34 Marketing Mix

S. Thilagamani

Introduction

Marketing involves a number of management activities at a food service operation. 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, place and promotional efforts are 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”.

Objectives:

The contents of the module will enable the learners to

•  explain the concept of marketing mix and its components

•  compile the meaning of product and its classification

•  state the various factors affecting pricing decisions

Concepts of Marketing Mix

The businessman needs to

1. produce or manufacture the product according to consumers’ need;
2. make available it at a price that the consumers’ find reasonable;
3. supply the product to the consumers at different outlets they can conveniently approach and
4. inform the consumers about the product and its characteristics through the media they have access to

So  the  marketing  manager  concentrates  on  four  major  decision  areas  while  planning  the marketing activities, namely (i) products, (ii) price, (iii) place (distribution) and (iv) promotion.

These 4 ‘P’ s are called as elements of marketing and together they constitute the marketing mix. All these are inter -related because a decision in one area affects decisions in other areas.

Elements of Marketing Mix

Product:

Product refers to the goods and services offered by the organisation. 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 marketer offers to the consumer for a price. While buying a packet of chips, we are actually buying as snacks, while buying a gas stove we are actually paying for the cooking of foods. Product can also take the form of a service like hotel rooms, air travel, telecommunication. Thus, the term product refers to goods and services offered by the organisation for sale.

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.

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 or use the services. Sree Annapoorna Sree Gowrishankar Group of Hotels, a popular commissary food production organisation at Coimbatore in Tamil Nadu has its service rendered at the outlets all over the city and foods are available at the specified time with quality service. 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.

Promotion:

If the product is manufactured keeping the consumer need 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.

CONCEPT OF PRODUCT AND ITS CLASSIFICATION

According to William J. Stanton, “Product is a set of tangible and intangible attributes including packaging, colour, price, manufacturer’s prestige, retailer’s prestige and manufacturer’s and retailer’s services which buyer may accept as offering satisfaction of wants and services”. Jerome McCarthy

“A product is more than just a physical product with its related functional and aesthetic features. It includes accessories, installation, instructions on use, the package, perhaps a brand name, which fulfills some psychological needs and the assurances that service facilities will be available to meet the customer needs after the purchase”.

PRODUCT CLASSIFICATION

Product can be broadly classified on the basis of (1) use, (2) durability, and (3) tangibility  Classification of Products based on Use

1.  Based on use, the product can be classified as:

(a) Consumer Goods; and

(b)   Industrial Goods.

(a)  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 behavior the consumer goods can be further classified as

(i)     Convenience Goods;

(ii)   Shopping Goods; and

(iii)   Speciality Goods.

(i)  Convenience Goods :

Goods that are widely distributed and that are relatively inexpensive which are purchased frequently and with minimum effort, such as gasoline (petrol), newspapers, and most grocery items. Such goods are usually sold at convenient retail outlets.

(ii) 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 finalize 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.

(iii)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 vapour extractor hoods, cooking ranges, steamers and .

2.  Based on Durability, the products can be classified as :

(a) Durable Goods; and

(b) Non-durable Goods.

(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 pre-sale and after-sale service are important determinants of purchase decision.

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. 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; and

(b)   Intangible Goods.

(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 food items, foods at restaurants, groceries, cars, raw-materials, machinery 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. Diet counselling, Medical treatment, postal services, banking and insurance services all fall in this category.

PRICING AND FACTORS AFFECTING PRICING DECISIONS

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:

(a) 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.

(b) 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.

METHODS OF PRICE FIXATION

Methods of fixing the price can be broadly divided into the following categories.

1.  Cost based pricing

2.  Competition based pricing

3.  Demand based pricing

4.  Objective based pricing

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 food costs the marketeer Rs. 8 and he desires a profit of 25%, the price of the soap is fixed at Rs 8 + (8×25/100) =Rs. 10. 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 marketers 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 Marketing 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

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.

