Unit 1.

MARKETING MIX
By Leopoldo L. Salas Jr., MM

Meaning & Definitions, Four P’s of Marketing Mix: Product, Price, Promotion, Place, Product
A) product-Meaning – product quality, product design, product features, Difference
between brand name and trade mark, after sales service, packaging- Role and functions of
packaging
Meaning and Definitions of Marketing Mix
While doing market planning, the marketing manager of a company obtains
marketing information to assess the situation. He does the market segmentation on the
basis of such information and sets the marketing objectives to be achieved through the
satisfaction of needs and wants of the consumer population in these market segments. For
each segment of market, he formulates a marketing programme to cater the needs of
consumers. A combination of marketing methods and activities, integrated into a
marketing programme to achieve marketing goals through satisfaction of consumer needs
in a market is called marketing mix. A marketing mix is made of four elements, namely
(1) Decisions on product or services,
(2) Decisions on price,
(3) Decisions on promotion and
(4) Decisions on distribution of goods and services to the place of consumer.
The concept of marketing mix was evolved by Prof. N.H.Barden of Harward Business
School of America. In his words, marketing mix refers to two things.
(a) A list of important elements or ingredients that make up the marketing
programme and
(b) The list of forces having bearing on marketing operations. According to Mr.
Jerome McCarthy, “Marketing mix is a pack of four sets of variables, namely
product variable, price variable, promotion variable, and place variable”.
In simple words marketing mix means a marketing programme that is offered by a
firm to its target consumers to earn profits through satisfaction of their wants. Such a
marketing programmes is a mixture of four ingredients, namely Product mix, Price mix,
Place (Distribution) mix and Promotion mix. Product mix indicates the decisions of the firm
regarding the product design, product range, product packing, product quality, product
branding, product labeling and after sale service.
Price mix reflects the managerial decisions of the business pertaining to pricing
policies and strategies, terms of credit, terms of delivery, margin of profit, discount and
allowances. Place (Distribution) mix is made up of managerial decisions about the
channels of distribution, transportation, warehousing and inventory control. Promotion
mix covers variables such as personal selling, advertising, publicity, sales promotion, public
relations, trade fairs and exhibitions used in promotion of sales.
Four P’s of Marketing:
The term Marketing Mix, popularly known as 4P’s, was given by Jerome McCarthy. He
classified the marketing mix into four heads beginning with the alphabet ‘P’, namely
(1) Product,
(2) Price,
(3) Promotion,
(4) Place (Physical Distribution) as shown in the following figure.
Let us discuss these 4 elements of marketing mix in detail.
(1) Product
Product is the main element of marketing. Without a product, there can be no
marketing. “A product is anything that can be offered to a market for attention, acquisition,
use or consumption that might satisfy a want or a need’’, says Philip Kotler. According to
Alderson, “Product is a bundle of utilities, consisting of various product features and
accompanying services”. A product stands for the organization’s offer to the market place.
It provides physical comfort and psychological satisfaction to the buyers. It may be both
tangible and intangible. Tangible product is one that can be seen and touched in its physical
presence. The examples are - garments, shoes, mobiles, vehicles, soaps, vegetables, etc.
Intangible product is one that cannot be seen and touched but can be felt. It is in the form
of services. The examples of intangible products are - education, medical care, insurance,
banking, travel and transport, holiday resorts, etc. Product is the most important element
of marketing mix. Hence, the marketing manager has to put all his efforts in framing
marketing strategies of its product offered to the market. In doing so, all the sub-elements
of product are to be considered. The sub-elements (or variables) of product are - product
design, product range, product line, product package, product features, product quality,
product branding, trade mark, labeling, after sale services and guarantees, etc. A proper
combination of these sub-elements gives a product its ability to succeed in market. Product
strategy also covers the marketing decisions about product modification, product
simplification, removal of non-profitable products, etc.
(2) Price
Price is the value of a product expressed in monetary terms. It is the amount
charged for the product. According to Philip Kotler, “Price is the amount of money charged
for a product or service, or the sum of the values that consumers exchange for the benefits
of having or using the product or service.” Price is the second element of marketing mix.
The product has to be adequately priced. Price is the only element that brings revenue to
