Understand the Individual Elements of the Extended Marketing Mix - Assignment Example

? Understand the Individual Elements of the Extended Marketing Mix Table of Contents Table of Contents 2 Marketing 2 Traditional 4P’s of Marketing 3 Proctor & Gamble 4 Product Strategy 4 Distribution Strategy 6 Pricing Strategy 7 Additional 3P’s of Marketing 8 References 10 Marketing Every organization needs a well designed marketing department to create brand equity among customers. Strategic marketing works as a deciding force for a company to survive in hyper competitive business environment. Marketing works as a promotional and distribution tool for company. Marketing strategy differs according to the nature of product. Traditional 4P’s of Marketing Marketing department of any company focuses on four things to create a successful offering. Four things can be described in the following manner. 1-Product (manufacturing product, maintaining the quality standard of product, optimum utilization of resources during production process), 2- Price (deciding the price of the product in accordance with the demand among customers, setting high price or low price for the product is an important part of pricing strategy), 3-Place (designing distribution network for the product. Company creates distribution network to expand the reach of the product. Appointing c&f agents, stockiest, wholesalers, retailers is a part of distribution strategy), 4- Promotion (company uses direct marketing, sales promotion, advertising and public relation activities to create awareness about the product among people. Above the line promotion and below the line promotion is part of advertising strategy). For sake of simplicity the study will try to focus on marketing strategy of Procter & Gamble which is known as one of the major consumer durables company in the world. The company has established category leadership and examples of break through marketing in many parts of the world by using 4 P’s of marketing in an innovative manner and this is the reason for selecting the company as protagonist for the study (Kotler et. al., 2009, p. 330-394). Jerome McCarthy used the concept of four P’s (Product, price, place and promotion) during 1950’s for the first time (Jerome McCarthy used 4P’s concept in his book “Basic Marketing” published in 1960 and he used the concept to explain campaign made by JWT). Philip Kotler and other academicians (In 1965, Philip Kotler described 4P’s as various marketing variables in his article) proselytized the concept in coming years (Schultz, and H Schultz, 2004, p.7). Proctor & Gamble Proctor & Gamble is a renowned American consumer goods company. The company is headquartered in Cincinnati, Ohio, USA. The organization was established by William Procter and James Gamble in the year 1837. The company serves over eighty countries across the world. Sales volume has touched a record mark of $82,500 billion in the year 2011. The company has established category leadership in various segments like House Care, Skin Care and Oral care. More than 127,000 people work in the company. The consumer goods company markets more than two hundred and fifty brands across the world. The company enjoys leadership in almost twenty four brands in its category and able to fetch billion of dollars annually from each of the brands. The consumer goods organization has established twenty eight technical centres across the globe (PG-Global, n.d.). Product Strategy Product strategy of P&G is influenced by one seventy year old vision statement established by James Gamble that is being honest in product making. The study will focus on product strategy in terms of cosmetics division for the company. They have noticeably changed time tested cosmetics business into a new height by implementing strategic and holistic approach of new product development. Before 1994, the company tried to maintain product systems complemented with Olay, Clarion and Cover Girl but failed due to their unfocused business effort. Real breakthrough was achieved during late 1990’s when the company launched Diamond initiative and developed new product Olay. Previously the product was meant for whole body usage but the new campaign targeted the product for facial usage. They streamlined distribution network and supply chain management according to market demand. They used below the line and above the line promotion to create awareness among customers. Penetration pricing was used for the product to establish category leadership among existing offering by other cosmetics company. The company used product stage gate process to complement growth stage of product life cycle. Oil of Olay was in the decline stage during the early 1990’s but stage gate process helped the company to re launch Olay product with different targeting statement. Olay regained their position as growth stage product during early 2000’s and finally achieved maturity stage within next few years. Source- Author’s Creation P&G used rigorous product launch process to create a successful marketing strategy for Olay and now the cosmetics division contributes more than $2 billion to annual revenue of the company (Cooper, and Edgett, 2009, p. 6-8). Distribution Strategy The company has given importance on maintaining streamlined supply chain management to decrease lead time. The company has found that retailers their product loses 11% on sales revenue due to out of stock order and same brand substitute of the product can counterbalance only 25% of the lost sales after rigorous market research. P&G implemented Cisco’s digital