification of the product into durable, non-durable and service categories allows further analysis of consumer buyer behaviour, and an insight into the level of involvement a purchase has.  Consumer groups weight product involvement differently; social grades A and B (UK JINCNARS social class classification) put emphasis on the experience a product will deliver once purchased, where as other social grades seek perceived good value.  If a product is being developed using market-led design techniques, target audience intelligence should be used to gain an advantageous market position and vice-versa, to increase brand delineation.

Within the 4P’s of marketing, Place encompasses logistics and distribution channels, as well as retailer location – it dictates where to place the product so that it reaches the target market at the best possible time and location to secure a purchase.  Distribution channels vary depending on the product being sold and the amount of control needed.  For intensive, mass marketing, distribution may be streamlined by utilising intermediaries such as wholesalers and agents (particularly for foreign and new markets).  However, this can distance the company from the consumer, reducing brand loyalty and overall buying experience, and increasing time-to-market.

Pricing of a product begins with calculations of the manufacturing and selling costs of an item.  These proposition costs can be categorised into fixed costs (e.g. office buildings) and variable costs (e.g. energy costs) (Baines, et al., 2013).  Once the base level of costs has been calculated, the product can then be examined to determine customer perceived quality and value.  There are four common pricing approaches used by companies to determine product price; cost-orientated, demand-oriented, competitor-orientated and, value-oriented. Fast moving consumer goods (FMCG), such as toothpaste, are often competitor-orientated to be highly competitive in a saturated market.  For well established high-end goods, such as Apple’s iPhone, a demand-orientated approach used to set profit margins on how much customers are prepared to pay (Wakabayashi, 2015).

Many of the components of a marketing plan are interdependent; for example the 4P’s should all be considered with regards to the target market and each other to contribute towards a successful marketing strategy.  To efficiently manage these elements, feedback should be taken at every level possible, and exit and repositioning strategies calculated to quickly adjust to any issues.  Feedback can be gained through the integrated marketing communications (IMC) set up as part of the product promotions, allowing comprehensive control over the continuation of the marketing plan by adjusting SMART targets and promotion scheduling on a Gantt chart.

Baines, P., Fill, C. & Page, K., 2013. Essentials of marketing. 1st ed. Oxford: Oxford University Press.
Kotler, P., Armstrong, G., Saunders, J. & Wong, V., 1999. Principles of Marketing. 2nd European ed. New Jersey: Prentice Hall.
Wakabayashi, D., 2015. The Wall Street Journal - ‘Staggering’ iPhone Demand Helps Lift Apple’s Quarterly Profit by 38%. [Online]
Available at: http://www.wsj.com/articles/staggering-iphone-demand-helps-lift-apples-quarterly-profit-by-38-1422394222
[Accessed 15 05 2015].