the business. The other elements of marketing mix, such as product, promotion and
physical distribution involve expenditure. Hence, pricing should be done with utmost care.
The factors considered while determining the prices are target customers, price
elasticity of demand, cost of production, level of competition, government restrictions on
price, if any, and social responsibility of business. A proper pricing policy in different market
conditions determines the acceptance of the product by the customer. The sub elements
of price are - price level, pricing policies, margin of profit, terms of credit, terms of delivery,
rebates and discounts, resale price, maintenance, etc.
(3) Promotion
An excellent product with competitive price cannot achieve a desired success and
acceptance in market, unless and until it’s special features and benefits are conveyed
effectively to the potential consumers. Promotion does the task of effective and persuasive
communication of the product features and benefits to the potential consumers.
Promotion is a process of communication that informs influences and persuades a
potential consumer to buy the product or service. It is the third essential ingredient of
marketing mix. The sub-elements of promotion are - personal selling, advertising, publicity,
sales promotion, public relations, trade fairs and exhibitions, etc. Promotion strategies
include decisions on budgets, theme, media selection, timing, proper evaluation of the
promotional effectiveness and appropriate feedback system to facilitate market research.
(4) Place (Physical Distribution)
An excellent quality product, with the competitive price structure, backed up by
efficient promotional activities, will be a waste if it is not moved from the place of
production to the place of consumption at an appropriate time. The fourth element of
product mix, namely place or physical distribution does this work of carrying products at
the place of consumption at right time. Place or distribution activities add value to the
products by creating time, distance and possession utilities.
It makes the products easily available to the consumers, whenever and wherever
they want to buy. The sub-elements of place (or physical distribution) are - channels of
distribution, transportation, and warehousing and inventory control. Thus, marketing mix
is the proper combination of the above four ingredients. The business firms use such a mix
to achieve desired level or turnover in the target market. The marketing mix should be
regularly revised in order to meet the requirements of changes in the marketing
environment of the business. Changes in the customer, preferences also call for alterations
in the marketing.
A) Product: Concept of Product
A product is the basic element of marketing mix. The word ‘Product’ has several
meanings. In our day-to-day life, we use many, goods, such as food-grains, garments,
soaps, toothpaste, books, watches, fans, vehicles, stationery, etc. All these goods are called
products. But according to marketing science, the term product includes not only the
goods but also the services, ideas, and several other features of products such as quality,
style, brand, warranties and after-sale services, etc. In order to have a clear understanding
of the term ‘product’, let us study the important definitions of ‘Product’ as under:
(1) “A product is anything that can be offered to a market for attention, acquisition, use
or consumption that might satisfy a want or need: it includes physical objects,
services, personalities, organizations and ideas.” (Philip Kotler)
(2) “Product is a bundle of utilities consisting of various features and accompanying
services.” (Alderson)
(3) “The product is the sum total of three things the intrinsite characteristics, its
material and construction, its ability to perform; the extrinsic characteristics, its
packaging, brand or trade mark and the intangibles associated with it.” (Prof. Harry
L. Hanson) Thus, from the above definitions, a product can be described as a bundle
of utilities that provide physical comfort and psychological satisfaction to its buyers.
The product may be goods, services, or just an idea. The term product refers to its
features, quality, style, brand name and image, packaging, warranties, after-sale
service and other accompanying attributes. To a consumer, the product is
anything, which satisfies his needs, starting from primary needs to esteem needs.
To a marketer, the product is a bundle of attributes that can bring returns through
satisfaction of needs of market. To examples of products are:
(1) Goods like food-grains, stationery, garments, scooters, fans, cars, computers, etc.
 (2) Services like banking, education, health care, travel, transport, movies, software,
etc.
(3) Ideas like insurance plan, shares, mutual funds, etc. Thus, product is not only a
tangible entity. Even intangible services and psychological attributes such as brand,
prestige, image, etc., which consumer looks for and marketers provide in these
tangible items, are also an integral part of a product.

