Relationship between Marketing Mix and Consumer Behaviour

Relationship between Marketing Mix and Consumer Behaviour The primary idea of a marketing mix was introduced by Neil Borden in 1953 while describing the recipe that was needed to make a successful marketing campaign. The idea was then given the 4 Ps in 1960 by E. Jerome McCarthy. Marketing Mix is a combination of elements used in the sale of a specific product. The marketing elements that affect a products performance are seen in four distinct functions, also called the Four Ps of marketing. They include product, price, place (of distribution), and promotion. All these functions are considered in the process of planning a marketing strategy. Any one may be enhanced, deducted, or changed to some degree, depending on the market scenario, in order to create a strategy necessary to sell a product. A brief description of each of the aspects of the marketing mix is explained below. Product The physical product/service offered to the consumer. Product decisions include aspects such as function, appearance, aesthetics, post sale service, product warranty, etc. Promotion Promotion decisions are those related to telling or communicating to the target customer what the product has to offer. The duty involves luring a customer in for the sale and then finally completing the required sale. Promotions teams have a responsibility to selling to a new customer and increase the use of the product to encourage more sales. Since these costs often over shoot the products price, a break even analysis must be conducted when making promotion decisions. The promotions team decides to which kind of customers the product needs to be sold. This is also significant in the planning of the product cost and the type of promotion that would go into the promotion of the products. Promotion include advertising, public relations, media types, etc. Place This deals with the location or the place where the product is expected to be sold. The product has to reach the consumers through a series of distributors and retailers. It is associated with the distribution channels which all serve as the means for getting the product to the customers who pick it off a shelf or pay for it otherwise. The distribution system performs all the transactional, logistical, and facilitating functions between middle men and retailer which brings them the best deals and the most effective profit. Distribution decisions include market coverage, channel member selection, logistics, and levels of service. Price Pricing decisions should take into account to account for profit margins and competitors. Keeping up with competitor pricing and treatment of the product in the market brings in a great deal of strategy to the products life cycle. Pricing includes along with the marked list price, the discounts, financing, and more options such as leasing. The following section will deal with describing the effect of the various aspects and sections of the Marketing Mix with association with RD(Research and Development), Brand Portfolio, Sales force and Market Research. Link between Marketing Mix and Consumer Behaviour The psychological processes that a consumer goes through to recognize his needs and finding ways to fill the gaps formed by these needs, making decisions about a purchase (eg., whether or not to pay for a product and, if they are then, which brand do they want to buy and where), process information, planning and implementation of these plans (eg., by engaging in comparison or window shopping or actually paying for a product). It is often necessary to understand the customer and his/her regional and cultural influences. Chances of an Indian or a Chinese bargaining at a retail store are higher than that of an American customer. This affects the pricing and the promotion done for the product. Often, the advertisements and the promotion strategy are re-used in different parts of the world on account of the type of customer. This make a difference on spends and proper consumer behaviour can often bring the difference between a successful and an unsuccessful campaign. Decision making by customers include the availability of the product in the region and information that helps him/her make the required decision pertaining to the purchase of the product. Let us use a few examples to explain the link between the marketing mix and consumer behaviour. The denim and jeans industry which include some internationally recognised brands including Levis, Lee and Pepe understand that within their target range, we include the young crowd. Commonly people up to 30 years of age. They, therefore make sure that the campaigns and marketing include a specific intention to pull these customers in. The ads therefore include several young people in harsh surroundings. KFC and McDonalds have learnt that people tend to eat more in bright coloured surroundings. Therefore, all their outlets usually have bright colours across the walls. A study showed that the These are only very simple examples of consumer behaviour. Understanding the performance or the process of aligning the 4 Ps as per our customers needs is huge in scope and profitable in practice. Link between Marketing Mix and Market Research Market Research is the process of gathering data or info in order to better understand the aspects which would affect the performance of a product on the market. We have to