Marketing Mix as Applied to Google

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The marketing mix is probably the most famous marketing term. Its elements are the basic, tactical components of a marketing plan. Also known as the Four P's, the marketing mix elements are price, place, product, and promotion.

Source: Marketing Teacher, accessed on April 15, 2011 from http://www.marketingteacher.com/lesson-store/lesson-marketing-mix.html

Price

There are many ways to price a product. Let's have a look at some of them and try to understand the best policy/strategy in various situations.

Price Skimming
The organization 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. Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented.

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.

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 maximizing turnover and profits.

Product Bundle Pricing
Here sellers combine several products in the same package. This also serves to move old stock. Videos and CDs are often sold using the bundle approach.
The organization bundles a group of products at a reduced price. Common methods are buy one and get one free promotions.

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.
This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example 'price point perspective' 99 cents not one dollar.

Optional pricing
The organisation sells optional extras along with the product to maximise its turnover. 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.
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

Premium Pricing
Use a high price where there is a uniqueness about the product or service. This approach is used where a a substantial competitive advantage exists. Such high prices are charge for luxuries such as Cunard Cruises, Savoy Hotel rooms, and Concorde flights. 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.

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. The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom and Sky TV.

Economy Pricing
This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.
Product Line Pricing
Where there is a range of product or services the pricing reflect the benefits of parts of the range. For example car washes. Basic wash could be $2, wash and wax $4, and the whole package $6.

Optional Product Pricing
Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.

Captive Product Pricing
Where products have complements, companies will charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor.

Promotional Pricing
Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free).

Geographical Pricing
Geographical pricing is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price.

Value Pricing
This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales e.g. value meals at McDonalds.

Sources:
Marketing Teacher, accessed on April 15, 2011 from http://www.marketingteacher.com/lesson-store/lesson-marketing-mix.html

Learn Marketing, http://www.learnmarketing.net/Price.htm, accessed April 15, 2011.

Place
Another element of Marketing Mix is Place. Place is also known as channel, distribution, or intermediary. It is the mechanism through which goods and/or services are moved from the manufacturer/ service provider to the user or consumer.
Depending on the type of product being distributed there are three common distribution strategies available:
Types of Channel Intermediaries.
There are many types of intermediaries such as wholesalers, agents, retailers, the Internet, overseas distributors, direct marketing (from manufacturer to user without an intermediary), and many others. The main modes of distribution will be looked at in more detail.
1. Channel Intermediaries - Wholesalers
? They break down 'bulk' into smaller packages for resale by a retailer.
? They buy from producers and resell to retailers. They take ownership or 'title' to goods whereas agents do not (see below).
? They provide storage facilities. For example, cheese manufacturers seldom wait for their product to mature. They sell on to a wholesaler that will store it and eventually resell to a retailer.
? Wholesalers offer reduce the physical contact cost between the producer and consumer e.g. customer service costs, or sales force costs.
? A wholesaler will often take on the some of the marketing responsibilities. Many produce their own brochures and use their own telesales operations.
2. Channel Intermediaries - Agents
? Agents are mainly used in international markets.
? An agent will typically secure an order for a producer and will take a commission. They do not tend to take title to the goods. This means that capital is not tied up in goods. However, a 'stockist agent' will hold consignment stock ...