Product Quality- the modern marketing philosophy emphasizes that customer needs be
satisfied through a product at some price. Quality is one of those aspects that
contribute to customer satisfaction. The marketer must know what quality the
customer really wants and adjust his/her product in such fashion. e.g. if a
manufacturer of refrigerator wants to sell his/ her product, he /she must find out
the requirements or criteria of quality (here a durable compressor with no sound
space arrangement of trays, colour, finish and design) and must deliver the
promised quality. i.e. the qualities must be physically present in the product.
When a customer speaks of a ‘quality product’ he generally means a high-priced
item. Most consumers cannot afford to purchase high priced item, however so they are
willing to settle for products that have satisfactory quality. They take into consideration
the expenses of use and maintenance as well as the purchase cost. A manufacturer wants
his products to be of the finest quality possible, so that he can sell them. He balances the
cost of quality against the benefits, (i.e. increased sales) to be derived from the products.
Because of product quality the manufacturer may enjoy large sales and good customer
relations. Selling goods of low quality is not in the producer’s best interest because funds
the customers must spend for maintaining and repairing existing items cannot be used to
purchase new items. Investment for quality is an investment to improve company
reputation and repeat sales. In many cases no extra cost is required at all in raising the
quality level of a product to a competitively acceptable level. The production cost may
actually decline if one considers the indirect cost of product warranty and repair.
Product Design- A product design indicates its usefulness as well as its attractiveness. The
product design is the first step in the production process. Product design is the
translation of intellectual wisdom, requirements of the entrepreneurs, or needs of
the consumers etc. into a specific product.
Product design is concerned with the efficient and effective generation and
development of ideas through a process that leads to new products. product designers
conceptualize and evaluate ideas, making them tangible through products in more
systematic approach. Their role is to combine art, science and technology to create
tangible three-dimensional goods. This evolving role has been facilitated by digital tools
that allow designers to communicate, visualize and analyze ideas in a way that would have
taken greater manpower in the past. Product design is sometimes confused with industrial
design, industrial design is concerned with the aspect of that process that brings that sort
of artistic form and usually associated with craft design to that off mass produced goods.
The meaning of product design is depicting in the following diagram.
Product design includes form design, functional design, package design, and
product research and product development. Form design means the shape and
appearance of the product functional design means the working of the product. That is,
how the product works. It is very important because the product will sell only if it works as
expected. Package design –an eye-catching attractive package lures customer to try a
product, this increases sales. Ideas for products may come from consumers, salespeople,
engineers, competitors, trade associations, advertising agencies, or any number of other
sources. Once a product has been approved, it must be designed, made, tested, revised,
and retested. It may be subject to test marketing (sold or given away in a few places) before
being put on the market generally.
Product Features The important features of product are:
(1) Tangible Features: A product (like soap, car, jewelry, etc.) has some physical
features such as shape, size, colour, weight etc. It can be touched, seen and its
physical presence can be felt. It is made up of materials like stone, wood, plastic or
metal.
1. (2) Intangible Attributes: - A product may also be in intangible form. It may not be
seen or touched but can only be felt. It may be in the form of a service such as
education, health care, bank, travel, transport, beautician, etc. These services may
be brought exclusively or may be associated with physical products like repairs and
maintenance, free-servicing after buying an automobile vehicle.
(2) Association Features: - Product may have associated attributes to facilitate its
identification and acceptance by buyers. Such attributes may be a brand name,
package, warranty, credit terms, delivery terms. For example, Hindustan Lever has
detergent powder with brand names Surf, Wheel, Rin, Maruti Udyog has cars with
brand names Maruti-800. Zen, Swift, Wagon R.
(3) Exchange Value: For marketing purpose, every product, whether tangible or
intangible, should have an exchange value and should be capable of being
