Unit 4: Marketing

4.4 - The Seven P's of The Marketing Mix

Understanding the Extended Marketing Mix and Branding Strategy

Introduction to The Marketing Mix

The Marketing Mix is a set of controllable marketing tools that a business uses to achieve its marketing objectives in the target market. These tools help companies create the right offering for their customers.

Evolution of the Marketing Mix:

Original 4 P's (1960s): Product, Price, Promotion, Place
Extended 7 P's (1980s): Added People, Process, Physical Evidence
Reason for extension: Growth of service industries required additional elements

Purpose: Create a cohesive marketing strategy that satisfies customer needs while achieving business goals.

1. Product

Product refers to the goods or services offered to satisfy customer needs and wants. It encompasses everything the customer receives when making a purchase.

Levels of a Product

1. Core Product:

The fundamental benefit or service
What the customer is really buying
Example: A hotel provides accommodation and rest

2. Actual Product:

The tangible product with specific features
Brand name, design, quality, packaging
Example: Hotel room with specific amenities, brand (Marriott), design

3. Augmented Product:

Additional services and benefits
After-sales service, warranty, delivery
Example: Hotel concierge service, loyalty program, free Wi-Fi, breakfast

Product Features and Attributes

Quality: Standard of excellence, durability, reliability
Design: Appearance, functionality, user experience
Features: Specific characteristics and capabilities
Brand name: Identity and reputation
Packaging: Protection, information, appeal
Product range: Variety of products offered
Product line: Related products within a category
Unique Selling Point (USP): What makes product different from competitors

Product Life Cycle Integration

Product strategies vary by life cycle stage:

Introduction: Focus on awareness, unique features, build brand
Growth: Improve quality, add features, extend product line
Maturity: Differentiate from competitors, modify product
Decline: Discontinue or reposition product

Product Example: Apple iPhone

Core product: Communication and connectivity
Actual product: Smartphone with specific features (camera, processor, iOS), Apple brand, sleek design, premium packaging
Augmented product: Apple Care warranty, iCloud storage, Apple Store support, regular software updates, ecosystem integration
USP: Seamless ecosystem integration, premium user experience, brand prestige

2. Price

Price is the amount customers pay for a product or service. It's the only P that generates revenue; all others represent costs. Pricing affects demand, profitability, brand positioning, and competitive advantage.

Pricing Strategies

1. Cost-Plus Pricing:

Add markup percentage to total cost
Formula:

\[ \text{Selling Price} = \text{Total Cost per Unit} + (\text{Total Cost} \times \text{Markup \%}) \]

Advantages: Simple, ensures profit coverage
Disadvantages: Ignores customer demand and competition

2. Penetration Pricing:

Set low initial price to gain market share quickly
Increase price once established
Best for: New markets, mass market products
Example: Netflix low initial subscription prices

3. Price Skimming:

Set high initial price, lower gradually over time
Target early adopters willing to pay premium
Best for: Innovative products, luxury goods
Example: Apple iPhone pricing strategy

4. Competitive Pricing:

Set prices based on competitors' prices
Price at, above, or below competition
Best for: Highly competitive markets

5. Psychological Pricing:

$9.99 instead of $10.00 (charm pricing)
Creates perception of lower price
Appeals to emotional buying decisions

6. Premium Pricing:

Set high price to signal quality and exclusivity
Creates prestige brand image
Example: Rolex, Tesla, luxury brands

7. Dynamic Pricing:

Prices change based on demand, time, customer
Example: Airline tickets, Uber surge pricing

8. Loss Leader Pricing:

Sell product below cost to attract customers
Expect customers to buy other profitable items
Example: Supermarket discounts on milk to drive foot traffic

Factors Affecting Pricing Decisions

Costs: Must cover variable and fixed costs
Competition: Competitor pricing influences decisions
Target market: Customer purchasing power and willingness to pay
Product life cycle stage: Different strategies for each stage
Brand positioning: Premium vs. budget image
Demand elasticity: How sensitive customers are to price changes
Marketing objectives: Market share vs. profit maximization
Legal constraints: Price fixing laws, minimum pricing

Price Strategy Example: Amazon Prime

Strategy: Penetration pricing initially to build subscriber base
Initial price: Low annual fee ($79) to attract members
Value proposition: Free shipping, streaming, benefits outweigh cost
Result: Lock in customers to ecosystem, increase over time
Current strategy: Gradual price increases as value increases

3. Promotion

Promotion encompasses all communication activities used to inform, persuade, and remind customers about products or services. It builds awareness, creates desire, and drives action.

