Module 1. Overview of marketing

Lesson 4


4.1 Introduction

American marketing expert James Culliton coined the term ‘marketing mix’ which was later popularized by Neil H. Borden. American professor of marketing Jerome McCarthy described the marketing mix in term of four Ps i.e. product, place, price and promotion. Each P of marketing mix encompasses other sub-elements. The main purpose of all the organizations is to earn maximum profit and become market leader in this competitive world. This calls for proper management of all marketing mix elements. Each elements of marketing mix has its own importance and are equally important. But for an organization, to gain a competitive edge it is essential that the elements of marketing mix are chosen and mixed in right proportion to increase the attractiveness of product. The use of marketing mix varies from organization to organization. A large organization with more financial resources may spend more on promotion than a small firm. In general the use of marketing variables is depended upon a) environmental factor b) financial position of the organization c) objectives of firm d) organization structure and information system of the organization.

4.2 Product

A product is anything which is capable of satisfying a want. It is generic term which refers to all similar objects that provide same benefits to the consumer. In competitive market different firm sell their product under different brand name.

A product is the main focus of any marketing planning which determines the success or failure of the firm. A product is not a simply physical item but a mixture of tangible and intangible characteristics including packaging, colour and price. A product can be anything and ranges from goods (toothbrush), services (hospitals), experiences (waterpark), events (Marathon run), concepts (polio eradication), ideas (women empowerment) propositions (love for the country), places (Taj Mahal), nations (India), properties (textile, agricultural land), organizations (IIMs, IITs), information (websites). A product is any item of value offered to the customer for attention, purchase, use and disposal of consumers for satisfaction of their needs and wants.

A product is further categorized in to following categories.

Table 4.1 Classification of product

Core benefit

The reason for purchasing a product

The text book is purchased to gain knowledge

Basic product

It includes tangible elements of product.

A textbook includes written pages, arranged properly and available in a bound form.

Expected product

Normal expectation of consumer from the product.

From the text book, a purchaser (generally student) expects colorful pages, easy explanations, case studies, question answer etc.

Augmented product

Features which exceeds customer expectations.

In addition to book, a CD containing power point presentations, a facility to use other links provided in the book through unique password provided with the book.

Potential product

All possible changes in the product in future to increase its attractiveness.

4.3 Price

Pricing is the secret component of marketing mix. Price is the only component of marketing mix which provides revenue to the firms. For all other Ps of marketing mix, organization has to spend money. Price is referred by many terms such as rent, tuition, fare, rate, interest, due, premium, honorarium, bribe etc. The key factor to be considered in determining products price depends upon the value placed by consumer on the products which is derived from consumer’s perception of the total satisfaction provided by the product. If the price is higher than the perceived value, the exchange between buyer and seller does not result.

Price setting by the firm involves following steps.

1. Selecting the pricing objective: It may be survival, maximum current profit, maximum market share, maximum market skimming, product quality leadership or other objectives.

2. Determining demand: It employs various methods of demand estimation and takes into consideration price elasticity.

3. Estimating cost: It aims at finding out the cost of production and segregating it into fixed and variable cost.

4. Analyzing competitors, cost, price and offers.

5. Selecting a pricing method: Different methods are adopted by firms based upon marketing objectives and competitive scenario. This includes mark up pricing, target return pricing, perceived value pricing, value pricing, going rate pricing, auction type pricing.

6. Deciding the final price: Considering its impact on other marketing activities and based upon company pricing policy, a final price for the product is selected.

4.4 Place

Place is third P of marketing mix. This involves network of distribution channel through which product reach the final consumer. It is essential that finished goods are made available at customer points, of desired quality in sufficient numbers at right time. This is made possible through marketing channels. A marketing channel is a system of relationship among participating members which make the final product available to the consumer.

The distribution process of any marketing organization consists of two basic parts.

i. The channel of distribution through which goods and services are made available to the consumers.

ii. Physical distribution which involves actual transportation of goods from the origin point to consumption point. Organizations employ different channels for distributing their products. Industrial goods and some services have limited clientele and thus often marketed directly to the consumer eliminating the middlemen. Consumer goods and mass consumption items are distributed with the help of many middlemen such as distributors, stockiest, whole sellers, dealers, agents and retailers as it is not possible to reach large number of consumer directly. Each of these intermediaries forms a separate link in the distribution chain.

When the goods are distributed without involving any middleman, the process is called zero level or direct distribution. If the goods pass through different middleman before reaching the final consumer, it may be referred to one, two or more level distribution channel. Depending upon number of levels, a channel may be categorized as long or short. Use of long or short chain depends upon quantity of output, number of consumers and their frequency of buying, nature of product, shelf-life of product, geographic spread of market etc. A long chain increases the cost and time of distribution. A short channel limits the market penetration of product. The marketing organization faces a tradeoff between the long chain and short chain of distribution.

There are various types of marketing channels as shown below:

a) Direct marketing channel

i) Zero-level channel: No market intermediary


b) Indirect marketing channel

i) One-level channel: One market intermediary


ii) Two-level channel: Two market intermediaries


iii) Three-level channel: Three market intermediaries


iv) Four-level channel: Four market intermediaries


Fig. 4.1 Types of marketing channel

4.5 Promotion

It is the face of the company. It refers to tools of communicating message to the customer. It includes advertising, sales promotion, personnel selling, public relations, publicity, events & experiences, direct marketing, interactive marketing, word of mouth marketing.

Advertising is any paid form of non personal presentation and promotion of ideas, goods or services by an identified sponsor. Sales promotion includes a variety of short term incentives to encourage trial or purchase of a product or service. Personal selling is a face to face interaction with one or more prospective consumers. So as to make presentation, solve their queries and take the purchase orders.

Different types of programmes designed to promote or protect firm’s image and its products are referred to as public relations and publicity.

Activities and programmes sponsored by firms to create daily or special brand related interactions are referred to as events and experiences.

The vehicles used to communicate directly with the customer and prospects are referred to as direct marketing tools viz., mail, telephone, fax, email, and internet.

Online activities and programmes which involve customers and prospects directly and indirectly and aim at raising awareness, improve image and lead to sale of goods or services are referred to as interactive marketing.

Oral, written or electronic communication between two persons with regards to advantages or experiences of purchasing or using products or services is called word of mouth marketing.

4.6 Important Decisions of Marketing Mix

The four Ps are to be controlled by the marketing manager subject to internal and external constraints of the marketing environment. The goals should be, to make the decisions that center around the four Ps of the customers in the target market so as to create perceived value and generate a positive response. The important decisions to be made with each of the four Ps are shown in Table 4.2.

Table 4.2 Important decision parameters of four Ps





Brand name







Accessories & Services

Pricing Strategy

Volume discount & wholesale pricing

Seasonal pricing

Cash & early payment discount

Price flexibility


Distribution Channels

Market Coverage

Inventory Management

Specific Channel Members

Distribution Centers


Order Processing


Reverse Logistics

Strategy (Pull Push)


Personnel Selling and Sales force

Public Relations & Publicity

Marketing communication on budget.

With marketing more integrated into organizations and with a wider variety of products and markets, some authors have also proposed fifth & such as packaging, people, processes etc., however, even today the marketing mix most commonly remains based on the four Ps.

Last modified: Wednesday, 6 June 2012, 11:21 AM