exchanged between buyer and seller, for mutually agreed consideration.
 (4) Consumer Satisfaction: - The product should be able to satisfy the consumer need.
Satisfaction can be both real and psychological. For example, when we use eatables,
clothing, medicines, we get a real satisfaction, whereas when we purchase
insurance plan, services of travel agency or beauty parlor we derive psychological
satisfaction.
(5) Business Need Satisfaction: - The product should also be able to satisfy business
needs as well as societal needs. The basic need of the business is profit, whereas
the basic need of society is satisfaction of individual and social needs of people.
Every product brings the profit for the marketer through satisfaction of human
wants and desires. Branding- Introduction- The physical product is only a part of the
product image. It cannot stand alone before the potential buyer.
There are 4 elements that surround the product to give us a complete product concept.
These are:
1. Branding
2. Packaging
3. Product Guarantee and Warranty, and
4. Service.
There four elements are the vital marketing tools in any marketing programme to secure
the desired market share in a competitive market.
1. Branding- Branding is process. It covers various activities such as giving a brand
name for a product, designing a brand mark and established and popularizing it.
Brand Name – According to American Marketing Association, “Brand name is a part
of a brand consisting of a word or group of words comprising a name which is intended to
identify the goods or services of a seller to differentiate them from those competitors”
In other words, a brand name consists of words which may be pronounced e.g.
Usha, Fans, Godrej etc.
Brand Mark: A brand mark is that part of the brand which appears in the form of a
symbol, design or distinctive coloring or lettering. It is recognized by sight, but not
pronounceable. It is designed for easy identification of the product. E.g. the picture of
‘Gopuram” of Tamil Nadu Tourism and Development Corporation.
Types of Brand-
1. Individual Brand Name- Each product has a special and unique brand name. A firm
may decide upon a policy of adopting distinctive brands for each of its products.
 E.g. Surf, Aspro, etc. The manufacturer has to promote each individual brand in the
market separately. This creates a practical difficulty in promotion.
2. Family Brand Name- When a firm is making many lines of products and each line of
product is given a particular brand name it is called family brand. e.g. ‘Amul’ for milk
products, ‘Ponds’ for cosmetics etc. Family brand name can help combined
advertising and sales promotion
3. Umbrella/Company Brand: When all the products of a company have the name of
the company as a band name, such brand name is known as umbrella brand or
company brand. All the product of Godrej Company- soap, furniture, typewriter etc.
has only one brand name ‘Godrej’
4. Combination Device: Tata house is using a combination device. Each product has an
individual name but it also has the umbrella brand to indicate the business house
producing the product, e.g. tata’s Tej Under this method, side by side with the
product image, we have the image of the organization also. Many companies use
this device profitably.
5. Private or middleman’s Brands: in this type of brand the manufacturer introduces
his products under the distributors brand name. in India, this practice is popular in
the woolen, hosiery, sports goods market. The manufacturer merely produces
goods as per the specifications and requirements of distributors and he need not
worry about marketing. Middlemen enjoy more freedom in pricing products sold
under their own brands.
Trade Mark-A trademark is a registered brand or trade name. It can include any
combination of a name, slogan, logo, sounds or colors that identify the company or its
products or services.
Purpose The goal of a brand name is to provide an easy to recognize and remember
name that evokes a positive response in consumers. For example, many shoppers prefer
to buy "brand name" products as opposed to the generic kind because of their perceived
value.
A trademark provides legal protection of the brand name. Through registration, the
company is able to seek legal action against others who copy or use the brand without
permission.
What is the difference between Brand and Trademark?
• A brand is developed over a course of time with consistent quality that is
appreciated by customers.
 • A trademark is granted by trademark and patent office and is a legal device that
protects the owner in case of unlawful use of the trademark.
• Brand helps in identification of the product and the company, while trademark
helps in preventing others from copying.
• If a brand has not been registered, anyone can copy it, and there is no provision of
any penalty, while in case of trademark violation, there is severe penalty.