Promotional Mix Elements

1. Advertising:

Paid, non-personal communication through mass media
Types: TV, radio, print, online, outdoor (billboards)
Advantages: Wide reach, control over message
Disadvantages: Expensive, impersonal, difficult to measure effectiveness

2. Sales Promotion:

Short-term incentives to encourage purchase
Examples: Discounts, coupons, BOGOF (Buy One Get One Free), contests, loyalty programs
Advantages: Immediate sales boost, measurable results
Disadvantages: Can damage brand image if overused, temporary effect

3. Public Relations (PR):

Building positive image through media coverage and events
Activities: Press releases, sponsorships, charity events, media relations
Advantages: High credibility, cost-effective
Disadvantages: Less control over message, indirect impact

4. Personal Selling:

Face-to-face interaction with customers
Examples: Sales representatives, retail staff, B2B sales teams
Advantages: Personalized, builds relationships, immediate feedback
Disadvantages: Expensive, limited reach, labor-intensive

5. Direct Marketing:

Targeted communication to specific customers
Methods: Email, SMS, direct mail, telemarketing
Advantages: Targeted, measurable, personalized
Disadvantages: Can be intrusive, requires customer data

6. Digital Marketing:

Social Media Marketing: Facebook, Instagram, Twitter, TikTok
Search Engine Marketing (SEM): Google Ads, paid search
Content Marketing: Blogs, videos, podcasts, infographics
Influencer Marketing: Partnering with social media influencers
Email Marketing: Newsletters, promotional emails
Advantages: Cost-effective, targeted, measurable, interactive

Promotional Strategies

Push Strategy:

Push product through distribution channels to customers
Focus on wholesalers, retailers with trade promotions
Personal selling and trade shows
Best for: B2B, new products, low brand awareness

Pull Strategy:

Create consumer demand that "pulls" product through channels
Focus on end consumers with advertising and promotions
Consumers request product from retailers
Best for: Established brands, consumer goods

Promotion Example: Coca-Cola

Advertising: TV commercials, billboards, sponsorships (Olympics, FIFA)
Sales Promotion: "Share a Coke" campaign with names on bottles
Public Relations: Sustainability initiatives, community programs
Digital Marketing: Social media campaigns, influencer partnerships
Strategy: Pull strategy—create strong consumer demand

4. Place (Distribution)

Place refers to how products reach customers—the distribution channels, locations, and logistics involved in making products available to target markets at the right time and place.

Distribution Channels

Channel Levels:

1. Direct Distribution (Zero-level):

Manufacturer → Consumer
No intermediaries
Examples: Dell computers (direct online), farmers' markets
Advantages: Full control, higher margins, direct customer relationship
Disadvantages: Higher costs, limited reach

2. One-level Channel:

Manufacturer → Retailer → Consumer
Examples: Clothing brands selling to department stores

3. Two-level Channel:

Manufacturer → Wholesaler → Retailer → Consumer
Examples: Food products, consumer goods
Advantages: Wide distribution, lower costs for manufacturer

4. Three-level Channel:

Manufacturer → Agent → Wholesaler → Retailer → Consumer
Used for: International distribution

Distribution Strategies

1. Intensive Distribution:

Distribute through as many outlets as possible
Maximize availability and exposure
Best for: Convenience goods (soft drinks, snacks, newspapers)
Example: Coca-Cola available in millions of locations

2. Selective Distribution:

Use limited number of outlets in specific locations
Balance between coverage and control
Best for: Shopping goods (electronics, furniture)
Example: Nike products in selected sports retailers