CHANNELS OF DISTRIBUTION

The path or route adopted by him for the purpose is known as channel of distribution. A channel of distribution thus, refers to the pathway used by the manufacturer for transfer of the ownership of goods and its physical transfer to the consumers and the user/buyers (industrial buyers). Stanton has also defined it as “A distribution channel consists of the set of people and firms involved in the transfer of title to a product as the product moves from producer to ultimate consumer or business user”. Basically it refers to the vital links connecting the manufacturers and producers and the ultimate consumers/users. It includes both the producer and the end user and also the middlemen/agents engaged in the process of transfer of title of goods.

(a) Nature of Market:

There are many aspects of market which determine the choice of channel of distribution. Say for example, where the number of buyers is limited, they are concentrated at few locations and their individual purchases are large as is the case with industrial buyers, direct sale may be the most preferred choice. But in case where number of buyers is large with small individual purchase and they are scattered, then need may arise for use of middlemen.

(b) Nature of Product:

Nature of the product considerably affects the choice of channel of distribution. In case the product is of technical nature involving a good amount of pre-sale and after sale services, the sale is generally done through retailers without involving the wholesalers. But in most of the consumer goods having small value, bought frequently in small quantities, a long channel involving agents, wholesalers and retailers is used as the goods need to be stored at convenient locations. Items like toiletries, groceries, fall in this category. (c) Middlemen Consideration:

If right kind of middlemen having the necessary experience, contacts, financial strength and integrity are available, their use is preferred as they can ensure success of newly introduced products. Cost factors also have to be kept in view as all middlemen add their own margin of profit to the price of the products. But from experience it is learnt that where the volume of sales are adequate, the use of middlemen is often found economical and less cumbersome as against direct sale.

PROMOTION

Promotion refers to the process of informing and persuading the consumers to buy certain product. By using this process, the marketeers convey persuasive message and information to its potential customers. The main objective of promotion is to seek buyers’ attention towards the product with a view to:

• Arouse his interest in the product;
• inform him about its availability; and
• inform him as to how is it different from others. It is thus a persuasive communication and also serves as a reminder.

The Hospitality Marketing Mix

Hospitality marketing mix consists of five components

1.      Product – service mix

2.      Presentation mix

3.      Communication mix

4.      Pricing Mix

5.      Distribution mix

1.      PRODUCT SERVICE MIX

This is a combination of all the products and services offered by the hospitality operation, including both tangible and intangible elements. The consumer purchase and use the services and is largely intangible.

2.    PRESENTATION MIX

This include those elements that the marketing manager uses to increase the tangibility of the product – service mix as perceived by the consumer. This mix includes location, atmosphere and personnel.

3.    COMMUNICATION MIX

This involves all communication that takes place between the hospitality operation and the consumer. It includes advertising, marketing research and feed back about the consumer perceptions. The communication mix should be viewed as a two way communication link, rather than a one way link. The food service operator seeks information and data from the consumer thereby establishing open communication with various market segments.

4. PRICING MIX

     The pricing mixing encompasses the consumer’s perception of value. The pricing mix includes such variables as volume discounts and bundling multiple products together for an overall discounted price. This bundling approach is used extensively by fast food chains as a method to increase spending by the customers.

5. DISTRIBUTION MIX

This includes all distribution channels available between the firm and the target market. Historically the distribution occurred at the point of production such as the restaurants where the food was produced. This has changed since the newer distribution channels, such as the internet. The factors that have influence on the distribution mix are consumer perceptions, attitudes and behavior industry practices and trends, local competition, brand trends, government policy and legislations.

Conclusion

The marketing manager’s job is thus to identify consumer needs, provide products or services aimed at satisfying such needs and then move the product or service with the help of appropriate strategies in the area of product planning, pricing, physical distribution and promotion so that the final result is twofold namely consumer satisfaction and profitability of the operations. Therefore planning, execution and evaluation in marketing process is vital and help the food service organisation.

Book References

1. William J. Rothwell and H.C. Kazanas, 2006, Planning and Managing Human Resources, 2nd edition, Jaico Publishing house, Delhi
2. Aquinas P G, 2009, Human Resource Management Principles and Practice, Vikas Publishing House Pvt ltd, New Delhi
3. Durai P, 2010, Human Resource Management, Pearson Publications, New Delhi
4. Dyche Jill, 2003, The CRM handbook, Pearson Publications, New Delhi