Advantages and Disadvantages of Branding

Advantages to Buyers:
1. A brand name denotes uniform quality. With it, the consumer has the assurance of
quality when he buys the products having a particular name.
2. Brand names make shopping easier. The customer has to spend less time and
energy in buying, as brand names make product identification easier, moreover the
customer has to go to the market and buy the products for the brands he prefers
without wasting time.
3. Competition among brads can and does, in due course of time, lead to quality
improvement.
4. Purchasing a socially visible brand gives immense psychological satisfaction to the
buyer.
Disadvantages to Buyers:
1. The product price tends to go up.
2. Manufacturers, taking advantages of the popularity of their brand names, may
reduce the quality gradually.
3. Branding creates confusion, consumers are not able to decide which brand is the
best in quality, because al l the brads claim to be the best ever in quality.
Advantages to Manufacture:
1. Branding is means of product identification.
2. In a highly competitive market, brand names can carve out niches for themselves
through product differentiation.
3. If brand loyalty can be developed through successful promotion, the sellers will be
able to exert quasi-monopolistic power.
4. Brand makes recall easier. The stronger the brand, the stronger its recall among the
people.
 After sales service/product support service Customer service is another element of
product strategy. Now a day’s more and more companies are using product support service
as a major tool in gaining competitive advantage. A company should design its product and
support service to profitably meet the needs of target customer. The first step is to survey
customers periodically to assess the value of current service and to obtain ideas for new
ones. Once the co has assessed the value of various support service to customers, it must
next assess the cost of providing these services. It can then develop a package of service
that will both delight customers and yield profits to the company.
Many companies are now using the internet and other modern technologies to
provide support services that were not possible before. Using the web, 24-hour telephone
help lines, self- service centers and other digital technologies, companies are now
empowering consumers to tailor their own service and support experiences.
Why After Sales Service? After sales service plays an important role in customer
satisfaction and customer retention. It generates loyal customers. Customers start
believing in the brand and get associated with the organization for a longer duration. They
speak well about the organization and its products. A satisfied and happy customer brings
more individuals and eventually more revenues for the organization. After sales service
plays a pivotal role in strengthening the bond between the organization and customers.
After Sales Service Techniques Stay in touch with customers- Sales Professionals
need to stay in touch with the customers even after the deal. Never ignore their calls.
Give them the necessary support. Help them install, maintain or operate a particular
product. Sales professionals selling laptops must ensure windows are configured in the
system and customers are able to use net without any difficulty. Similarly, organizations
selling mobile sim cards must ensure the number is activated immediately once the
customer submits his necessary documents. Immediate exchange service- Any product
found broken or in a damaged condition must be exchanged immediately by the sales
professional. Don’t harass the customers. Listen to their grievances and make them feel
comfortable. Create a web-site-Create a section in your organization’s website where
the customers can register their complaints. Every organization should have a toll-free
number where the customers can call and discuss their queries. The customer service
officers should take a prompt action on the customer’s queries. The problems must be
resolved immediately. Feedback from customers-Take feedback of the products and
services from the customers. Feedback helps the organization to know the customers
better and incorporate the necessary changes for better customer satisfaction.
Ask the customers to sign Annual Maintenance Contract (AMC) with your
organization. AMC is an agreement signed between the organization and the customer
where the organization promises to provide after sales services to the second party for a
certain duration at nominal costs. Transparent exchange policies-The exchange policies
must be transparent and in favour of the customer. The customer who comes for an
exchange should be given the same treatment as was given to him when he came for the
first time. Speak to him properly and suggest him the best alternative.
Benefits of after sales service- 1. Creates Goodwill- After sales service can build up
and maintain seller’s good will. 2. Satisfy consumer needs--grievances regarding servicing
and maintenance will be promptly and efficiently dealt with by the seller. Customer
satisfaction is the master key to further sales and growth. 3. Increases Sales and profit-
company will achieve remarkable success if after sales service is included in sales
promotion. 4. Helps to sale industrial goods-Free service during the guarantee period is
the best-selling point in the sale of machinery and appliances.

Packaging- 1. Introduction- Packaging is the process of containing the product in bottles,

plastic bags, wrappers, paper cartoons and boxes etc. Useful information regarding the
product, its contents, weight, size, price, constituents, usage necessary instruction about
the usage and storing the product must be recorded on the package. Package reduces the
risk of wastage, spoilage, leakage and evaporation etc. in the process of transportation and
storage. 2. Definitions- 1. William Stanton-“Packaging is the general group of activities in
designing the containers or wrappers of the product.”
2. Philip Kotler-“Packaging as all activities of designing and producing the containers for
the product, which is concerned with the protection, economy, convenience and
proportional considerations of the product.”

Functions/ role of Packaging 1. Protection-The fundamental function of packaging is to

protect it from sun, rain, insects and atmospheric contracts etc. packaging maintains the
product fresh and enhances its life. 2. Easy identification-Every producer has its own
distinct packaging, different from other with respect to design, size, color and other
specification packaging helps-us in the easy identification and immediate picking up of the
product. 3. Convenience-Packaging provides convenience in the transportation and
storage of the product. It is convenient for the consumers to use these products. Packaging
of Frooti Juices facilitates their consumption. Packaging, no doubt helps us in the safe and
convenient handling and storing of the product. 4. Sales promotion-It is rightly said that
packaging works as silent, salesman. It catches the attention of customers, who pick up the
product, go through its description and are induced to purchase the product. Self-service
is becoming more and more common in the field of shopping, where the customer picks
up the product himself and makes its payment on the counter. Packaging in these
circumstances promotes the sales. 5. Innovative ideas-The producers sometime develop
innovative ideas about packaging which promotes their sales. For examples, shampoo,
tomato ketchup, surf, sugar, milk, oil etc., are sold in small pouches. In addition to the
above functions packaging facilities branding of the product. Empty packages have their
resale value for customers. Packaging builds image of the product and its producers. The
effective packaging is the source of prestige to its producers. Packaging continues to be
more important in the modern growing completion, open, display of the product and self
service of the customers. 6. Economy- package provides various economies both to the
producers and to the consumers. Well packed products are fresh, clean and intact.
Therefore, monetary loss is prevented. Moreover, whenever possible, containers should
be so designed that they may be useful for further use-domestic or re-use.

7. Self service- the package is capable of performing many of the sales tasks. It must attract
attention, describe the producers’ features, give the consumer confidence and make a
favourable overall impression.