understand if a particular move or step is worth the risk. Incorrect or inadequate market research often leads to poor performance due a poor understanding. Most companies are founded on the principle of profitability. Goods or services they provide should aim to be something that the customer needs and the company can benefit from. That is where market research plays it hand at making a decision. Doing that research accurately will determine if your business will flourish or fall flat on its face. The research conducted around a single product includes analysis of the customer during the purchase phase, the reaction to a specific advertisement, the positioning of the product on the shelves of the stores they appear in, the comfort of the customer with the product etc. In a business strategic sense, they are used to collate Market Information (data about competitors and the supply and demand situation), Segmentation (understanding what kinds of customers appeal to what kind of customer reacts to a specific form of promotion based on common criteria), Market Trends (the fluctuation of the market), Risk Analysis, Competitor Analysis etc. Each and everyone of these activities brings the product manufacturer/service provider with the info he/she needs to process and successfully sell the product. This changes the manner in which the product is sold. The price, the positioning, the promotion and the product itself depends on this research. Link between Marketing Mix and RD Research and Development in a company often implies the need or the drive to improve the product and allow for a better replacement to make its way into the market. The idea behind research and development is to maximise the benefits that the consumer gets out of the product. The idea behind research and development is to improve the products and possibly charge a premium on the improved product which will increase profitability and allow the company to re-invest in research for a better product or a better variant of the same. The benefits from research are manifold. They include better products and hence a more loyal customer and possibly new ones. A company which thrives on research like a Pharmaceutical company is normally not considered the best kind of investment for a player in the stock market. This is because of unusual and over the top spending patterns for research which doesnt necessarily return the investment made. Research and development is also to keep one step ahead of the competitor. To remain at or reach to the top of the table, a company must constantly come out with a product thats just better than the competitors product. Pricing is always a major aspect to consider while working the specifics in research. The price of a product depends on the amount of research that goes into its development. The premium charged on a product comes from patents that protect it against duplication. Patents however, are only offered for a temporary period. Post that, the product is open to duplication. In this case, the price drops to a minimum, usually to push for maximum sales and to allow a return from plain sales. In promotion , the results of research are often touted in the ads about the same. This comes from Surf Excel and Bournvita ads which talk about extra acting chemicals and extra nutrients respectively to make it a better choice than competitor products. Link between Marketing Mix and Sales Force The sales team that drives the amount of revenue coming into the company involves the final point of contact with the customer. This is the point where all the promotions and pricing bring the customer to the final decision making stage. The best salesman is who gets the sale done and the papers signed. It is assumed at times that a large sales force implies the sale of more products. This is not true. A sales force means training. The training involves teaching your sales force selling the product and the nuances associated to the product. This leads to an automatic rise in the spends of the company and very easily reflects on the prices of the products. The size of a sales force depends on the reach of the product in terms of distribution. The type of product also as a major say in the strength of the sales force. Pharmaceuticals have lesser sales force as they cover doctors in mostly urban and sub-urban areas. FMCG sends their sales force all across the country and the world to maximise sales. Link between Marketing Mix and Brand Portfolio The brand portfolio is a system used to categorise the products into high-earners, dead-beats and break-evens. The brand portfolio is created for both analysis of the past and application in the future. The portfolio will contain details about the product that helps the company make decisions about the products future. These include the promotional activities that the product will go through, the price at which we make it available to the customer, the positioning of the product and the condition of the products complete development. The price of a high-earning luxury item can be increased and the smaller items which lose you money will be the losers which will be either pushed back from promotion or pulled out altogether. The idea behind a brand portfolio is to keep a check or an eye on the products performances. Application of Key Learnings to Reckitt Benckiser in the liquid antiseptic division Reckitt Benckisers liquid antiseptic