3. Exclusive Distribution:

Grant exclusive rights to limited distributors
Maintain brand prestige and control
Best for: Luxury goods, specialty products
Example: Tesla only selling through company-owned stores

E-commerce and Omnichannel Distribution

E-commerce Distribution:

Online sales through company websites or platforms (Amazon, eBay)
Advantages: Global reach, lower costs, 24/7 availability, data collection
Challenges: Logistics, returns, lack of physical experience

Omnichannel Approach:

Integrate multiple channels for seamless customer experience
Online + physical stores + mobile apps
Example: Buy online, pick up in store (BOPIS)

Place Example: Zara (Fast Fashion)

Strategy: Selective distribution with company-owned stores
Physical stores: Prime locations in major cities worldwide
Online: E-commerce platform with home delivery
Logistics: Rapid inventory turnover, efficient supply chain
Advantage: Control over brand experience, quick response to trends

5. People

People refers to all individuals involved in the production, delivery, and consumption of a service or product. This includes employees, management, and customers themselves. People are crucial especially in service industries where human interaction defines the experience.

Importance of People in Marketing

Service delivery: Employees directly affect customer satisfaction
Brand ambassadors: Staff represent the company and its values
Customer relationships: Personal interactions build loyalty
Differentiation: Excellent service distinguishes from competitors
Word-of-mouth: Good employee interactions lead to positive reviews

Key Aspects of People Management

1. Recruitment and Selection:

Hire employees with right skills, attitude, and values
Look for customer service orientation
Cultural fit with company values

2. Training and Development:

Product knowledge training
Customer service skills
Communication and problem-solving
Ongoing professional development

3. Motivation and Empowerment:

Empower employees to make decisions
Incentive programs and recognition
Create positive work environment
Link employee satisfaction to customer satisfaction

4. Customer Interaction:

Professionalism and courtesy
Responsiveness to customer needs
Handling complaints effectively
Building long-term relationships

5. Internal Marketing:

Treat employees as internal customers
Ensure they understand and believe in brand
Create brand advocates within organization

People Example: Ritz-Carlton Hotel

Selection: Rigorous hiring process for service-oriented individuals
Training: Extensive training on luxury service standards
Empowerment: Staff can spend up to $2,000 to solve guest problems
Culture: "We are Ladies and Gentlemen serving Ladies and Gentlemen"
Result: Exceptional customer experience and loyalty

6. Process

Process refers to the methods, procedures, and flow of activities by which services are delivered to customers. Efficient processes ensure consistent quality, reduce costs, and enhance customer satisfaction.

Importance of Process in Marketing

Service quality: Standardized processes ensure consistency
Customer experience: Smooth processes reduce friction and frustration
Efficiency: Streamlined processes lower costs and time
Differentiation: Superior processes create competitive advantage
Scalability: Well-designed processes enable business growth

Key Process Elements

1. Customer Journey Mapping:

Identify all touchpoints in customer experience
Understand customer needs at each stage
Optimize each interaction point

2. Service Blueprinting:

Visual representation of service delivery process
Front-stage (customer-visible) activities
Back-stage (internal) processes
Support systems and processes

3. Standardization vs. Customization:

Standardization: Consistent, efficient, predictable (McDonald's)
Customization: Tailored to individual needs (luxury services)
Balance between efficiency and personalization

4. Automation and Technology:

Self-service options (kiosks, mobile apps)
Online booking and payment systems
CRM systems for customer management
Chatbots for customer support

5. Quality Control:

Monitoring and measuring service delivery
Feedback mechanisms
Continuous improvement (Kaizen)
Mystery shoppers and audits

6. Waiting Time Management:

Queue management systems
Appointment scheduling
Fast-track options
Entertainment/distraction during waits

Process Example: Amazon Order Fulfillment

Ordering: Simple one-click purchasing process
Warehousing: Automated picking and packing systems
Shipping: Real-time tracking, multiple delivery options
Returns: Easy, no-questions-asked return process
Technology: AI for recommendations, logistics optimization
Result: Industry-leading customer satisfaction and efficiency

7. Physical Evidence

Physical Evidence refers to the tangible elements that customers encounter before, during, and after service consumption. Since services are intangible, physical evidence helps customers evaluate service quality and creates tangible reminders of the service experience.