Kinds of packaging- 1. Consumer Packaging- a consumer package is a kind of package which

holds the required volume of product for the household consumption. E.g. tooth paste,
shoe polish, face powder etc. sometimes the same article may be packed in larger volume
for office or factory purpose. E.g. oil, ink, gas etc. 2. Family packaging- The product of a
particular manufacture when packed in an identical manner is known as family packaging.
The shape, color, size etc. of packaging will be similar for all his products. In such a case of
packaging methods, materials used for packaging the appearance etc. will be one and same
for all the products of a manufacturer. For example- Asian paints company packs all its
products is similar type of packing. 3. Re-use packaging- re-use packaging is also known as
dual package. Packages that could be used for some other purposes after the packed goods
have been consumed is known as re-use packaging. E.g. the glass of Nescafe instant coffee.
4. Multiple Packaging- the practice of placing several units in one container is known as
multiple packaging. Johnson’s Baby care set.
B.Price- Meaning, Importance of price in the marketing mix, factors affecting price of a
product / service.
Introduction- Pricing decisions have strategic importance in any enterprise. Pricing governs
the very feasibility of any marketing programme because it is the only element in a
marketing mix accounting for demand and sales revenue. Other elements are cost factors.
Price is the only variable factor determining the revenues or income. A variety of economic
and social objectives came into prominence in many pricing decisions. The term ‘price’
needs not be confused with the term ‘pricing’. Pricing is the art of translating into
quantitative terms the value of the product or a unit of a service to customer at a point of
time. Pricing is a managerial task that involves setting objectives, determining the available
the available flexibility, developing strategies, setting price and engaging in
implementation and control.

Meaning and definition of price-

‘Economist defines price as the exchange value of a product or service always expressed
in money’ . ‘The amount in money for which something is offered for sale’.

‘Price is the mechanism or device for translating into quantitative terms (Rupees and
Paise) the perceived value of the product to the customer at a point of time.’

We shall define the price as the amount charged for the product or service including any
warranties or guarantees, delivery, discounts, services or other items that are part of the
conditions of sale and are not paid for separately
Importance of Price in marketing mix: 1. Price is the pivot of an economy- price
policy is a weapon to realize the goals of planned economy, where resources can be
allocated as per planned priorities. Price is the prime mover of the wheels of the economy
namely, production, consumption, distribution and exchange. As price is a sacrifice of
purchasing power, it affects the living standards of the society; it regulates business profits
and hence, allocated the resources for the optimum output and distribution. Thus, it acts
as a powerful agent of sustained economic development. 2. Price regulates Demand-
marketing manager can regulate the product demand through price. Price increases or
decreases the demand for the products. To increase the demand, reduce the price and
increase the price to reduce the demand. Price has a special role to play in developing
countries where the marginal value of money is higher than those of advanced nations. 3.
Price is competitive weapon- any company whether it is selling high or medium or low
priced merchandise will have to decide as to whether its prices will be above or equal to
or below its competitors. It acts as a weapon to generate sale and repeat sale in the
competition. 4. Price is the determinant of profitability- price of a product determines the
profitability of a firm. In the firm, price is the basis for generating profits. Price reflects
corporate objectives and policies and it is an important ingredient of marketing mix. 5.
Price is a decision input- in the areas of marketing management countless and crucial
decisions are to be made. Normally, profit is taken as a base for decisions. E.g. it is a
decision regarding selecting product improvement possibilities; select that possibility
which gives the highest price as compared to the cost. 6. Price contribute to the revenue-
the other factors of marketing mix require to make expenditure where as price adds
earnings to the company. So by keeping prices at appropriate level, company can earn
more profit.
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7. Price is flexible- the company cannot make changes in product and distributions as per
our convenience. But we can change price depending upon competition, demand,
government policies etc. 8. Price reflects the quality of the product –a low price may
suggest an inferior or average quality of the product. The customer may go under the
impression that the product will perform very poorly. Conversely too high price may not
be justifiable form customers point of view. Therefore the price should be reasonable. 9.
Positioning- this positioning statement sets the arena for identifying the major competitors
of the company. Price is thus major in the sense that it can determine with whom the
company is competing. Factors affecting Price of product / service

