The Internal Environment Of Marketing
The internal environment is comprises of the activities inside of your marketing organization. In your internal environment, you have some variables to make decisions and influence your marketing efforts, such variables as in your 7Ps of marketing e.g. product, promotion, price, place, process, physical environment.
PRODUCT STRATEGY PRODUCT MIX, PRODUCT LINES AND PRODUCT STRETCHING
Businesses are continuously making critical decisions about their product range. Product decisions will include whether to develop new products and how to manage existing products. This article is about the different ways firms manage the type and number of products they sell and related terms.
Product Mix (Product Portfolio or Product Assortment)
The Product mix is the total variety of products a firm sells. Some firms will sell just one product, whilst others will sell a large number of different products. For example Samsung’s product mix includes mobile phones, netbooks, tablets, televisions, fridges, microwaves, printers and memory cards. Firms should select their product mix carefully as they will need to generate a profit from each of the products in the product mix.
Firms may decide to split their product mix into groups known as product lines. A product line is a number of products grouped together based on similar characteristics. The characteristic used to split products, will depend on the firm and its product strategy. They include product price, product quality, who the product is aimed at (target group), and product specification/features. For example Samsung’s mobile phones are divided into product lines based on the following features; touch screens, slider/folders, QWERTY keyboards and bar phones. Product lines help firms manage their products as product strategy can be designed around product lines. This is useful if the firm has a large product mix as there is less need to concentrate on individual product type strategy.
Product Line Length
The product line length shows the number of different products in a product line. A long product line has lots of different products in it and a short product line has a small number of different products. The product manager’s job is to work out how many products to include in the product line. If there are too many product types in a product line, they will begin to compete with each other, increase costs unnecessarily and even confuse customers. If the product line is too short it will limit customer choice and send customers to competitors with a greater selection of products.
Product Line Depth
Some of the product types in a product line may be split again into groups, the product line depth shows how many subgroups the product line contains. For example Samsung have split their mobile phones into the following product lines touch screens, slider/folders, QWERTY keyboards and bar phones. Each of these product lines can be further split into subgroups at the time of writing this article Samsung had 7 slider mobile phones and 32 touch screen mobile phones, 32 is a deep product line.
Pricing should take into account the following factors into account:
- Fixed and variable costs.
- Company objectives
- Proposed positioning strategies.
- Target group and willingness to pay
An organisation can adopt a number of pricing strategies, the pricing strategy will usually be based on corporate objectives.
Types of Pricing Strategy
|Penetration Pricing||Here the organisation sets a low price to increase sales and market share. Once market share has been captured the firm may well then increase their price.||A television satellite company sets a low price to get subscribers then increases the price as their customer base increases.|
|Skimming Pricing||The organisation sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer.||A games console company reduces the price of their console over 5 years, charging a premium at launch and lowest price near the end of its life cycle.|
|Competition Pricing||Setting a price in comparison with competitors. Really a firm has three options and these are to price lower, price the same or price higher||Some firms offer a price matching service to match what their competitors are offering.|
|Product Line Pricing||Pricing different products within the same product range at different price points.||An example would be a DVD manufacturer offering different DVD recorders with different features at different prices eg A HD and non HD version.. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximising turnover and profits.|
|Bundle Pricing||The organisation bundles a group of products at a reduced price. Common methods are buy one and get one free promotions or BOGOF’s as they are now known. Within the UK some firms are now moving into the realms of buy one get two free can we call this BOGTF i wonder?||This strategy is very popular with supermarkets who often offer BOGOF strategies.|
|Psychological Pricing||The seller here will consider the psychology of price and the positioning of price within the market place||The seller will therefore charge 99p instead £1 or $199 instead of $200. The reason why this methods work, is because buyers will still say they purchased their product under £200 pounds or dollars, even thought it was a pound or dollar away. My favourite pricing strategy.|
|Premium Pricing||The price set is high to reflect the exclusiveness of the product.||An example of products using this strategy would be Harrods, first class airline services, Porsche etc.|
|Optional Pricing||The organisation sells optional extras along with the product to maximise its turnover. T||This strategy is used commonly within the car industry as i found out when purchasing my car.|
|Cost Based Pricing||The firms takes into account the cost of production and distribution, they then decide on a mark up which they would like for profit to come to their final pricing decision.||If a firm operates in a very volatile industry, where costs are changing regularly no set price can be set, therefore the firm will decide on their mark up to confirm their pricing decision.|
|Cost Plus Pricing||Here the firm add a percentage to costs as profit margin to come to their final pricing decisions.||For example it may cost £100 to produce a widget and the firm add 20% as a profit margin so the selling price would be £120.00|
Although figures vary widely from product to product, roughly a fifth of the cost of a product goes on getting it to the customer. ‘Place’ is concerned with various methods of transporting and storing goods, and then making them available for the customer. Getting the right product to the right place at the right time involves the distribution system. The choice of distribution method will depend on a variety of circumstances. It will be more convenient for some manufacturers to sell to wholesalers who then sell to retailers, while others will prefer to sell directly to retailers or customers.
In marketing, the promotional mix describes a blend of promotional variables chosen by marketers to help a firm reach its goals. It is believed that there is an optimal way of allocating budgets for the different elements within the promotional mix to achieve best marketing results, and the challenge for marketers is to find the right mix of them. Activities identified as elements of the promotional mix vary, but typically include the following:
- Advertisingis the paid presentation and promotion of ideas, goods, or services by an identified sponsor in a mass medium. Examples include print ads, radio, television, billboard, direct mail, brochures and catalogs, signs, in-store displays, posters, mobile apps, motion pictures, web pages, banner ads, emails.
- Personal sellingis the process of helping and persuading one or more prospects to purchase a good or service or to act on any idea through the use of an oral presentation, often in a face-to-face manner or by telephone. Examples include sales presentations, sales meetings, sales training and incentive programs for intermediary salespeople, samples, and telemarketing.
- Sales Promotionis media and non-media marketing communication used for a pre-determined limited time to increase consumer demand, stimulate market demand or improve product availability. Examples include coupons, sweepstakes, contests, product samples, rebates, tie-ins, self-liquidating premiums, trade shows, trade-ins, and exhibitions.
- Public relationsor publicityis information about a firm’s products and services carried by a third party in an indirect way. This includes free publicity as well as paid efforts to stimulate discussion and interest. It can be accomplished by planting a significant news story indirectly in the media, or presenting it favorably through press releases or corporate anniversary parties. Examples include newspaper and magazine articles, TVs and radio presentations, charitable contributions, speeches, issue advertising, seminars.
- Direct Marketingis a channel-agnostic form of advertising that allows businesses and nonprofits to communicate directly to the customer, with methods such as mobile messaging, email, interactive consumer websites, online display ads, fliers, catalog distribution, promotional letters, and outdoor advertising.