system to speed up logistic system and decrease the lead time. The company changed their multimodal transportation into intermodal transportation by using shipment containers. They synchronized CRM technique and supply chain altogether to create a customized delivery network. The company created a distribution network complemented with retailer, distributors, stockiest and c&f agents. Retailers are their primary customers and they started to use rough cut capacity planning to achieve optimum inventory level. The company has valued ethical issues like maintaining sales margin for retailers and taking care of the interest of other stakeholders of business. The company has tested all of the 10,000 permutation planning for distribution channel in North America to increase customer convenience and availability (Jimenez, and Prior, 2002). Pricing Strategy Economic theory of pricing can be used to understand pricing strategy of Procter & Gamble. The concept of cross elasticity (when pricing strategy of the company affects competitor’s strategy) and self elasticity (when pricing strategy of competitors affects market leader’s strategy) can practically implemented for P&G. The company is market leader in detergent industry and more than 55% of buyers purchase their product. The company use mix of competitive pricing (setting price according to competitor) and penetration pricing (setting price higher than competitor’s price) depending on the market situation. For example, the Cincinnati based company sells Tide in competitive price in developing nations of Asia but they sell the same product in premium price for American and European consumer. Three conceptual framework like share of category requirements (SOR), penetration (PEN) and category usage (USE) can be used to dissect company’s pricing strategy. Companies use premium pricing in order to create superior brand image in the mind of consumers. Penetration pricing strategy is used for products that can be manufactured on huge volume. Huge volume production helps companies to achieve economies of scale. According to economies of scale cost manufacturing decreases with volume of production. P&G also used the concept of economies of scale to do penetration pricing and the strategy has paid off for them in detergent segment of Asian market (Ailawadi, Lehmann, and Neslin, 1999). Promotional Strategy Integrated marketing communication has emerged as important ‘magic bullets’ for marketers to gain competitive edge over others. Advertising, Sales Promotions, Direct Response Marketing and Public Relation are four pillars of integrated marketing communication. IMC technique can be used to understand promotional strategy of Procter & Gamble. This study will try to explain promotional strategy of the company for their Light Duty Liquid segment. Ivory Liquid, Dawn and Joy are three variants in Light Duty Liquid segment. They used four elements of IMC in the following manner. General Advertising- the company used TVCs to promote the product. 2. Direct Marketing- this element is not used by them due to the nature of the product. 3. Sales Promotion- free product sample was distributed to generate product usage among customers. 4. Public Relation- the company used news paper editorial and magazine article to promote the product. Below the line activities like road shows also helped the brand create awareness among customers. Additional 3P’s of Marketing Marketing strategy for service industry comprises of additional three types of activities. 1-People (customer relationship management plays a cordial role to increase customer base for any particular brand. Internal staffs are the important assets for any company. Staffs are responsible to provide value for money service to customers and they can help the company to increase service efficiency), 2- Process- (company needs to maintain a proper system of service delivery to be successful in long run. Companies take help of different software systems like RFID, Enterprise Resource Planning, Tally, Oracle to deliver efficient service to customers, 3- Physical Evidence (well designed interior of service delivery place creates a positive brand image of the company from the view point of aesthetics. Restaurants use physical evidences to create the wow factor among customers. Chinese restaurants in America use dragon framework to design interior of the food store. They do it to increase visibility factor of the service among customers. In 1981, Booms and Bitner proposed additional 3P’s of marketing in order to explain marketing mix for service industry (Lockyer, 2007, p.49). References Ailawadi, K. L., Lehmann, D. R., and Neslin, S. A., 1999. Market Response to a Major Policy Change in the Marketing Mix: Learning from P&G’s Value Pricing. [pdf] Available at: < http://mba.tuck.dartmouth.edu/pages/faculty/kusum.ailawadi/docs/pg_value_pricing_moveJM2001.pdf> [Accessed 22 September 2012]. Cooper, R.J., and Edgett, S. J., 2009. Product Innovation and Technology Strategy. Ontario: Stage-Gate International. Jimenez, M., and Prior, D., 2002. Procter & Gamble: Building a Smarter Supply Chain. [pdf] Available at: < http://www.emory.edu/BUSINESS/dra/PGsmartersupplychain.pdf> [Accessed 22 September 2012]. Lockyer, T., 2007. The International Hotel Industry: Sustainable Management. London: Routledge. PG-Global., No Date. P&G Global. [online] Available at: < http://www.pg.com/en_IN/company/pg-global.shtml> [Accessed 22 September 2012]. Schultz, D., and Schultz, H., 2004. IMC, the Next Generation. New York City: McGraw-Hill Professional. Read More