A. Internal Factors 1. Marketing Objectives:- Before setting price, the company must decide
on its strategy fo the product. If the Company has selected its target market and positioning
carefully, then its marketing mix strategy, including price will be fairly straightforward. For
example, if general motors decide to produce a new sports car to compete with European
Sports cars in the high-income segment, this suggests charging a high price. The company
may seek additional objectives e.g. to keep a plant going, a company may set a low price,
hoping to increase demand. 2. Marketing Mix Strategy- price is only one of the marketing
mix tools that a company uses to achieve its marketing objectives. Price decisions must be
co-ordinated with product design, distribution, and promotion decisions to form a
consistent and effective marketing program. E.g. producers using many resellers who are
expected to support and promote their products may have to build larger reseller margin
into their prices. 3. Organization Objectives -Some organizations are pricing their products
on High Price Category because their image and market positioning strategy are “Market
leader” and “High Quality Brands”. For example: “apple laptops”, “BMW cars”, and other
high pricing products. So the organization should have a harmony of their image and their
brand image in the marketplace. Although sometimes organizations tend to release a low
price product of the same brand (to release a generic brand but for another target
segment); for example;
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if apple company released a laptops for Apple Brand, but the parts are collected from
Chinese market not from apple manufacturing company, and those brands became a low
price. 4. Organizational considerations- Management must decide who within the
organization should set prices. Companies handle pricing in a variety of ways. In small
companies prices are often set by top management rather than by the marketing / sales
departments. In large companies, pricing is typically handled by divisional or product line
managers. In industrial markets, salespeople may be allowed to negotiate with customers
within certain price ranges. 5. Costs-costs set the floor for the price that the company can
charge for its product. The company wants to charge a price that both covers all its costs
for producing, distributing and selling the product and delivers a fair rate of return for its
effort and risk. A company costs may be an important element in its pricing strategy. Many
companies work to become the ‘low-cost product’ in their industries. Companies with
lower costs can set lower prices that result in greater sales and profit.

External Factors affecting pricing strategies? 1. The market and demand-The costs set the
lower limit of prices, the market and demand set the upper limit. Both consumers and
industrial buyers balance the price of a product or service against the benefits of owning
it. Thus, before setting prices the marketer must understand the relationship between
prices and demand for its product. 2. Competition-All producers have to study the prices
charged by the competitors while pricing. To avoid competitive pricing, a firm may decide
that its product may be sufficiently different from that of the others. This is achieved
through methods of advertising, branding etc. sometimes; a higher price may itself
differentiate the product. This is known as prestige pricing. Sometimes the opposite also
takes place. 3. Customers- A price should be affordable to the customers. The pay ability
of the customer plays a very important role in price fixation of a product. This ability
depends upon personal and disposable income level of employment, condition of
economic progress and prosperity of people.
20

4. Suppliers-Raw material supply has an impact on the cost and price of the product. The
costs of the raw material, regularity of supply, seasonal variations in supply, quality of raw
material, delivery schedule and terms, and facility of transportation, carrying and ordering
cost of inventory and backward integration has effect on cost and price of the product.
Smooth, regular, continuous supply of raw material of good quality and at reasonable price
helps to stabilize prices. 5. Legal factors -They are part of Macro-environmental factors,
and can be considered as separate items because of the importance of legal and regulatory
laws in affecting your pricing strategies. Many companies aren’t capable to release their
products in the marketplace (especially for multinational companies) because of the legal
and regulatory influences that determine their pricing strategies. Many companies are
accepting to decrease their pricing strategies to be matched with the same products in the
marketplace, other are refusing to decrease their pricing strategies and finally their
product became not available in the marketplace. 6. Regulatory factors-Regulatory factors
should be considered while pricing. E.g. In the Pharmaceutical Market, there are Key
Accounts which are belonging to Governmental sector or ministry of health sector (M.O.H.)
who are obligated to decrease their pricing strategy by 50-80% to make their product
available for the end-consumers in those sectors. So really the key account management
and relationship marketing are playing an essential role in helping your organization to get
best pricing strategies in those sectors.

