Chapter 4

Chapter 4: DEVELOPING THE MARKETING MIX
In order to appeal to its customers, organizations must align the 4P’s

(product, price, place, promotion ) of marketing effectively. All four elements
must focus on the target market.
The 4P’s Marketing
Product
The product is the first element in the marketing mix. After identifying a
need in the market, a company may already have a product that is capable of
satisfying the need.
Packaging
The packaging serves to contain and protect, and, sometimes, identify and
promote the product. A product’s packaging is different from its label.
Labeling
Is a display of information about a product on its container, packaging, or
on the product itself.
“One of the most effective ways to get ahead of competition is through new product development.”
The Rationale Behind New Product Development

Why do companies introduce new products? Presented her are sample caselets, and the
reasons behind.
1. To defend its market share.
2. To position ahead of competition in a market segment.
3. To establish a foothold in a future market in the future.
4. To take advantage of strengths in product distribution.

The New Product Development Process
Step 1: Idea Generation – the initial stage of the new product development process
where any or all of several idea generation techniques (need/problem identification,
attribute listing, forced relationships, brainstorming, etc.) are used to generate as many
new product ideas as possible.
Step 2: Idea Screening – the stage where the ideas generated in the initial step are
screened using predetermined criteria to reduce them to a manageable few.
Step 3: Concept development and testing – where new product ideas are converted
to customer-centered product concepts and tested by a representative sample of
consumer for acceptability, and purchase intent.
Step 4: Business analysis – pencil-pushing stage where, based on a concept

development and testing results.
Step 5: Product Development - the new product development stage where the
product concept is converted into a tangible working prototype.
Step 6: Market Testing - the stage where the new product is marketed in a limited
geographical area to determine whether fine tuning of attributes, positioning, pricing,
advertising, and promotions program.
Step 7: Product Commercialization - the final stage of the process where a new
product is launched.
Price
The price that a marketer charges for a product or service is a vital decision
has far-reaching the consequences. From the point of view of business, products
and services are offered with the intention of making a profit.
Product Cost Estimation
Before determining the price of a product or service, the total cost of production must
be computed.
With physical products, two types of cost are calculated:

(1) unit variable cost
(2) Fixed cost – unite share of operating and other expenses.
Direct Materials – used in manufacture of a shirt may include the fabric, thread and buttons.
Direct Labor – would include the wages of all workers directly responsible for making the shirt .
Direct Overhead – is the amount that was spent in the manufacturing overhead (energy,
water, and other utility cost) for every shirt produced.
Pricing strategies
1. Mark-up pricing - is a pricing strategy that allows the seller a fixed markup every time the
product is sold.
2. Target Return pricing - is a pricing method that allows a product manufacturer to recover a
certain portion of his/her investment every year.
3. Odd pricing or psychological pricing – is a pricing method premised to the theory that
consumers will perceive products with odd price endings as lower in price than they actually
are.
4. Loss leader pricing - a pricing strategy frequently utilized by supermarkets. It is based on the
practice of housewives to use only a few selected essential products.
5. Price lining - a pricing strategy designed to simplify a consumer’s buying decision.
6. Prestige pricing - a pricing strategy that disregards the unit cost of a product or service.
7. Marginal Pricing – where a business organization prices its product at a range below its unit
cost but higher than its unit variable cost.
8. Predatory Pricing - a pricing strategy where the firm prices its product lower than the unit
variable cost, initially resulting in short-term loses.
9. Going rate pricing – a pricing strategy where a company prices its product at the same level
as or very close to its competitors’ prices.
10. Promotional pricing – a pricing strategy involving a temporary reduction in the selling price
of a product/service in order to induce trial or encourage repeat purchase.
When the new products are introduces into the market, one of the two ff pricing strategies can
be used:
1. Price Skimming – where the product’s selling price is way above its unit cost. This allows the
company to recover its research and development cost and expenses.
2. Penetration pricing – a pricing strategy where the new product is priced only marginally
above its unit cost. The objective of this strategy is to capture a large part of the market.
PLACE
How a company deliver its product to its customers effectively and efficiently.
1. Information collection and dissemination –marketing intermediates, particularly

retailers.
2. Product storage and movement – the warehousing facilities of manufacturers are
relived of large amounts of merchandise.
3. Operational financing- distribution channels that take care of storage and transport
assumes.
4. Product promotion- help in the development and implementation of
communications.
5. Risk taking – most marketing intermediates eventually pay for the merchandise they
carry.
Supply Chain- A supply chain is the network of all individuals, organizations, resources,
activities, and technology involved in the creation and sale of a product.
Product Distribution Types
1. Exclusive Distribution – distribution is limited to a select no. of dealers, usually one or

a few.
2. Intensive distribution – this product distribution type, used mostly by fast moving
consumer goods and convenience goods.
3. Selective distribution- positions between exclusive and intensive distribution. This
type of product involves the use of more than one but not as many dealers as in
intensive distribution.

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Chapter 4: DEVELOPING THE MARKETING MIX

In order to appeal to its customers, organizations must align the 4P’s

The Rationale Behind New Product Development

1. To defend its market share.

2. To position ahead of competition in a market segment.

3. To establish a foothold in a future market in the future.

4. To take advantage of strengths in product distribution.

Step 4: Business analysis – pencil-pushing stage where, based on a concept

With physical products, two types of cost are calculated:

1. Information collection and dissemination –marketing intermediates, particularly

Product Distribution Types

1. Exclusive Distribution – distribution is limited to a select no. of dealers, usually one or

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