4.3 The marketing mix
- Syllabus
- 2026
- Topic
- 4.3
- Level
- —
Learning objectives
4.3.1ProductProduct:• development of a new product/service• the difference between goods and services• packaging and its importance• product life cycle – main phases and extension strategies• managing and reviewing the product portfolio (Boston matrix).4.3.2PricePrice:• the main pricing strategies and when they might be applied:- cost plus- penetration- competition- skimming- promotional.4.3.3Place – distribution channelsPlace – distribution channels:• methods of distribution- retailers- e-tailers (e-commerce).4.3.4PromotionPromotion:• promotion strategies for different market segments:- advertising- sponsorship- product trials- special offers- branding• above the line and below the line promotion techniques• public relations – improving company image/brand• the use of technology in promotion:- targeted advertising online- viral advertising via social media- e-newsletters• the importance of a brand.
Manage a product from development to portfolio decision
A product is the good or service offered to satisfy a customer need. New-product development turns evidence about a need into an idea, design/prototype, test, modification and launch; each stage reduces uncertainty before larger resources are committed.
| Offer decision | What it means | Why it matters |
|---|---|---|
| good | tangible item that can usually be owned and stored | design, inventory, transport and physical quality matter |
| service | intangible activity/benefit, often produced and consumed together | employee/customer experience, consistency and capacity matter |
| packaging | container/presentation that protects, identifies, informs and helps sell a good | affects damage, convenience, legal information, differentiation, cost and environmental impact |
| Phase | Typical sales pattern | Appropriate management focus |
|---|---|---|
| introduction | low, beginning to rise | build awareness/trial; secure distribution; monitor feedback |
| growth | rising quickly | expand supply/distribution and defend differentiation |
| maturity | high but growth slows/levels | retain loyalty, differentiate and control cost |
| decline | falling | extend, harvest, reposition or withdraw |
Extension strategies aim to delay decline by finding new markets or uses, changing features/packaging, promoting differently or adjusting price. They can renew interest but cost money and cannot make demand grow indefinitely.
| Boston category | Market growth | Relative market share | Portfolio implication |
|---|---|---|---|
| star | high | high | invest to sustain growth; may become a cash cow |
| cash cow | low | high | generate cash that can support other products |
| question mark | high | low | decide whether investment can build share or whether to exit |
| dog | low | low | review for withdrawal, harvesting or a defensible niche |
The life cycle describes one product's sales over time; the Boston matrix compares portfolio position using market growth and relative market share. Neither model proves profit or dictates a decision—use costs, cash flow, competition, strategic fit and reliable market definitions too.
Match the pricing strategy to the market situation
Price affects demand, revenue, positioning and contribution toward cost. Choose a strategy by connecting the product, objective, customer sensitivity, costs, competition and stage of launch—not by treating low or high price as automatically best.
| Strategy | How it works | Suitable when | Main risk |
|---|---|---|---|
| cost plus | add a markup to unit cost | costs are known and the business seeks a planned margin on cost | ignores demand and competitor prices; sales are not guaranteed |
| penetration | launch at a low price, then raise it later | entering a competitive market and seeking trial/share quickly | low margin; customers may resist the later increase |
| competition | set price with reference to rivals | offers are comparable and customers can switch easily | may not cover the firm's costs or express differentiation |
| skimming | launch at a high price, then reduce it | innovative/distinctive offer with early customers willing to pay | limits early demand and attracts competition |
| promotional | temporarily reduce price or offer a deal | stimulate short-run trial, traffic or sales | lower margin and sales may fall when promotion ends |
sellingprice=unitcost+markupamount
If unit cost is £40 and the business adds a 25% markup on cost, markup = £40 × 0.25 = £10 and selling price = £50. This protects a margin on each unit sold only if the cost estimate is complete and customers actually buy.
A launch may combine strategies over time—for example penetration followed by a sustainable regular price. Judge expected volume, unit margin, brand position, cash needs and likely competitor response.
Penetration and promotional pricing both use a lower price, but penetration establishes a new product/market then raises price, while promotional pricing is a temporary deal. Cost plus adds a percentage of cost; it is not the same as a profit margin percentage of selling price.
Choose how the offer reaches the customer
Place is how and where customers can obtain the offer. The distribution channel must deliver the required reach, convenience, speed and service at a cost and level of control the business can sustain.
| Channel | Advantages | Limitations | Best fit depends on |
|---|---|---|---|
| retailer / physical outlet | customers can see, try or receive personal service; established footfall and immediate possession | rent, staffing and retailer margin; limited opening hours/location; less producer control through an intermediary | need for experience/advice, local demand, product handling and retailer coverage |
| e-tailer / e-commerce | wider geographic reach, 24-hour ordering, customer data and potentially lower premises cost | delivery/returns, cybersecurity, platform/website cost, no physical trial and intense online comparison | customer digital access, delivery economics, trust and product suitability |
A producer may sell through other retailers for rapid access to their customers, sell directly online for reach and control, or combine channels. A small specialist shop might retain an experience-led outlet while adding e-commerce and local delivery.
Evaluate the whole route: customer convenience can raise demand, but delivery, returns, retailer discounts, stock availability and channel conflict affect cost, margin and reputation. Monitor service quality across every channel.
E-commerce is a sales/distribution channel, not merely online promotion. Removing a physical shop does not remove all costs: fulfilment, packaging, delivery, returns, systems and digital marketing remain.
Select promotion by audience, message and objective
Promotion communicates with a target market to create awareness, interest, trial, purchase or loyalty. Select a method by the segment's media behaviour, the message, objective, reach, credibility, timing, cost and ability to measure response.
| Method | Useful role | Main limitation |
|---|---|---|
| advertising | paid message with broad or targeted reach | cost, clutter and exposure do not guarantee purchase |
| sponsorship | associates the brand with an event/person/cause and audience | reputation risk and effect can be hard to isolate |
| product trial | reduces uncertainty by letting customers experience the offer | sampling cost and trial may not become repeat purchase |
| special offer | creates urgency or short-run value | reduces margin and can train customers to wait for deals |
| branding | creates a recognisable identity and promised experience | needs consistent delivery and continuing investment |
| public relations | manages relationships/news to improve company or brand image | less control over coverage and credibility can be damaged quickly |
| Route | Meaning/examples | Strength and boundary |
|---|---|---|
| above the line | paid mass-media promotion such as television, radio or broad press | wide reach, but costly and less individually targeted |
| below the line | more direct/targeted activity such as direct mail, sales promotion, events or trials | more focused/measurable, but usually narrower reach |
| targeted online advertising | uses audience/behaviour data to deliver selected ads | relevant and measurable; depends on data quality, privacy and platform rules |
| viral social advertising | users share content rapidly | low-cost scale is possible, but reach/message cannot be controlled |
| e-newsletter | permission-based updates to known contacts | supports repeat purchase; lists, relevance and consent must be maintained |
A strong brand helps recognition, differentiation, trust and loyalty and may support repeat purchase or a price premium. It is built by consistent product/service experience as well as promotion; a logo or campaign cannot compensate for weak delivery.
Match method to segment: a specialised audience may be reached efficiently through targeted content or sponsorship, while a broad consumer product may combine mass advertising with offers and digital reminders. Track suitable outcomes such as reach, response, trial, sales and repeat purchase against cost.
Above/below the line describes the promotional route, not whether it is good or bad. Public relations seeks image and relationships rather than guaranteed sales, and online targeting/viral reach may exclude audiences, create privacy concerns or spread negative responses.