is the very popular Dettol. Dettol has been a strong contender in the liquid antiseptic industry. It has ruled the roost in the industry for several years and still holds solid ground. Dettol enjoyed over 80% of the market share in its antiseptic form. The soap and the liquid soap formats however, had just about 15% of the industry. The soap and liquid soap formats did not enjoy the same success that the antiseptic did. The demand for Dettol rose from about Rs. 105 billion in 1999 to Rs. 160 billion in 2009. The demand forecast graph for Dettol over the past 10 years can be seen below. Consumer Behaviour Study of Dettol A consumer behaviour study to understand the success of Dettol as an antiseptic brand was conducted to understand the reasons for the popularity of the brand. The study revealed that 85% of the respondents knew about Dettol i.e. they were aware that the product existed. 72% of the respondents used it as a preferred antiseptic. 72% also continue using Dettol because of Brand Loyalty and 56% are open to using other Dettol products. Dettol and Reckitt Benckiser have never had to worry about the competition so far. The users mostly preferred Dettol to other products. The figure below refers shows the analysis, study and the results of the research conducted. Pricing Strategies surrounding Dettol The Dettol variants have always been competitively priced with the market. The Soap variant was priced at Rs. 16/75mg and Rs.26/125mg. This was priced against the similar Savlon product which was priced at Rs.16 and Rs.24.5 respectively for the two package varieties. Both of the products however, are far higher than the alternate Medimix which was Rs.12 and Rs.17 for the two variants. At this point, a manager would wonder whether or not the right idea would be to work towards the price. Dettol can charge a minor premium on the product price because it holds a certain edge over the existing products. However, Savlon is catching on fast considering its an antiseptic which doesnt hurt as much. The manager therefore, tries to make the best of the current scenario and ensure that the competition wouldnt eat into its market share. In liquid soap, Dettol was exactly the same as the Fem variant which both sold as Rs.55/250ml. The market share of the liquid soap for Dettol is very low. A change in the price might even help the return to the market and allow Dettol to take the product ahead. The Shaving Cream division sees Dettol lying between the Old Spices Rs.37.50/70g and Rs.24.50/30g and Palmolives Rs.36/70g and Rs. 19.50/30g. Market Research and Research and Development of Dettol Reckitt Benckiser and Dettol say Good health begins with hygiene. The Dettol variants were restricted to products which represent hygiene and banked on the very reliable name of Dettol to push the hygiene factor across to the customer. Dettol was broken down into the Antibacterial Soap, Liquid Handwash, Shaving Cream and Band-Aid. The marketing team at Dettol looked into what could be done to maximise the reach of the Dettol brand and where it could be used conversely to decide what kind of variant would be required and what type of product is needed for the next step. The products all promote killing germs, freshness and absolute cleanliness and purity. Dettol has performed extensive research on the expansion plans of their major brand. The Dettol brand took the reach of Dettol to go as far as possible. The reach of Dettol moved from homes and hospitals to hotels, theatres, railways, educational institutes, saloons, school events. Trend Analysis of Dettol between 2000 and 2004 The trend analysis has shows sales numbers on a high. The numbers have constantly been increasing over the past several years. In 2000, the sales numbers were close to 48000. In 2001, the numbers went up to 55000. Uptil 2003 following this, the number remained largely stagnant and then moved to dip slightly below 54000. However, the year 2004 was a fantastic attack on the market and shot up numbers in a single year in 2004 to 63000. We can tell from the demand forecast table that the demand made for the hygiene industry products kept going up. The demand kept going up. Sales number increasing means we need to bump up the sales force. Ideally, the need for a greater sales force comes from the need for more retailers. The more the retailers, means that the reach of the product has increased and there are more people who are willing to buy and to sell. A sales force involves training. The need for greater performance is what keeps a company going. To maximise sales, they have to increase sales force. To increase sales force, they have to spend more money on the hiring, training and keeping the sales force. This automatically leads to greater spending in the event that the product might not do well, thus bringing up the costs of the product. SWOT Analysis of the Reckitt Benckiser Dettol industry Below we have a brief SWOT analysis of the industry. Strengths: High market share of antiseptic liquid Brand loyalty Most trusted Brand High quality at affordable prices Weaknesses: Poor marketing strategies for Dettol Shaving Cream Dettol Talc Burning sensation of Antiseptic liquid Opportunities: Dettol Water Purifier due to increase in epidemics Opportunity to capture the shaving cream segment Threats: Competitive Pricing Attractive Packaging of competitor products Good Advertisements by competitors