Types of Physical Evidence

1. Servicescape (Physical Environment):

Exterior: Building design, signage, parking, landscaping
Interior: Layout, décor, lighting, music, temperature, scent
Cleanliness: Hygiene and maintenance standards
Example: Apple Store's minimalist, spacious design reinforces premium brand

2. Employee Appearance:

Uniforms and dress code
Grooming standards
Name badges and identification
Professional presentation

3. Tangible Communication:

Business cards and stationery
Brochures and promotional materials
Signage and wayfinding
Website design and user interface
Social media presence

4. Equipment and Facilities:

Technology and tools used
Furniture and fixtures
Vehicles (delivery trucks with branding)
Quality of equipment signals service quality

5. Tangible Souvenirs:

Receipts and invoices
Packaging and bags
Loyalty cards
Branded merchandise
Post-service communications

6. Other Customers:

Type and behavior of other customers
Crowding levels
Creates atmosphere and social proof

Functions of Physical Evidence

Tangibilize intangibles: Make services more concrete and evaluable
Signal quality: High-quality environment suggests high-quality service
Create atmosphere: Influence customer mood and behavior
Facilitate service: Good design improves service delivery
Differentiate from competitors: Unique physical elements create distinction
Socialize customers: Guide appropriate behavior through design

Physical Evidence Example: Starbucks

Exterior: Green mermaid logo, welcoming storefront
Interior: Comfortable seating, warm lighting, coffee aroma, background music
Employee appearance: Green aprons, casual but clean attire
Equipment: Visible espresso machines, quality coffee-making equipment
Tangibles: Branded cups with customer names, loyalty app, merchandise
Result: "Third place" between home and work—comfortable community space

8. Marketing Mix Integration

The 7 P's must work together cohesively to create a unified marketing strategy. Each element influences and supports the others.

Key integration principles:

Consistency: All elements must align with brand positioning
Target market focus: All P's designed for specific customer segment
Competitive advantage: Combine P's to differentiate from competitors
Flexibility: Adapt mix as market conditions change

Marketing Mix Element	Key Questions	Examples
Product	What does customer need? What features matter? What's our USP?	Quality, design, features, branding, packaging
Price	What will customers pay? What's our pricing strategy? How do we compare?	Premium, penetration, skimming, competitive
Promotion	How do we communicate? What channels? What message?	Advertising, social media, sales promotion, PR
Place	Where do customers buy? How do we distribute? Online or offline?	Direct, retail stores, e-commerce, wholesalers
People	Who delivers service? How are they trained? What's customer interaction?	Staff training, customer service, empowerment
Process	How is service delivered? Is it efficient? Is it consistent?	Service blueprints, automation, quality control
Physical Evidence	What tangibles support service? What's the environment? What do customers see?	Store design, uniforms, packaging, website

9. Branding

Branding is the process of creating a distinctive identity for a product or company in the minds of consumers. A brand is more than just a name or logo—it's the total customer experience and perception.

Components of a Brand

Brand name: The word or words used to identify product (Nike, Apple)
Brand mark/logo: Visual symbol or design (Nike swoosh, Apple apple)
Tagline/slogan: Memorable phrase ("Just Do It", "Think Different")
Brand values: Core beliefs and principles the brand represents
Brand personality: Human characteristics associated with brand
Brand promise: What customers can expect from the brand

Types of Branding Strategies

1. Product Branding:

Each product has its own brand name
Example: Procter & Gamble brands (Tide, Gillette, Pampers)
Advantage: Failure of one doesn't affect others
Disadvantage: Expensive to build multiple brands

2. Corporate Branding:

Company name is the brand for all products
Example: Sony (Sony TV, Sony PlayStation, Sony Camera)
Advantage: Brand recognition transfers across products
Disadvantage: Negative publicity affects all products

3. Own-Brand/Private Label:

Retailers create their own brands
Example: Walmart's Great Value, Target's Up & Up
Advantage: Higher margins, customer loyalty to retailer