MARKETING MIX
In the previous lesson you learnt that marketing identifies consumers’ needs and supplies
various goods and services to satisfy those needs most effectively. So the businessman
needs to: (a) produce or manufacture the product according to consumers’ need; (b)
make available it at a price that the consumers’ find reasonable; (c) supply the product to
the consumers at different outlets they can conveniently approach; and (d) 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. In this lesson you will learn about the basic aspects relating to
these 4‘P’s viz., product, price, place and promotion.
OBJECTIVES
After studying this lesson, you will be able to :
• explain the concept of marketing mix and its components;
• explain the meaning of product and its classification;
• state the various factors affecting pricing decisions;
• describe different methods of pricing;
• state the meaning of channels of distribution;
• identify the various channels of distribution;
• state the factors affecting choice of a channel of distribution; and
• explain the concepts of promotion and promotion mix.
20.1 CONCEPT AND COMPONENTS OF MARKETING MIX
Marketing involves a number of activities. 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, distribution and
promotional efforts is 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”. The controllable variables in this context
refer to the 4 ‘P’s [product, price, place (distribution) and promotion]. Each firm strives
to build up such a composition of 4‘P’s, which can create highest level of consumer
satisfaction and at the same time meet its organisational objectives. Thus, this mix is
assembled keeping in mind the needs of target customers, and it varies from one
organisation to another depending upon its available resources and marketing objectives.
Let us now have a brief idea about the four components of marketing mix.
Product : Product refers to the goods and services offered by the organisation. A pair of
shoes, a plate of dahi-vada, a lipstick, all are products. 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 marketeer offers to the consumer for a price. While buying a pair of
shoes, we are actually buying comfort for our feet, while buying a lipstick we are actually
paying for beauty because lipstick is likely to make us look good. Product can also take
the form of a service like an air travel, telecommunication, etc. 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. Woollens are
manufactured on a large scale in Ludhiana and you purchase them at a store from the
nearby market in your town. So, it is necessary that the product is available at shops in
your town. 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 etc. It can even plan to sell it directly to
consumers. The choice is guided by a host of factors about which you will learn later in
this chapter.
Promotion: If the product is manufactured keeping the consumer needs 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.
Marketing Mix: A bird’s eye view
 Price

Product Target Promotion

Customer

Place
(Distribution)

Having acquainted ourselves with the broad nature of the four components of marketing
mix, let us now learn some important aspects of each one of these in detail in the
following sections.
20.2 CONCEPT OF PRODUCT AND ITS CLASSIFICATION
As stated earlier, product refers to the goods and services offered by the organisation for
sale. Here the marketers have to recognize that consumers are not simply interested in
the physical features of a product but a set of tangible and intangible attributes that
satisfy their wants. For example, when a consumer buys a washing machine he is not
buying simply a machine but a gadget that helps him in washing clothes. It also needs to
be noted that the term product refers to anything that can be offered to a market for
attention, acquisition, or use. Thus, the term product is defined as “anything that can be
offered to a market to satisfy a want”. It normally includes physical objects and services.
In a broader sense, however, it not only includes physical objects and services but also
the supporting services like brand name, packaging accessories, installation, after sales
service etc. Look at the definitions by Stanton and McCarthy as given in the box.

Product
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.
Let us have a brief idea about the various categories and their exact nature under each
head, noting at the same time that in marketing the terms ‘product’ and ‘goods’ are
often used interchangeably.
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 behaviour the consumer goods can
be further classified as :
(i) Convenience Goods;
(ii) Shopping Goods; and
(iii) Speciality Goods.
(i) Convenience Goods : Do you remember, the last time when did you buy a packet of
butter or a soft drink or a grocery item? Perhaps you don’t remember, or you will say last
week or yesterday. Reason is, these goods belong to the categories of convenience
goods which are bought frequently without much planning or shopping effort and are
also consumed quickly. Buying decision in case of these goods does not involve much
pre-planning. 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 finalise 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 cameras, TV sets, new automobiles etc.
(b) Industrial Goods: Goods meant for consumption or use as inputs in production of
other products or provision of some service are termed as ‘industrial goods’. These are
meant for non-personal and commercial use and include (i) raw materials, (ii) machinery,
(iii) components, and (iv) operating supplies (such as lubricants, stationery etc). The
buyers of industrial goods are supposed to be knowledgeable, cost conscious and rational
in their purchase and therefore, the marketeers follow different pricing, distribution and
promotional strategies for their sale.
It may be noted that the same product may be classified as consumer goods as well as
industrial goods depending upon its end use. Take for example the case of coconut oil.
When it is used as hair oil or cooking oil, it is treated as consumer goods and when used
for manufacturing a bath soap it is termed as industrial goods. However, the way these
products are marketed to these two groups are very different because purchase by
industrial buyer is usually large in quantity and bought either directly from the
manufacturer or the local distributor.
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 presale and after-sale service are
important determinants of purchase decision.
(b) Non-durable Goods: 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 etc.
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 groceries, cars, raw-
materials, machinery etc. 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. Medical treatment, postal, banking and insurance services etc., all fall
in this category.