4. Manufacturer Brands:

Producer creates and owns the brand
Example: Coca-Cola, Samsung, Toyota
Advantage: Control over brand image and quality

5. Co-branding:

Two brands collaborate on single product
Example: GoPro + Red Bull, Nike + Apple
Advantage: Leverage strengths of both brands

Brand Loyalty and Brand Equity

Brand Loyalty:

Customer commitment to repeatedly purchase brand
Resistant to switching despite competitive offers
Levels: Brand recognition → Brand preference → Brand insistence
Benefits: Repeat purchases, word-of-mouth, price premium acceptance

Brand Equity:

Value premium that brand name adds to product
Intangible asset with financial value
Components: Brand awareness, perceived quality, brand associations, brand loyalty
Example: Coca-Cola brand worth estimated at $80+ billion

Building Strong Brands

Consistent messaging: Maintain coherent brand identity across touchpoints
Quality delivery: Meet or exceed brand promise consistently
Emotional connection: Create meaningful relationships with customers
Differentiation: Stand out from competitors with unique value
Authenticity: Be genuine and transparent
Customer experience: Deliver excellent experience at every interaction
Storytelling: Create compelling brand narrative
Innovation: Stay relevant and evolve with customer needs

Branding Example: Tesla

Brand identity: Innovation, sustainability, luxury
Brand values: Environmental responsibility, cutting-edge technology
Brand personality: Visionary, disruptive, exclusive
Brand promise: Accelerate world's transition to sustainable energy
Differentiation: Electric vehicles with superior performance and technology
Brand equity: Strong loyalty, premium pricing, brand evangelists
Result: Market leader in electric vehicles with cult-like following

IB Business Management Exam Tips

Common Exam Questions

"Explain the importance of the extended marketing mix (7 P's) for service businesses" (6 marks)
"Analyse the marketing mix of Company X" (10 marks)
"Discuss the importance of branding for a business entering a new market" (10 marks)
"Evaluate the effectiveness of Company Y's promotional strategy" (12-16 marks)
"To what extent does physical evidence influence customer satisfaction?" (20 marks)

Answer Structure Tips

Define key terms: Always define marketing mix, branding, specific P's
Apply to context: Use information from case study/question
Use examples: Real company examples strengthen answers
Show integration: Explain how P's work together
Consider stakeholders: Impact on customers, business, employees
Evaluate: Discuss advantages, disadvantages, alternatives
Context matters: Different industries require different emphasis (services vs. products)

Key Distinctions to Remember

4 P's vs. 7 P's: Original 4 for products, extended 7 for services
Place = Distribution: Not just location, but entire distribution strategy
Process ≠ Production: Process is about service delivery, not manufacturing
People includes customers: Not just employees
Branding ≠ Logo: Brand is total perception, logo is one element

✓ Unit 4.4 Summary: The Seven P's of The Marketing Mix

You should now understand that the marketing mix consists of seven controllable elements businesses use to achieve marketing objectives. The original 4 P's (Product, Price, Promotion, Place) were extended to 7 P's (adding People, Process, Physical Evidence) to address service industry needs. Product encompasses core benefits, actual features, and augmented services with unique selling points. Price involves various strategies (cost-plus, penetration, skimming, premium, psychological) based on costs, competition, and positioning. Promotion includes advertising, sales promotion, PR, personal selling, direct marketing, and digital marketing using push or pull strategies. Place covers distribution channels (direct, one-level, two-level, three-level) and strategies (intensive, selective, exclusive) including e-commerce. People refers to all individuals affecting service delivery requiring proper recruitment, training, and empowerment. Process involves service delivery methods ensuring consistency, efficiency, and quality. Physical Evidence provides tangible cues (servicescape, appearance, communication, equipment) that help customers evaluate intangible services. All seven elements must integrate cohesively aligned with brand strategy. Branding creates distinctive identity through names, logos, values, and personality, building brand loyalty and equity. Strong brands require consistency, quality, emotional connection, differentiation, and authenticity across all marketing mix elements.